Ruble use in border city to spur Sino-Russian trade

HARBIN - At a large furniture market in Suifenhe city, Heilongjiang province, Qu Ying sold a table and chair set to two Russian businessmen, who paid him about 5,000 Russian rubles.

Payment in rubles instead of the renminbi -- the Chinese currency -- is also common in another market where clothing and daily commodities are sold in Suifenhe city, which borders Russia. The Chinese cabinet recently authorized the city as the country's first pilot zone where the Russian ruble can function equally alongside the renminbi.

Every Friday and Saturday, Qu's furniture shop sees many Russian customers, most of whom pay in rubles, according to Qu.

"In the past, we exchanged rubles into renminbi in underground markets, but they lack strict administration and good reputations, " said Qu. "Now, the exchange between the ruble and renminbi can be done directly in local banks, and we feel secure."

Under the new policy, the Russian ruble can be freely deposited and withdrawn at local banks. People can pay their bills with rubles. It is the first time since the founding of the People's Republic of China that a foreign currency has been allowed to function on par with the renminbi in a designated area on the Chinese mainland.

Border trade at Suifenhe began in the late 1980s. The Chinese government approved Suifenhe to be an open city in 1992, and the border port city has played an important role in China-Russia trade.

In the first half of 2013, Sino-Russia trade at Suifenhe reached $3.45billion, or nearly one tenth of the trade volume between the two countries in the same period, and one third of the trade between Heilongjiang and Russia.

With the growth of bilateral trade and investment, the ruble has increasingly been used in Suifenhe and has become the major payment currency in tourism, trade and commodity markets.

However, currency exchange business in banks has not been able to meet demand, and a large amount of cash has had to be exchanged on the black market.

"The approval of the use of rubles is conducive to regularizing the ruble exchange market and cracking down on the underground market," said Song Kui, president of the contemporary China-Russia regional economy research institute in Heilongjiang.

The policy will attract more Russians to China for shopping and tourism and promote bilateral trade development, said Song.

It will also contribute to the formation of a direct exchange rate between the renminbi and the Russian ruble and lay a foundation for renminbi use in Russian cities, according to Song.

With bilateral trade reaching a record high of $88 billion in 2012, China and Russia are aiming to raise the volume to $100 billion by 2015, and $200 billion by 2020.