By IB Times Staff Reporter | November 24, 2010 7:41 PM IST

China, Russia to dump US dollar for bilateral trade

China and Russia have said they will renounce the US dollar and use their domestic currencies in bilateral trade.

Chinese Premier Wen Jiabao (C), Russian Prime Minister Vladimir Putin (R of Wen) and a Shanghai Cooperation Organisation (SCO) leader attend a news conference at the Great Hall of the People in Beijing October 14, 2009. The SCO is a grouping of central Asian states. China and Russia signed a pact to notify each other of ballistic missile launch plans during Putin's visit this week to Beijing, Chinese media said on Wednesday.

The announcement came as the leaders of both countries met in St. Petersburg to expand bilateral trade and energy-cooperation between the countries, according to an AFP report on Tuesday.

"We agreed to expand the possibilities for application of national currencies during trade and economic contacts," said Russian Prime Minister Vladimir Putin after holding talks with the Chinese premier Wen Jiabao.

However, the move is not aimed at challenging the dollar but to protect their economies, as the countries started exploring other options in the wake of the global financial crisis.

With Russian ruble already trading on the Chinese exchange, yuan trade in Moscow is expected to begin in early December.

The bilateral trade between the two countries is estimated to reach above $50 billion by the end of 2010, according to the Russian government. A major chunk of the trade is transacted in US dollars currently.

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