China’s New Gold-Backed Oil Benchmark to Deal Blow to U.S. Dollar

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New financial instrument gives oil-exporting nations their long-sought alternative to the petrodollar.

China will soon introduce a crude oil futures contract denominated in yuan and convertible into gold, the Nikkei Asian Review reported on September 1. Analysts say that since China is the world’s largest oil importer, the move could deal a major blow to the global influence of the United States dollar.

The contract would allow oil exporting nations such as Russia, Iran and Venezuela to conduct sales in yuan, instead of in U.S. dollars, and to then change the yuan into gold on both the Hong Kong and Shanghai exchanges. This would also allow these countries that often fall afoul of American foreign policy to circumvent dollar-based U.S. sanctions.

The Chinese government has been developing the gold-backed futures contract for years, and Oilprice.com reports that it is expected to launch this year. It will be China’s first commodities futures contract available to foreign entities, and analysts expect many oil-exporting nations and firms to find it appealing. Continue reading

The Coming China-Germany Trade Juggernaut

 

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In a post-American trade war, this emerging bloc will wield devastating power.

Stories of international angst over United States President Donald Trump’s protectionist approach are becoming more commonplace. Mr. Trump’s “buy American, hire American” catchphrase sounds good for many at home, but abroad, it is prompting a weighty reorganization of international trade relationships. And long term, the result will be a trade war that will prove ruinous to the U.S.

World trade has changed a great deal over the last several decades. The international community at large no longer depends on America’s giant import expenditures and exports. Parag Khanna of Politico wrote:

As Americans, it’s easy to assume that global trade still depends on America as the consumer of last resort. But that’s no longer true. In fact, the majority of trade in emerging-market nations is with each other, not with the U.S. In 1990, emerging economies sent 65 percent of their exports to developed nations like the U.S. and Europe, and only 35 percent to other developing countries. Today, that figure is nearly reversed. Continue reading