TAIPEI (Reuters) – The war in Ukraine and Russia’s effective exclusion from the global currency system could be an opportunity for China to raise the profile of its currency in a challenge to the U.S. dollar, a senior Taiwanese security official said on Monday.
Russia has said it is counting on China to help it withstand the blow to its economy from Western sanctions, and will use Chinese yuan from its foreign exchange reserves after the sanctions blocked its access to its U.S. dollars and euros reserves.
Taking questions in parliament, National Security Bureau Director-General Chen Ming-tong said China had always wanted a way to throw off the domination of the U.S. dollar, and the war could boost the use of the yuan.
“Whether in renminbi trade or currency issuance system, this is an opportunity that must be taken” by China, Chen said, using the yuan’s formal name.
Taiwan, which China claims as its own territory, has raised its security alert level since the war, wary of Beijing making a similar move against it, and Taiwanese officials have been studying the lessons both they and China could learn from the conflict.
Chen said the war could actually improve China-U.S. relations if China chose to stand with the United States in the same way it did after the Sept. 11, 2001, attacks which earned U.S. goodwill.
“The Ukraine-Russia war is maybe another 911-style opportunity,” he said.
Beijing has repeatedly voiced opposition to the sanctions on russia and has insisted it will maintain normal economic and trade exchanges. It has declined to condemn Moscow’s action in Ukraine or call it an invasion.
But behind the scenes, China is wary of its companies running afoul of sanctions and is pressing companies to tread carefully with investment in Russia, its second-largest oil supplier and third-largest gas provider.