well thats a good news, Back in Q1 and Q2 of 2015 China was facing some economic downfalls, this will surely help its economy.
Nice. The Shanghai Trading Exchange has a Cultural Development Office and a Party Committee Office, and of course there remains the elephant in the room - namely the huge nationalized energy companies China National Petroleum Corporation (CNPC) and China Shenhua Energy Company ( SEHK ) .
That could spell doom for the dollar. Thanks for the link. This is actually a national security issue for the US, but they probably don't realize it.
Please explain how this is a national security issue for the United States. At first blush, many might conclude that State owned energy companies dominating a State-controlled trading exchange is not going to attract legitimate price discovery or outside participation. Just my honest opinion. It's not going to displace ICE or Nymex in terms of fungibility and transparency.
I don't think so. The USD will be the primary influence on the final price. They might pay with the Yuan - but they will be thinking in USD. "The contract is priced in Yuan, although participants will also be allowed to settle their trades in US dollars, at prevailing exchange rates"
To both, Russia has long wanted to move oil away from being priced in US dollars. Since this contract will be priced in Yuan, it removes the oil/dollar peg. Therefore Russia and China are no longer at the mercy of the dollar. Since the dollar will have less influence, the rest follows.
"... part of a trend by Russian companies to denominate imports and exports in renminbi or rubles, and not U.S. dollars. "We're moving away from the diktat of the market that denominates all the commercial oil flows in U.S. dollars, Putin said...." http://www.upi.com/Top_News/World-N...llar-embraces-Chinese-currency/5241415977738/
The Saudis insist on being paid for their oil with US Dollars. In fact, the big Middle Eastern producers have economic incentives to continue to demand dollars. The contract does not remove the dollar peg - the Shanghai contract specifications offer the option of settling in either the Yuan or the Dollar. They have to - look at the physical delivery points ( they demand dollars ). This is just a weak foreign exchange mechanism. And given Russia's past in terms of fiscal defaults, economic sanctions, and Ruble devaluations, Putin's wishes are a fantastic pipe dream. Besides, what about my original premise that a state-controlled trading exchange dominated by state-owned oil and energy companies being fair and transparent to outside parties ? Who would want to venture into that...
To speak to everyone's point, this is just another step in China's long march towards a liberalized market. They are establishing RMB trading posts around the world from Australia to Canada, building Silk Road infrastructure projects linking Europe to Asia, investing billions in Africa and the Middle East, enforcing and even increasing their sovereignty over the South China Sea, and increasingly settling debts away from the USD. While much remains to be done, if you view China in the context of economic history, they are being extremely deliberate in their tactics.