At the China-Gulf Cooperation Council summit held recently, China proposed that in the next 3 to 5 years, it is willing to build a new pattern of three-dimensional energy cooperation with the GCC countries. China will continue to increase imports of crude oil and liquefied natural gas from GCC countries, strengthen cooperation in oil and gas development, and clean and low-carbon energy technology, and carry out RMB settlement of oil and gas trade.
Coinciding with the gradual progress in the internationalization of the renminbi and the acceleration of the process of “de-dollarization” in countries around the world, the concept of “petrorenminbi” has become a hot topic recently.
What far-reaching impact will the “petro-yuan” have on the international crude oil market? Will it have an impact on the oil trading system monopolized by the US dollar?
After the Russian-Ukraine conflict broke out, the United States and other countries announced that some Russian banks would be excluded from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), and imposed various unprecedented restrictive measures on Russia.
In order to mitigate and avoid the harm caused by Western sanctions, Russia took the lead in announcing the promotion of “de-dollarization”. From April onwards, when Russia supplies natural gas to “unfriendly” countries and regions, the payments will be settled in Russian currency. The Russian government also stated that it does not rule out extending this settlement model to other fields, and liquefied natural gas and agricultural products are all under consideration.
In April, Russia said it wanted to increase the use of non-Western currencies in trade with countries such as India.
The RBI launched a rupee settlement mechanism for international trade in July. The RBI said the move was aimed at “facilitating the growth of global trade, boosting India’s exports and supporting the growing interest in the rupee from the global trading community”.
In another interesting development: Israel included the Canadian dollar, Australian dollar, Japanese yen and Chinese yuan in its foreign exchange reserves for the first time in this year, while reducing its holdings of greenbacks and Euros to diversify its foreign exchange reserves.
According to the report released by the Central Bank of Brazil at the end of March, the proportion of US dollars in Brazil’s foreign exchange reserves fell from 86.03% to 80.34%, the proportion of euros fell from 7.85% to 5.04%, and the proportion of RMB rose from 1.21% to 4.99%, becoming Its third largest foreign exchange assets.
De-dollarization’ itself is a long-term call for the reform of the international monetary system, and it is an expression of the long-term negative spillover effects of the dollar hegemony by countries around the world. The United States relies on its comparative advantages in military, technology, and financial markets to force the world’s major oil producers to It is unreasonable for China to use the US dollar for settlement and try to increase the US dollar reserves of various countries to collect US dollar seigniorage from the world. All countries in the world have long hoped that emerging currencies, including the renminbi, will form a check and balance on the hegemony of the US dollar.
From the current point of view, under this wave of ‘de-dollarization’, the future trend of diversification of the global currency system will become more clear, but if there is a currency that can replace the US dollar in the international arena, then it will A currency should be recognized and used by most countries in the world under a system that transcends countries, economic alliances, and political alliances, so that it can exist for a long time and occupy a dominant position in the international market.
However, “de-dollarization” is a gradual process, and it is also an inevitable adjustment of countries’ reserves and transactions in the future. With the expansion of the scale of oil and gas transactions and settlements in RMB, this trend will accelerate. Hence, the U.S. dollar will remain one of the most important currencies in the world for a long time to come, so there is no need to exaggerate the results of “going away from the U.S. dollar.”
According to the official currency composition of foreign exchange reserves (COFER) data released by the International Monetary Fund (IMF), in the first quarter of 2022, the RMB accounted for 2.88% of the global foreign exchange reserves, compared with 2016 when the RMB just joined the Special Drawing Rights (SDR). ) currency basket rose 1.8 percentage points, ranking fifth among major reserve currencies. In May 2022, the International Monetary Fund will increase the weight of the RMB in the Special Drawing Rights from 10.92% to 12.28%, reflecting the recognition of the increased degree of free use of the RMB.
The RMB is not a freely convertible international currency. It currently has special drawing rights in the IMF, but it is still attached to the US dollar system.
The escalation of international risk events has driven more and more countries to adopt trade settlement currency diversification strategies to get rid of the situation of over-reliance on US dollar-denominated trade. This move will help promote the further internationalization of the renminbi. However, the internationalization of the renminbi is not to replace the US dollar, but to reduce China’s dependence on the US dollar and ensure its own security in the economic and financial fields. As the process of internationalization continues to move forward, the RMB is increasingly valued by the international market, and more and more countries are increasing the proportion of RMB in their foreign exchange reserves. In the face of new challenges and new opportunities, as long as the internationalization of RMB continues to be promoted in an orderly, steady and prudent manner in the future, it is expected that the RMB will become the third largest international currency next to the US dollar and the euro in about 10 years at the earliest. .
