(Yicai Global) Oct. 26 -- China's central bank, the People's Bank of China (PBOC), has announced the institution of a payment versus payment (PVP) yuan-ruble payment system for financial businesses, which aims to lower the exchange rate risks in trade, cankaoxiaoxi.com reported, citing Russian media.

The main potential risk for the ruble and yuan is the possible financial battle between the dollar and US treasury department, economist Frederick William Endal wrote in an article appearing on globalresearch.ca.

The China Foreign Exchange Trading System (CFETS) gained PBOC's approval on Oct. 9 to institute PVP business for yuan-ruble transactions based on its High Value Payment System (HVPS). PBOC said it marked the official establishment of PVP mechanism of yuan and foreign currencies in China's foreign exchange market, and new progress has come in infrastructure construction of the foreign exchange market.

The official statement released by CFETS noted in addition to ruble, CFETS also plans to launch a similar PVP system for the yuan and other foreign currencies based on China's Belt and Road initiative. PVP is a prophylactic foreign exchange settlement mechanism that requires the simultaneous transfer of currencies for purposes of transactional security.

The set up of the PVP platform for ruble and yuan (bypassing USD) is one of the most important changes in the international financial system. Such news will be extremely unwelcome to Wall Street banks who have been working for the dollar system since 1944, and which has hitherto retained its dominant position, Russian media reported.

In fact, the significance of founding the PVP system does not lie in reducing the exchange rate risks in Sino-Russian trade in which the settlement has been made with local currencies, thus bypassing the dollar for a long time. The point is it will create a vast new reserve currency area unbeholden to the greenback. This move is the latest step towards using local currencies for settlement in bilateral trade among China, Russia and other partners on the New Silk Road, and paves the way for minting a vital reserve currency which can bump the dollar.