Indian banks and traders asked to avoid using Chinese Yuan in international transactions

New Delhi – The government has instructed Indian traders and banks to avoid using the Chinese Yuan while doing business with other countries. Claims are being made that the government gave this instruction and the Reserve Bank of India as relations between India and China are strained. The news about this has been published by citing the officials related to this development. Considering that the Yuan is more likely to be used in transactions with Russia, traders and banks have been warned against this.

Moreover, the tension between India and China over Ladakh’s LAC is still unresolved. China is appealing that India and China can cooperate even if this dispute on the LAC continues. But India says that China cannot expect bilateral cooperation from India by deploying thousands of troops on the LAC. India made China aware of this from time to time. There has been no significant change in China’s role even after that. Therefore, it seems that this instruction has been given to Indian traders and banks regarding the Yuan. Indian traders and banks have been advised to use the United Arab Emirates dirham instead of the Yuan if necessary.

There is another side to this decision taken by India. As the dollar depreciates internationally, competition has begun between China’s Yuan and India’s Rupee to become the alternative currency. Russia had long ago removed the dollar from trade with China and started trading in Rubles and Yuan. Due to the economic sanctions imposed by the US after the war in Ukraine, Russia decided to do business with India in rupees and rubles. This has greatly benefited India and nearly fifty countries have opened vostro accounts in Indian banks. Therefore, the Rupee seems to have emerged as an alternative international currency.

Furthermore, China has often been accused of deliberately devaluing the Yuan to gain an advantage in trade with other countries. It was also repeatedly revealed that China’s currency system was not transparent. In the meantime, China’s economy is currently facing severe crises. China’s economy based on exports could be hit hard by the global slowdown. At the same time, China has serious differences from almost all the countries in its region due to hegemonic and expansionist policies. China’s Yuan will not be able to replace the US dollar in such a situation. There is a strong possibility that some countries will strongly oppose this.

In such a situation, the position of the Indian Rupee is stronger than the Chinese Yuan as the Indian Rupee is more reliable, secure and also very easy to use for digital transactions. In such a situation, India’s instruction to its traders and banks not to use the Yuan is noteworthy. Earlier, India had proposed to China to use local currencies for trade with China. But China, which earns billions of dollars from trade with India, rejected this proposal then.

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