Chinese Economics Thread

escobar

escobar

Brigadier
tonyget said:
Please, Log in or Register to view URLs content!

Trading Oil in Yuan, Would it Matter At All?​


What Would It Take for the Yuan to Dethrone the Dollar?
  1. China would have to float the yuan.
  2. End capital controls
  3. Respect property rights
  4. Have a bond market big enough (China has virtually no gov't bond market)
  5. Inspire global trust
  6. Be willing to have trade deficits
  7. Stop export mercantilism
  8. Have a currency market big enough
At a minimum, China flunks the first seven. Numbers 1, 2, 4, 6, and 7 are serious show stoppers.

Yet, every year, these stories surface. China will back the yuan with gold, China will do set up a BRIC block, China will do this or that (while this and that circulate between gold and other nonsense).

Six and seven are essentially the same point.

For all the pissing and moaning about US dollar privileges, no other country really wants to stop their export mercantilism. The two biggest players are China and Germany. Japan was once a leader in that group and squandered it.

Consumer of Last Resort

Every country wants the US consumer to remain the consumer of last resort.

Even IF that changes (someone tell me when), there are 5 critical requirements a country must meet (#s 1, 2, 4, 6- 7, 8).

The Yuan Will Not Replace the US Dollar, Nor Will It Be Backed by Commodities

Pricing Unit Is Irrelevant

Meanwhile, I assure you oil trades for euros.

Regardless, the trading currency is meaningless. It's the holding currency that matters. Currencies are fungible. It makes no difference where a swap happens.

For example, it makes no difference if Europe sells euros for dollars to buy oil, or if Saudi takes euros and one second later converts them to dollars.

A swap for yuan does not work because the yuan does not float nor is there a big Chinese bond market to challenge US treasuries.
This oil in euros idea spawned endless silliness about oil for euros being the reason for the Gulf Wars.
Click to expand...
The vast majority of commodity sellers are private sector and those private sector sellers do not want to receive CNY. If they do, they will immediately sell the CNY to cover their own costs (not in CNY). Most private sector commodity sellers will not be holding RMB cash or securities on the balance sheet because China pays in RMB. "RMB internationalization" objective is to avoid weaponisation of the US dollar settlement system against CN, and getting others countries (like Gulf states) on board with future denial of such weaponisation.
And, that makes a lot of sense.

RMB internationalization is a long-term strategic project that is contingent on lots of very complex geoeconomic dynamics. China has to be the source of final consumer demand for a good chunk of its geoeconomic sphere of influence for the RMB to be a regional reserve currency and to initiate a recycling system.
Please, Log in or Register to view URLs content!
 
T

tonyget

Senior Member
Registered Member
escobar said:
The vast majority of commodity sellers are private sector and those private sector sellers do not want to receive CNY. If they do, they will immediately sell the CNY to cover their own costs (not in CNY). Most private sector commodity sellers will not be holding RMB cash or securities on the balance sheet because China pays in RMB. "RMB internationalization" objective is to avoid weaponisation of the US dollar settlement system against CN, and getting others countries (like Gulf states) on board with future denial of such weaponisation.
And, that makes a lot of sense.

RMB internationalization is a long-term strategic project that is contingent on lots of very complex geoeconomic dynamics. China has to be the source of final consumer demand for a good chunk of its geoeconomic sphere of influence for the RMB to be a regional reserve currency and to initiate a recycling system.
Please, Log in or Register to view URLs content!
Click to expand...

During regular times，investors would pour money into emerging markets，because it yields higher return compare to developed markets. But in financial turbulence times，the money will be pulled from emerging markets and back to the US. That's why US monetary policy has a huge impact on emerging economy
 
vincent

vincent

Grumpy Old Man
Staff member
Moderator - World Affairs
tonyget said:
During regular times，investors would pour money into emerging markets，because it yields higher return compare to developed markets. But in financial turbulence times，the money will be pulled from emerging markets and back to the US. That's why US monetary policy has a huge impact on emerging economy
Click to expand...
After the West stole Russia's and its oligarchs' money, how many non-Western rich people want to keep they money in the West?
 
hullopilllw

hullopilllw

Junior Member
Registered Member
vincent said:
After the West stole Russia's and its oligarchs' money, how many non-Western rich people want to keep they money in the West?
Click to expand...
It's hard for a global investor not to keep their liquid investable asset in mostly USD. Most investment vehicles be it the most successful hedge funds, private equity funds, and even for alt assets are mainly using USD as the base currency.
 
vincent

vincent

Grumpy Old Man
Staff member
Moderator - World Affairs
hullopilllw said:
It's hard for a global investor not to keep their liquid investable asset in mostly USD. Most investment vehicles be it the most successful hedge funds, private equity funds, and even for alt assets are mainly using USD as the base currency.
Click to expand...
Well, it would be stupid of them not at least diversify some of their money
 
M

MortyandRick

Junior Member
Registered Member
tonyget said:
Please, Log in or Register to view URLs content!

Trading Oil in Yuan, Would it Matter At All?​


What Would It Take for the Yuan to Dethrone the Dollar?
  1. China would have to float the yuan.
  2. End capital controls
  3. Respect property rights
  4. Have a bond market big enough (China has virtually no gov't bond market)
  5. Inspire global trust
  6. Be willing to have trade deficits
  7. Stop export mercantilism
  8. Have a currency market big enough
At a minimum, China flunks the first seven. Numbers 1, 2, 4, 6, and 7 are serious show stoppers.

Yet, every year, these stories surface. China will back the yuan with gold, China will do set up a BRIC block, China will do this or that (while this and that circulate between gold and other nonsense).

Six and seven are essentially the same point.

For all the pissing and moaning about US dollar privileges, no other country really wants to stop their export mercantilism. The two biggest players are China and Germany. Japan was once a leader in that group and squandered it.

Consumer of Last Resort

Every country wants the US consumer to remain the consumer of last resort.

Even IF that changes (someone tell me when), there are 5 critical requirements a country must meet (#s 1, 2, 4, 6- 7, 8).

The Yuan Will Not Replace the US Dollar, Nor Will It Be Backed by Commodities

Pricing Unit Is Irrelevant

Meanwhile, I assure you oil trades for euros.

Regardless, the trading currency is meaningless. It's the holding currency that matters. Currencies are fungible. It makes no difference where a swap happens.

For example, it makes no difference if Europe sells euros for dollars to buy oil, or if Saudi takes euros and one second later converts them to dollars.

A swap for yuan does not work because the yuan does not float nor is there a big Chinese bond market to challenge US treasuries.
This oil in euros idea spawned endless silliness about oil for euros being the reason for the Gulf Wars.
Click to expand...
Wait so your saying china doesn't respect property rights but there's nail houses everywhere?!? Hypocrite much?
 
You must log in or register to reply here.
Top