China Declares It is Moving to Buy Oil in its Own Currency

• China’s President Xi Jinping pushed Friday for the settlement in the yuan of energy trades.
• Xi, at a summit meeting with Arab leaders, stated that China would continue to rely on large quantities of oil.
• The US dollar’s dominance globally could be weakened if more trade is made in the yuan.

At a summit with Arab leaders on Friday, China’s President Xi Jinping pushed for the settlement of energy trades in the Chinese yuan — a move that could weaken the US dollar’s global dominance in the long run.

Xi stated at the summit that China will continue to import large amounts of oil and gas from the Gulf states and settle its claims in the Chinese yuan or RMB. statementThe foreign ministry of China. The US dollar is the currency of choice for most international trade.

According to a transcript of his speech, Xi stated that the Shanghai Petroleum and Natural Gas Exchange platform would be fully utilized for RMB settlements in oil and gas trade. China Daily.He didn’t specify when the change would take effect.

It’s not clear if any of the Gulf nations are taking up the proposal, but Saudi Arabia — the world’s top oil exporter —  has been in talks to use the yuan to settle its energy salesChina’s largest consumer.

Such a move would make it difficult to keep the US dollar’srole as the reserve currency of the world, spurring “de-dollarization.”

“The Saudis can buy a lot from China, and China can buy a lot from Saudi Arabia,” Why should they transact with a third-party currency, and incur all these exchange-rate cost? Gal Luft, a director of the Institute for the Analysis of Global Security thinktank, stated CNBCFriday Already, China uses the yuan. buy Russian energy.

China wants to make the Yuan the world’s most dominant reserve currency, but it has not yet achieved this goal. long way to goThis is due to Beijing still managing its value carefully. It is not fully convertible to other currencies currently on the global marketplace.

Xi was in Saudi Arabia speaking on a state visitThis was at a time when tensions between Riyadh & Washington are high.

According to Khalid Al Falih (the kingdom’s investment minister), about $50 billion worth of investment deals were struck during Xi’s visit. BloombergSunday. He did not specify whether the amount includes deals made with other Arab countries.