China and Russia’s New Credit Card Payments and their Impact on the Foreign Exchange Market

There has been significant tension in the east of Europe, and much of this tension has been caused by Russian encroachment into Crimea and Ukraine. As a result, American companies that had become a mainstay of a flagging Russian economy began to freeze Russian accounts. The supremacy and dominance of America in the world of international economics allowed it to coerce Russia into withdrawing from Ukraine through the leveraging of accounts held by Russians with American companies MasterCard and Visa.

Following Russia’s involvement in crimes committed against Crimea, account holders at Russian banks who were using credit card services offered by MasterCard and Visa found their lines of credit frozen. However, Russia had already made moves this year that seemed like an attempt to end the American dollar’s supremacy in the foreign exchange market by selling of dollar assets and purchasing gold assets instead. A similar move was made by China last year. These attempts at destabilizing the dollar made by the two dominant superpowers after America seem to indicate a similarity in strategy that is shared between the two nations.

It is fitting, then, that China and Russia have begun to work together to try to topple the American economic behemoth. China had launched a credit card of its own called Union Pay, and this credit card is quickly gaining vogue in the Russian economy. Major Russian businessmen have already begun favoring the use of Union Pay credit cards, especially after the accounts freezing performed by MasterCard and Visa.

Union Pay is now the most widely used credit card in the world, mostly due to the fact that China’s enormous population almost solely uses this credit card rather than MasterCard or Visa. UnionPay now spreading to Russia, a similarly formidable economic entity, has lead to the rise of the Chinese Yuan as a strong contender for the world’s major currency. There are simply so many people in China, and as a result so many businesses and so much money being spent, that transactions in Yuan are slowly outstripping transactions in dollars.

As a result, the dollar has seen its popularity starting to wane in favor of other currencies. The dollar has become a lot more unstable in recent years, and a lot of this instability can be attributed to the confrontational political moves performed by the American government. The sanctioning of Iran and Russia, as well as an arguably unsuccessful economic war with China, has had America fighting on three fronts, and the strain is starting to show.

The use of UnionPay credit cards in Russia has also resulted in a bolstering of the Ruble. The lack of need to rely on dollar investments in order to stabilize the country has allowed the Ruble to stand on its two feet, something that is clearly indicated in the high amount of dollar to Ruble conversions in recent months.