The Rise of The Petro-Yuan

• The Rise of The Petro-Yuan
  by https://www.rt.com/
  China is aiming to overthrow the US dollar as the currency of choice for the oil market, a move that could have far-reaching consequences.
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  Since the 1970s, the oil trade has almost entirely been conducted in US dollars, even when buyers and producers are not American. The ramifications of the dollar-denominated oil trade are immense: Because oil is priced in dollars, there is huge demand for dollars, lending the US economic and strategic power. 
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  Beijing hopes to challenge the dollar by setting up a futures market with its own currency, the yuan. To that end, reports indicate that China is set to introduce an oil benchmark priced in yuan in the coming months.
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  For China, there are a lot of upsides to this gambit. An oil futures market based in yuan will stimulate demand for the Chinese currency, which China believes will lend it strategic clout. That money is also more likely to be recycled back into the Chinese economy. The US has been able to run huge budget deficits, borrowing money at extremely low rates because of the demand for its currency. Petrodollars continuously flow back into the US economy, creating investment and economic growth that might not otherwise occur. The dollar has also long been one of the premier safe havens for investors around the world.
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  China hopes to replicate this dynamic. And as the largest oil importer in the world, there is a great deal of logic in having oil contracts trade in yuan.
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  But it won’t be easy to unseat the greenback. The plan is to launch an oil futures contract on the Shanghai International Energy Exchange (INE), but there are obstacles in convincing large oil producers and consumers in using the yuan and investing in the Shanghai benchmark. Without some major countries participating, like, say, Saudi Arabia or Russia, it will be difficult to create a market that is deep and liquid enough to make a difference.
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