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

ISTOCK.COM/SELENSERGEN

 

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.

Chinese stock markets suspended after shares fall 7pc

The Shanghai and Shenzhen exchanges closed early after poor economic data triggered a sell-off

Trading on China’s stock markets ended early after steep losses triggered a new ‘circuit-breaker’ mechanism, installed to curb volatility.

The 7pc drop in China’s blue-chip CSI300 index prompted an automatic early closure of the Shanghai and Shenzhen stock exchanges on the first day of trading since the new safety measure was introduced.

China Destroyed Its Stock Market in Order to Save It

When you run out of magical intervention tricks in your bag the best way to handle the inevitable is a controlled demolition. Although the crisis is far from over, it alleviates the pain for the short-term time being. You know the situation is dire when the Communist Capitalists force investors to stay in by banning all selling of stocks for months, forcing you to shoulder the loss, in order to stem the tide.

 

Last week, China destroyed its stock market in order to save it. Faced with a crash in share prices from a bubble of its own making, the Chinese government intervened ruthlessly, and recklessly, to turn those prices around. Its heavy-handed approach seemed to work, for the moment, but only by severely damaging far more important goals and ambitions.Prior to the crash, China’s stock market had enjoyed a blissful disconnect from reality. As China’s economy slowed and corporate profits declined, share prices soared, nearly tripling in just 12 months. By the peak, half the companies listed on the Shanghai and Shenzhen exchanges were priced above a preposterous 85-times earnings. It was a clear warning flag — one that Chinese regulators encouraged people to ignore. Then reality caught up.

At first, when prices began to fall, the central bank responded by cutting interest rates and bank reserve requirements — measures to inject more money that had never failed to juice the market. But prices continued to fall. Then the government rallied the major brokerages to form a $19 billion fund to buy shares and waded directly into the market to buy stocks too. A few stocks rose, but most fell even further.