Renminbi Photo: VCG

Some financial institutions in India plan to come up with a payment channel that enables direct settlements in Chinese yuan for India's trade with Russia, as trade between the two countries, especially in energy goods, has jumped significantly in recent months, according to a financial sector insider on Wednesday.

 "Several financial institutions in India are working on plans to see whether direct cross-border yuan transactions between Indian and Russian companies can be realized," the insider from a financial institution told the Global Times on condition of anonymity, predicting a possible explosive growth for the use of yuan and trade in the short term, if the yuan can be directly used as a currency for transactions between India and Russia.

However, as direct transactions in yuan between Indian and Russian companies have not been available before, a new channel needs to be found, the person said.

India's biggest cement producer, UltraTech Cement, reportedly paid in Chinese yuan for a cargo of coal from Russian producer SUEK, Reuters reported on June 29. The cargo's sale was arranged by SUEK's Dubai-based unit, the report said.

The move, industry analysts said, signals the possible trend for the yuan to become an increasingly popular and reliable alternative to the US dollar, which has been increasingly weaponized by Washington.

The insider at a banking institution said that what they are working on is something new - direct transactions in yuan between Indian and Russian companies without going through any third party or countries, which can be more effective.

According to a report by the Center for Energy and Clean Air Research, after the Russia-Ukraine conflict, India's crude oil imports from Russia increased from about 1 percent to 18 percent.

There are no technical problems with yuan settlements in cross-border trade between Russia and India, and this is conducive not only to the internationalization of the yuan but also to the sustainability and smoothness of trade, as a possible means of avoiding risks for enterprises, at a time when the US government is apt to wield its dollar hegemony as a stick to put sanctions on others for political purposes, Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology, told the Global Times on Wednesday.

The US dollar is the monopoly currency of the entire international settlement system, allowing the US to freeze the assets of enterprises at any time, experts said.

"China, Russia and other countries must find ways to avoid risks, while coming up with more convenient and efficient payment methods such as the yuan to secure the supply chain and trade," Dong said.