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China’s Middle Eastern business will increase yuan-for-oil-deals, but dollar expected to stay dominant in world trade
China is looking to expand the use of the yuan in oil and gas settlements with the six Gulf Cooperation Council states
While the currency is likely to get a boost in energy markets, the yuan will not replace the US petrodollar, analysts say
+ myNEWS
Published: 10:00am, 18 Dec, 2022
Updated: 10:00am, 18 Dec, 2022
China’s plan to expand use of its currency for oil trading with six Middle Eastern countries will elevate use of the yuan in global commerce among friendly countries and futures traders drawn by its stable exchange rate, market analysts forecast.
But while that may lead to more yuan-for-oil deals – largely so China can buy fuel without intervention from the United States – experts say the shift will not offset use of the petrodollar or substantially boost the yuan’s use outside energy markets.
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The number of yuan deals should rise, however, because China – the world’s biggest buyer of oil – would ask exporters to use its currency, Zhao said.
Other parts of the world will catch on if yuan exchange procedures are convenient and the Chinese currency is regarded as “safer” than the dollar, he said. Among the candidates are Hong Kong, Singapore and some European nations.
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But the yuan will not replace the petrodollar as Middle Eastern exporters find the US currency to be their easiest way of investing proceeds from sales. Western countries and importers in Asia outside China still widely use it, Ho said.
“It’s a long way to go before we can say there is such a thing as petro-renminbi,” said Chen Zhiwu, chair professor of finance at the University of Hong Kong.
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But the currency’s global profile will stay low because China wants to continue controlling its international exchange rate, analysts say.
https://www.scmp.com/economy/global-economy/article/3203585/chinas-middle-eastern-business-will-increase-yuan-oil-deals-dollar-expected-stay-dominant-world
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