Just one month after conducting joint military exercises, Russia and China are set to sign an agreement which would boost the use of their national currencies in bilateral and international trade in an attempt to mmove away from the current dollar-denominated financial system, according to Russian state-owned news outlet TASS.

It is planned that Russia and China will be developing bilateral payments in national currencies, encourage and expand the use of national currencies, particularly through promotion of their use when signing international trade contracts. According to the draft agreement, the sides will also assume required measures to lift barriers for payments in national currencies. -TASS

The Kremlin released a draft decree on Wednesday outlining "settlements and payments for goods, service and direct investments between economic entities of the Russian Federation and the People’s Republic of China are made in accordance with the international practice and the legislation of the sides’ states with the use of foreign currency, the Russian currency (rubles) and the Chinese currency (yuan)."

According to the draft, Moscow and Beijing will cooperate to develop a national payments system, along with cross-border payments in national and other currencies.

"The sides deepen the cooperation in the field of national payment card systems and within the framework of the Russian and Chinese legislation provide support to commercial banks in their independent decision-making on joining the payment system in the state of the other side," reads the document.

Last November, Russian Prime Minister Dmitry Medvedev said that discussions were under way to allow the use of China's UnionPay credit card in Russia, and Russia's Mir card in China.

Russian Prime Minister Dmitry Medvedev (left) and Chinese Premier Li Keqiang in Beijing’s Great Hall of the People in November. Photo: EPA

"No one currency should dominate the market, because this makes all of us dependent on the economic situation in the country that issues this reserve currency, even when we are talking about a strong economy such as the United States," Medvedev said last year.

"I want to say something that may raise a few eyebrows, but I think some of these [US] sanctions are good or useful because they forced us to do what we should have done 10 years ago," he added.

Beijing and the Kremlin have grown considerably close in recent years

On Wednesday, Chinese President Xi Jinping touted a new level of relations with Russia during his three-day visit. "Step by step, we’ve been able to bring our relations to the highest level in history," said Xi.

Russian President Vladimir Putin chimed in, adding as he kicked off the meeting that ties between the two countries are "at an unprecedented level."

"We confirmed that the positions of Russia and China on key world problems are close, or as the diplomats say, coincide," said Putin after the first round of discussions with Xi - who he called a "dear friend."

Xi, who will address a flagship investment forum Friday in the Russian leader’s hometown of St. Petersburg, will sign about 30 documents with Putin after the talks focused on trade, investment and energy. Bilateral trade increased last year by about a quarter to a record $108 billion. The countries’ first natural gas pipeline is due to open later this year and China is investing in Russia’s Yamal Arctic LNG project. -Bloomberg

Xi brought two Chinese pandas to donate to the Moscow Zoo. Later, the Chinese leader will attend the opening of a Chinese car plant, before receiving an honorary doctorate from Putin's alma mater in St. Petersburg on Thursday.