The plunging value of the Russian currency, the ruble, has caused exporters in China to suspend sales on Russia’s e-commerce platforms, it has been reported.
The ruble hit a 32-month low this week of 114 to the U.S. dollar, prompting Russia’s Central Bank to halt foreign purchases on the domestic currency market for the rest of the year.
New U.S. sanctions against Russia’s Gazprombank, which had been used for foreign purchasers of Russian gas payments, were the latest economic blow to Russia amid ongoing financial punishment for Vladimir Putin‘s full-scale invasion.
The weaker ruble has also caused jitters among exporters in China, which has become Russia’s main trading partner after sanctions dried up other markets. Chinese exporters are concerned about losses in doing business with Russia and have suspended sales on Russian e-commerce platforms, according to The South China Morning Post.
Andy Guo, the founder of the Waimaojia business platform on WeChat, told the publication the weakening ruble is causing “serious losses for Chinese exporters.” The depreciating Russian currency had caused a sharp increase domestic commodity prices, “weakening Russian consumers’ willingness to buy and thus reducing orders from us.”
Yuan-ruble exchange rate rose from 1 yuan to 13.99 rubles on November 22 to 15.61 on Thursday, before falling to to 14.91 on Friday. But volatile exchange rate fluctuations “further erode the profit margins of Chinese merchants after settlement,” said Guo.
Pavel Bazhanov, a Russian lawyer who provides legal support for Russian businesses in China and the wider region, told Newsweek on Saturday that Chinese exporters in ecommerce are concerned about the devaluing ruble especially as “November is a month of sales.”
“During that time, the marketplaces press their suppliers to provide discounts,” he said. “Russian e-commerce platforms like Ozon, Wildberries and Yandex Market are less regulated and supplier-friendly compared with Chinese online platforms.”
“The Chinese suppliers on Russian e-commerce platforms in November may generate quite big sales, but at a loss,” Bazhanov said, “a reasonable businessman may decide to stop sales temporarily.”
However, he said, “I would not expect Chinese entrepreneurs to halt all sales on Russian e-commerce platforms or ordinary trade unless ruble is in free fall.
“First of all, Russian customers still have some purchasing power and also Chinese businesses will look everywhere in the world to find consumers for goods given that the Chinese economy is not doing well, and Donald Trump has threatened additional import duties on Chinese products.
“So, Chinese businesses need to explore any foreign market available and the Russian market may still be an option,” Bazhanov told Newsweek.
Russia’s economy, buffeted by Western-led sanctions that aimed to isolate the country from the world’s financial system, has weathered the turbulence with GDP growth still higher than many Western countries’, partly fueled by high levels of spending on the military.
But this has come amid high inflation of 8.5 percent which Russia’s Central Bank has sought to curb with a key interest rate of 21 percent, the highest since 2003.
But Grzegorz Drozdz, market analyst at Invest.Conotoxia.com said that while Russia’s falling currency weakens purchasing power, as an exporting country with a significant trade surplus, it will favor domestic exports.
“In addition, the Russian economy stands out for its low level of debt. At the beginning of the year, the public debt-to-GDP ratio was only 14.9 percent, which is exceptionally low compared to Western countries,” he told Newsweek.
The Russian Central Bank, which Newsweek has contacted for comment, said in a report released Friday that companies in Russia will find ways to circumvent sanctions and that the foreign exchange market will level out.
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