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China Calls Out U.S. Dollar Dominance As It Buys Russian Coal With Yuan

  • Chinese buyers are using yuan to purchase Russian crude oil and coal.
  • Chinese state media is using the situation as an opportunity to claim the status of the U.S. dollar is “at risk.” 
  • China is treading lightly in its trade with Russia, wary of potential Western sanctions.

The first shipments of Russian coal and crude oil, paid for in yuan, will arrive in China in April and May, respectively. Chinese state media used the opportunity to denigrate the United States, claiming that the international status of the U.S. dollar is “at risk.” However, financial expert Albert Song believes that it will not affect the U.S. dollar’s status as the leading global reserve currency. Fenwei Energy Information Service Co., China’s leading information and service provider to the coal and coke industries, revealed that several Chinese companies purchased Russian coal in Chinese currency in March, and the first shipment would be made in April. This is also the first shipment of Russian commodities paid in yuan to arrive in China after Russia was sanctioned by Western countries.

Fenwei did not specify on which date the shipment was expected to arrive.

In addition to coal, Chinese buyers also used yuan to purchase Russian crude oil. The first ESPO (Eastern Siberia Pacific Ocean) crude oil will be delivered in May, according to a commentary published in early April on Cngold.org, a Chinese online media outlet about investing.

Citing the purchases from Fenwei, the article stated that payments in U.S. dollars will become less popular.

“Russia announced that it would only accept payments in rubles for Russian oil and natural gas, which turned the United States and European countries from those who impose sanctions to those who are subjected to sanctions,” the commentary said. “Chinese yuan seized the opportunity and began to reveal its potential in global trade payments. Now that coal and oil paid for in yuan will arrive in China, the international community [will] become green-eyed [at our success].”

On April 23, Albert Song, a researcher at Tianjun, a politics and economics think tank, told The Epoch Times that the recent Chinese purchases of Russian commodities in yuan will not affect the international status of the U.S. dollar, “because these are only bilateral trades between China and Russia, not multilateral trades involving other countries. ”

Song has 27 years of professional experience in China’s financial industry, focusing on research in China’s politics and economics.

According to data released by China’s General Administration of Customs in mid-April, the quantity of imported coal and lignite to China dropped 39.9 percent year-on-year in March and 24.2 percent year-on-year in the first quarter. However, Russian imports not only retained the top spot in China’s coking coal imports in March, the quantity more than doubled year on year.

China’s total imports from Russia are also growing significantly. The latest mid-April report from the General Administration of Customs showed that in the first quarter of 2022, its total imports from Russia increased to $21.73 billion, a jump of 31 percent year-on-year, ranking second only to Indonesia’s 31.4 percent.

Related: Can Lebanon Repair Its Failing Energy Sector?

When touting the growing influence of the Chinese currency, the article on Cngold.org also revealed that the Chinese regime is currently negotiating with Saudi Arabia, planning to use the renminbi to price crude oil, in part.

Song disagrees with the commentary’s conclusion that the Chinese yuan is an emerging star on the international market.

“The most important thing is that a country’s sovereign currency is recognized by many countries. Although the Chinese Communist Party claims that the renminbi is on the path of internationalization, the share of the renminbi’s international payments over the years has only been 3.2 percent because it is a government-controlled currency and cannot be freely exchanged. It is therefore a currency with poor credit, to begin with,” Song commented.

China Wary of Sanctions

On April 7, the European Union announced the fifth round of sanctions against Russia, including a ban on coal imports from Russia.

The toughest sanction so far is to cut Russian banks from the global financial system. After Visa and Mastercard suspended services in Russia, Russian banks indicated that they planned to issue cards using China’s UnionPay system.

As China’s largest credit card brand, Unionpay cards are issued in over 70 countries and regions.

However, Russian news agency RBC reported on April 20 that China’s UnionPay refused to cooperate with Russian banks for fear of being sanctioned, leaving Russia with fewer options for a credit card provider for its global business.

“China UnionPay chooses not to cooperate with Russian banks, for fear that itself will get implicated in the sanctions. The CCP needs the New York Clearing House interbank payments system to obtain dollars. Sanctions against China will block it from earning foreign exchanges through exports,” Song explained.

He further elaborated that there are three driving forces for China’s economic growth—foreign trade, investment, and consumption.

“All three are in decline. If additional sanctions are imposed on China, it will be an unbearable situation for China’s economy,” he said.

By Zerohedge.com

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Leave a comment
  • Mamdouh Salameh on May 01 2022 said:
    The launch of the yuan-denominated crude oil futures in Shanghai on the 26th of March 2018 was a wake-up call for the United States. In so doing, China signalled that it is challenging the petrodollar for dominance in the global oil market and it does not plan to allow the US financial system to dominate the world indefinitely. Right now, China is the world’s largest economy based on purchasing power parity (PPP), the number one exporter on the globe and the largest crude oil importer in the world. The Chinese would like to see global currency usage reflect this shift in global economic power.

    The payment by China in yuan for Russian shipments of oil and coal dovetails with President Putin’s demand for payment in rubles for Russia’s oil and gas exports to apply later to all Russian exports from cereals to processed uranium and precious metals vital for the functioning of the global economy. In this occasion, Chinese state media used the opportunity to denigrate the United States, saying that the international status of the U.S. dollar is at risk.

    And contrary to false claims by Western media that China is distancing itself from Russia because of the Ukraine conflict, China’s total imports from Russia increased to $21.73 bn in the first quarter of 2022 or 31% year-on-year.

    Saudi Arabia has recently indicated that it is considering accepting the petro-yuan in payment for its crude imports to China, its largest oil export destination in the world.

    If Russia’s oil exports of 8.0 million barrels a day (mbd) are sold in rubles, China’s crude imports of 13.0 mbd paid for in petro-yuan, Saudi Arabia/s crude exports of 2.0 mbd to China paid for in petro-yuan and India’s imports of 5.0 mbd paid for in rupees with both Iran and Venezuela joining the fray, then it is very possible that the petrodollar could easily lose some 48%-50% of its share in globally traded oil.

    This would be a serious blow to the petrodollar, the American financial system and could lead to a major devaluation of the dollar against other major currencies.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • DoRight Deikins on May 01 2022 said:
    This is the key point: « Although the Chinese Communist Party claims that the renminbi is on the path of internationalization, the share of the renminbi’s international payments over the years has only been 3.2 percent «// because it is a government-controlled currency and cannot be freely exchanged. It is therefore a currency with poor credit, to begin with,”//» Song commented. »

    Since both the renminbi and the ruble are government-controlled currencies, have at it. But buyer beware.
  • Amin Amen on May 28 2022 said:
    The key point is that resistance to the dollar has gained great momentum and considering the opponents position in global markets it will soon be outmatched.

Leave a comment




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