Kyrgyzstan Central Bank Adds Chinese Yuan to Daily Foreign Exchange Updates

A Chinese bank employee counts 100-yuan notes and US dollar bills at a bank counter in Nantong in China's eastern Jiangsu province on August 28, 2019. Photo by STR/AFP via Getty Images

The National Bank of Kyrgyz Republic announced in recent days it will include the Chinese yuan in its shortlist of foreign currencies whose exchange rates are published daily.

The nation’s central bank will determine and publish the rate of the Chinese Renminbi Yuan (RMB) against the country’s official currency, the Kyrgyz Som, starting from Sept. 1, according to a statement on its official website.

Currently, only the exchange rates for the euro, Kazakhstani tenge, Russian ruble, and U.S. dollar are published daily. The exchange rates of other foreign currencies are published weekly.

Kyrgyzstan’s local media viewed the move as introducing more Chinese yuan into the nation’s official circulation, and predicted that the decision will facilitate more trade and enhance economic ties with China. Reports were of the view that more Chinese investment would help to stabilize Kyrgyzstan’s financial system.

China is Kyrgyzstan’s biggest trading partner. The central Asian nation has high dependence on Chinese imports and a huge trading deficit with China. Chinese exports to Kyrgyzstan totaled $4.163 billion in the first quarter of this year, while only $22 million of Kyrgyz goods and services were exported to China, according to public data.

Kyrgyzstan’s trade volume with China is double that of its trade with the Moscow-dominated Eurasian Economic Union, which includes Kyrgyzstan, Russia, Kazakhstan, Armenia, and Belarus. These central Asian countries were once part of the former Soviet Union led by Communist Russia.

CCP Jostles for Influence in Central Asia

Ding Shuh-fan, a professor emeritus of the Graduate Institute of East Asian Studies at National Cheng-Chi University in Taiwan, said on Aug. 18, of Kazakhstan’s decision to include the Chinese yuan as one of its commonly-used foreign currencies, “Whether a country’s currency is used or not is related to the country’s economic strength. Russia still has long-term influence on Central Asian countries. However, China’s economic influence has surpassed Russia. Kyrgyzstan’s use of the Chinese yuan can enhance its economic ties with China and is also conducive to China’s influence in Central Asia.”

Sun Kuo-hsiang, a professor of international affairs and business at Nanhua University in Taiwan, told The Epoch Times on Aug. 18 that China’s ruling Communist Party (CCP) has been pursuing the RMB’s internationalization for a long time as an important strategy “to promote the ‘regional economic integration’ that is policy by the Shanghai Cooperation Organization (SCO), led by China, which is the integration between China and Central Asian countries.”

The SCO is a political, economic, and security organization that was established by China and Russia in 2001 to counter the West. Its members include Kyrgyzstan, Kazakhstan, Tajikistan, Uzbekistan, India, Parkistan, and Belarus.

Chinese leader Xi Jinping, Kazakhstan's President Kassym-Jomart Tokayev, Kyrgyzstan's President Sadyr Japarov, Tajikistan's President Emomali Rahmon, Turkmenistan's President Serdar Berdymukhamedov, and Uzbekistan's President Shavkat Mirziyoyev pose for a group photo during the China-Central Asia Summit in Xian, in China's northern Shaanxi province, on May 19, 2023. FLORENCE LO/POOL/AFP via Getty Images

On the Kyrgyzstan central bank’s decision, Sun added, “When Kyrgyzstan now conducts trade, investment, and infrastructure cooperation with China, it can rely more on its own currency and the Chinese yuan. In other words, it no longer needs to exchange it for the Russian or American currencies.”

For China, Sun said that by promoting the circulation of the Chinese yuan in Kyrgyzstan, China can dominate Kyrgyzstan’s trade and financial activities to a greater extent.

“It also seems to want to use Kyrgyzstan as an example to influence Kazakhstan or Tajikistan, which will make China’s role in the Central Asian economy more prominent,” he said.

Belt and Road Initiative

Situated along the historic Silk Road, which was the busiest trading route spanning Eurasia for thousands of years and connecting ancient China with Europe, Kyrgyzstan also joined China’s modern equivalent called the Belt and Road Initiative (BRI). BRI is the Chinese regime’s expansive foreign policy project that aims to recreate ancient China’s silk road and maritime silk road to increase China’s trade with countries in Asia, Europe, and Africa in the 21st century.

The initiative invests Chinese capital in the construction of various high-cost infrastructure projects in participating countries, while exerting China’s political influence over them. It’s been criticized by international community for setting debt traps for the participating countries, most of which are developing countries.

Illustration by The Epoch Times, Shutterstock

Kyrgyzstan is one of the countries that is indebted to China for a large infrastructure loan. On top of that, it just signed an agreement with China in June to build the China-Kyrgyzstan-Uzbekistan railway as part of the BRI.

Sun said that Kyrgyzstan, as part of Central Asia, is an important region for the CCP’s BRI goals and “is of course also an important region to push for the use of Chinese yuan, which will enhance the influence of the BRI and consolidate the CCP’s economic influence in Central Asia.”

This is “because Central Asia is the first port and the first region for China’s BRI, especially the land route, to extend to the outside world,” he said.

A Balance Between China and Russia

Kyrgyzstan is also a member of the Collective Security Treaty Organization, established by Russia in 2002 consisting of six former Soviet states—Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan.

Sun pointed out that China and Russia have a relationship of both cooperation and competition in Central Asia. “Although China and Russia seem to cooperate closely on security matters, such as through the SCO, there is actually competition between them over economics and expanding their respective influences.”

Russia’s economy has been significantly weakened by its invasion and war in Ukraine since 2022, and the consequent sanctions imposed by the international community. China has been the main supporter of Russia’s war efforts, which has worsened its relations with the West.

A map of Central Asia. CC BY-SA 3.0 [https://creativecommons.org/licenses/by-sa/3.0]/Wikimedia Commons

Ding said that although Kyrgyzstan relies on Russia for security, the rise of China’s economy is bound to upstage Russia’s traditional influence in the region, and “Kyrgyzstan will closely watch the changes in China-Russia relations and try to maintain a balance between the two countries.”

Sun said that Kyrgyzstan has been making diplomatic adjustments between China and Russia accordingly to maximize its own benefits. “If Sino-Russian relations turns cold, Kyrgyzstan may accelerate economic cooperation with China.”

Regarding regional stability and security, “Kyrgyzstan needs to rely on the SCO or other multilateral organizations to avoid choosing sides between China and Russia in their competition,” he said.

Sun added that judging from the five currency exchange rates published by Kyrgyzstan’s central bank, Kyrgyzstan remains open to the world for business.

Luo Ya contributed to this report.