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PBOC Pressures USD Hegemony; Starts Yuan-Denominated Gold & Oil Trading

PBOC Pressures USD Hegemony; Starts Yuan-Denominated Gold & Oil Trading thumbnail

With 23 foreign central banks diversifying from US Dollars to Renminbi and the PBOC actively aiding numerous major financial hubs around the world with bilateral currency swap agreements, it seems yet another nail in the coffin of US dollar hegemony just got hit…


Nothing lasts forever, no matter how much you believe…

PBOC plans to start yuan-denominated gold and oil futures to help establish a global payment system for the Chinese currency, Guo Jianwei, deputy director of the second monetary policy department of the People’s Bank of China, is cited by Shanghai Securities News as saying.

PBOC will continue to push reform of interest rates, exchange rates and the capital account

The pace of Renminbi use is accelerating…

“In the first quarter, the RMB settlement of trade in goods amounted to 1.0871 trillion, accounting for the proportion of total import and export customs of 18.4% over the same period,” said Guo Jianwei, 18.4% and 11.7%, two figures, hidden vitality, accounting for just three months time improved 6 percentage points, indicating that the use of the renminbi is growing internal demand.

It seems the level of interest in diversifying away from the US Dollar is growing…

At the end of last year, China’s total with 23 foreign central banks or monetary authorities signed bilateral currency swap agreements, the total size of more than 2.5 trillion yuan.


Recently, the central bank after another with Britain and Germany signed a memorandum of agreement RMB clearing and settlement central bank, the European offshore RMB business to accelerate.


It is noteworthy that, in addition to London, Paris, Frankfurt, Luxembourg, Singapore, striving for offshore yuan trading center with only the United States “sitting on the sidelines.”

The goal seems clear…

Renminbi is a new bright spot in the next cross-border RMB business development.” Guo Jianwei, said the central bank will continue to advance the future of interest rates, exchange rate reform, capital projects, and expand the range of RMB payment using to promote the yuan-denominated policies, thereby establishing renminbi The global payment system and so on.

10 Comments on "PBOC Pressures USD Hegemony; Starts Yuan-Denominated Gold & Oil Trading"

  1. J-Gav on Fri, 25th Apr 2014 4:18 pm 

    Don’t know that I’d panic just now about a Chinese financial takeover of the world … too many bad loans outstanding there. Which doesn’t mean that there is no concerted effort underway to skirt dollar hegemony, but nobody needs an overnight systemic global collapse so they may be willing to sort of take their time about it … Just how much time nobody knows.

  2. dolanbaker on Fri, 25th Apr 2014 6:00 pm 

    The Chinese certainly won’t kill the golden goose (US) until it stops laying eggs! At a time of their choosing, they’ll simply stop buying US debt.

  3. Makati1 on Fri, 25th Apr 2014 7:09 pm 

    J-Gav, I would not bet on their taking their time. The world is in a money war if you haven’t noticed. Russia is also doing more and more trade in non-dollars, as are BRICS. When Russia decides to only take non-dollars for oil and the ME gets the message as their trade is in more and more non-dollars, I see a fast switchover. Either way, it is coming.

    Dolan, you are correct, but you or I do not know when that might be. If they see a chance to do it, they will. As they hold over 10,000 tons of gold now, when it happens they will likely make up for any loss by the increase in value of their gold holdings. Besides that, the US needs some of what they sell so total trade would not end. It would shrink but not by too much. Remember, trade works BOTH ways. The US has to export also.

    At least, that is the way I see it.

  4. Arthur on Sat, 26th Apr 2014 3:45 am 

    China is in no position to impose the new reserve currency. You need a military conquest first. Everybody may be trying to sideline the dollar, but there is no next reserve currency waiting in the wings to follow up on the dollar. Gold or other precious metals will always be accepted as a means of payment, but there is not enough of that and impractical for small scale transactions. Barter will be big, for sure; that’s what the Germans did in the thirties and it worked, to some extent. But the peakoil believers already know that international trade is in for a nose dive and the problem of a reserve currency will solve itself: no real need for it.

