Is the King Dollar being displaced and kicked off its throne?
It is being threatened by the Chinese who are preparing to launch an oil futures contract denominated in Yuan and redeemable in gold. This should take place before year end! The ability to sell oil on Chinese exchanges for Yuan will allow oil exporters such as Russia and Iran to bypass U.S. sanctions.
The move is another sign of the Chinese commitment to end the dollar’s reign as world reserve currency. Our Asian friends are eager to create a new world scenario which they aim to dominate! China is escalating economically and geopolitically and proving to be more resilient than ever in facing the US…
How it started…
The Chinese dream started materializing few years ago with the creation of the New Development Bank (NDB) led by China. The goal of NBD is to provide development funding for its member states (BRICS) and for the rest of developing nations. Most importantly, this is the first time the US has no influence in the governance structures of an international development bank. And yet, the story doesn’t end here… As of April 2016, China created a physical market for gold independent from the US and UK where the gold trade was conducted exclusively in Yuan. Now, they are hoping that by starting to integrate the Yuan futures contract for oil, the Yuan will be perceived as a primary currency for trading oil.
The Chinese now need the Saudis to sell them oil in exchange for Yuan. If the House of Saud decides to pursue that exchange, the Gulf petro-monarchies will follow as well, and then Nigeria, and so on. This will fundamentally threaten the petrodollar!
The question is: Can the Chinese overtake the US?
It takes more than a rising economic status to establish a global hegemony. China’s capacity for economic reform is still in question and its financial sector remains far less developed than Western world. Growth is slowing and economic inefficiencies remain. In addition, all Chinese conglomerates are state owned which is not viable on the long-term and will lead to major un-efficiencies.
As long as the English language and American culture dominate, it will not be an easy job for China to become the role model and superpower. Think about it: would you go pursue your MBA in the states or in China? Would you buy an iPhone or a Huawei? Would you use the US healthcare or the Chinese one? Would you be interested in Trump latest tweets or “Xi Jinping” latest speech?
Your answer speaks for itself…