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Prospects for expanding financial cooperation between EAEU and PRC discussed by experts at EAEU-China Belt and Road videoforum

Prospects for expanding financial cooperation between EAEU and PRC discussed by experts at EAEU-China Belt and Road videoforum

10/27/2020
Prospects for intensifying the use of national currencies in mutual settlements, developing  digital currencies and forming a new type of payment systems, ways to improve the financial stability and security of the Eurasian Economic Union countries and the People's Republic of China within coupling of the EAEU and the Chinese Belt and Road Initiative were discussed by attendees of the expert session "Prospects for expanding financial cooperation between the EAEU and the PRC" within "Coupling the Eurasian Economic Union and Chinese Belt and Road Initiative" videoforum held on October 26.

In his welcoming speech to the session attendees, Sergei Glazyev, EEC Minister in charge of Integration and Macroeconomics, has noted that current monetary and financial cooperation between the EAEU Member States and the PRC is far from potential, but the sides are ready to actively cooperate to reduce the use of third-country currencies. Along with that, the payment and financial infrastructure for cooperation has already been created to a large extent and it is required to develop a system of incentives for participants in trade and economic relations to use it and switch to national currency settlements.

"A desire is not enough to switch to national currency settlements, some advantages should be created," - Sergei Glazyev noted. In particular, the EEC Minister has proposed to develop mechanisms for stabilizing the exchange rates of the EAEU countries’ national currencies and then to create pricing mechanisms in national currencies for exchange commodity within coupling of the EAEU and the Belt and Road Initiative.

As measures to strengthen the attractiveness of using national currencies, Sergei Glazyev has proposed to reduce bank commissions and loan interest rates in national currencies of the EAEU countries, simplify currency control when settling in national currencies as well as discuss the possibility of forming a fund jointly with the PRC to equalize economic levels of the EAEU countries’ regions and China.

Igor Suvorov, Session Moderator and President of the Interstate Bank, has noted the expediency and importance of considering financial aspects within coupling of the EAEU and the Belt and Road Initiative as well as making practical recommendations hereon in the field of deepening monetary and financial cooperation between the EAEU States and the PRC.

Expert discussions at the session were opened with a report by Violetta Arkhipova, Senior Research Fellow at the Institute of Economics of the Russian Academy of Sciences, wherein she formulated possible ways to intensity the use of national currencies in settlements in the EAEU Member States and the PRC considering the internationalization experience of leading reserve currencies.

Possibilities for developing digital currencies have become the subject matter of the reports made by Liu Yu Shu, Director of Macro Research Department at the Renmin University of China, and Qu Qiang, Director of Financial Policy Research Center at the Renmin University of China. Yu Shu has noted that organizing expert groups to analyze the experience of monetary and financial cooperation between China, Russia and other EAEU countries should be the first step within the coupling and only then possible areas of cooperation with regard to the sides’ technological potential should be addressed. "Interaction in the field of digital currencies is an area of great opportunities whereby it is particularly efficient to join efforts," - he noted.

Qu Qiang has placed the emphasis on the need to develop an independent digital infrastructure of the EAEU countries and the PRC as an alternative to the use of American technologies. He has also emphasized that the question concerning feasible use of digital currencies amid active development of technologies is replaced by the question of maintaining the efficient use of fiat money. Commenting on the opportunities of the Russian Federation in developing and implementing the digital ruble, Qu Qiang has noted unequal broadband coating of the country compared to the PRC: however, in the future, according to the expert, Internet access will not be a determining factor for implementing digital transactions.

Wang Wen, Executive Dean of Institute for Financial Studies at the Renmin University of China, has reinforced the need to develop cooperation in the field of "green" finance. Wang Wen has told about the experience of the PRC's interaction with Kazakhstan in terms of "green" finance and stressed that the PRC investigates the possibility of adopting best practices to develop cooperation with other EAEU countries.

Viktor Dostov, Chairman of the Council of the Russian Electronic Money and Remittance Association, has informed about the prospects of digital payments in transboundary settlements, transfers and loans. The current mechanism of double conversion when making national currency transfers is associated with additional currency risks. In turn, the practice of using cash deposits to minimize risks escalates the liquidity problem.

As a tool for solving the problem Viktor Dostov has proposed the concept of interbank settlements based on distributed ledgers backed by blockchain technology by creating a special monetary aggregate for settlements between banks or launching a single currency. "Such an initiative will enable reducing numerous middlemen in the technological chain and will be absolutely useful for all sides," he noted.

Dmitry Shedko, Managing Director of the FinStore Investment online platform, has informed on the experience of the Belarusian FinStore online platform in the field of issuing digital financial assets. The FinStore platform - one of the six existing platforms in Belarus became entitled to manage digital assets and issue tokens (the equivalent of digital rights), has appeared out of the need for a more flexible approach to regulating technologies in the financial sector. It is important that the company focuses on simplifying investment activities: as a result, the platform's services have already been used by major companies in the real sector of the Belarusian economy - MAZ and Belvest. "This mechanism can be successfully extended to the EAEU and future processes of the EAEU-BRI coupling, if we succeed in solving the lack of comparable terminology and legislation in the sphere of state regulation of digital assets, tokens and crypto-currencies being circulated in the EAEU countries", – the expert noted.

Han Zhong, Head of the Representative Office of the Russian-Chinese Silk Road Park, has told on the Park's role in creating the Eurasian innovation system. According to Han Zhong, the Park’s performance is based on the "One Park – Two Territories" concept implemented in the form of creating a platform to exchange innovations, technologies, educational and scientific projects as well as to develop trade and tourism between the Russian Federation and the PRC.

Summing up the session, Oleg Solntsev, Head of the Division for Monetary Policy and Banking Sector Analysis at the Center for Macroeconomic Analysis and Short-Term Forecasting, has put forward proposals for ensuring macroeconomic, financial, technological and geopolitical stability within the EAEU and its coupling with the Belt and Road Initiative.

The session was attended by more than 100 participants, including representatives of public authorities, academic organizations, business circles, major companies and industry associations of the EAEU Member States, the PRC as well as other European and Asian countries.​