  5. Davy, Hermann, MO on Sat, 26th Apr 2014 6:36 am 

    Geez, hold on to yourself Mak. Articles like this get you all excited. Guys the amounts of money we are talking are still insignificant in comparison to global trade. In a world of increasingly efficient transactions, countries will make efforts to cut cost no doubt and they should. This is why many countries are making a bilateral trade deals. In a complex global and interconnected economy there is no substitute for what the dollar has to offer in the big picture. It is backed by a large unified and respected economy. Yes, that economy is becoming less respected but what is the alternative…there are currently none and no plan B’s. No other currency can compete with or replace the dollar. The Chinese currency is not yet freely convertible and its rate is set internally. This is typical of the early stages of an export economy. China cannot afford to change this structure. It is already seeing pressure on its exports of low end products. It is an export structured economy and relies on a managed currency to promote cheap exports. China is a mess with a debt spiral from many years of kicking the can down the road on bad debt from mass overcapacity in multiple industries. All this debt was conveniently supported and hidden in the many local governments. The pressures have built up and the unintended consequences of the moral hazards are an economy of smoke and mirrors. No one knows who owns what in many cases because of rehypothecation from excessive debt cross holdings. The Chinese shadow banking system is in the stratosphere with funny money. Chinese balance sheets, income statements, and government statistics are a puzzle of this smoke and mirror game. It worked for 20 years but the swans are coming home to roost. Many Chinese businesses were turning to this shadow banking system to cover their unpayable debts. The bubble is now deflating and the PBC is trying to manage the unmanageable. As for the gold holding they are significant and rising but nowhere like the Mak exaggeration. They may be half of Mak’s estimate. This gold accumulation will end eventually because of the pressures of an economy in decent unable to reach the all-important 7% growth target for social stability. China will be a deficit spender soon spending gold and foreign currency to try to cover all the cost associated with a country with multiple problems on all fronts and a debt unwind. China is in no position to dump the dollar nor is any other basket case Bric country. No, the dollar will end soon enough but it will be with the contraction and or collapse of global trade and exchange. The dollar will be the last of the global reserve currencies quite possibly. What will come next is anyone’s guess and will depend on the where, when, how of collapse. If the landing is hard enough and the reboot far down the decent curve then there will only be local efforts at exchange in a dangerous collapse global world of mass migrations and starvation. All other global economies will collapse along with a dollar collapse. There is no decoupling and no alternatives to the dollar in the present global economy. Those of you that believe there is a new global currency in waiting and relish the idea will be proven wrong. What you see is what you get with the last of the global expansion cycle. Sorry political propagandist, your grand ideologue fantasy is just that fantasy and fiction.

  6. Makati1 on Sat, 26th Apr 2014 7:58 am 

    Sorry, Arthur but the war is already waging and it is currency not bullets. Problem is, the West seems to have not gotten the message, except to complain when China devalues their currency to improve trade. If you had to watch the exchange rates because you need something different to spend than your US dollar income, you would notice the war. The Philippine Peso has devalued 10% in the last 4-5 months in relation to the USD. That gives me 10% more buying power towards my prep for the future.

    I’m going back to the States for a visit in a few days and am not anxious to see the slide down since my last one two years ago. Nor am I happy to have to deal with the TSA gestapo at the US airport of entry, JFK. But, I have to go as an obligation to family. I may not be online much for the next two weeks, but I will be back. (I do not take my PC when I travel.)

  7. Arthur on Sat, 26th Apr 2014 9:44 am 

    Makati, there is certainly a currency war going on, but the topic was: can the Yuan replace the dollar? Answer: the currency of an $8T economy cannot replace the currencies of US and EU economies with twice the size.

    I do not take my PC when I travel.

    peakoil proof! 😉

  8. Makati1 on Sun, 27th Apr 2014 1:18 am 

    Really? So the loss of 1/3 of the world’s trade in dollars would not affect the USD? BS! That is what we are talking about. BRICS is over half of the world’s population. With even the EU and ME doing business in Euros/gold/remimbi and not dollars, how long do you think the USD will last? The Chinese do not want to replace it, they just want to kill it’s power by taking a lot of trade out of it’s loop. When that happens all the printing by the fed will be useless and the US will drop to 3rd world status quickly.

  9. Davy, Hermann, MO on Sun, 27th Apr 2014 7:19 am 

    Settle Mak, it is not that exciting and your analysis is of basket case economies (sickbrics) that are sick and in need of stability. The act of a collective action against the dollar would have an effect they cannot afford in their current unhealthy state. China is by far the economy with the worst economic dynamics at the moment. China is near a hard landing and this will suck all that gold and foreign exchange back out. China’s hard landing has the potential to take the global economy with it. That is the only way they could kill the American economy. Russia is faced with recession from a cold war it cannot afford. India is a mess with foreign currency issues and capital flight. Brazil is a mixed bag but has a big budget deficit issue. So Mak, your team is a joke and your enthusiasm is a fantasy of a win that will never happen. The dollar will collapse but with a collapsed global economy. The dollar will either precipitate in that collapse or follow a different collapse trigger down.

  10. Arthur on Sun, 27th Apr 2014 9:59 am 

    the US will drop to 3rd world status quickly.

    If nothing happens, indeed. But the bills will be coming in for Euro-America big time after the dollar crash. And I already have a feeling how Euro-America is going to respond…

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