As is known, China is the world's largest oil importer. Historically, China has the largest population in the world, an impressive territory, and natural diversity from deserts to high mountains, from taiga to the tropical jungle. But China is deprived of oil resources. This creates big problems for the country. Therefore, it is not surprising that preparations are currently underway to begin trading oil futures on the Shanghai Stock Exchange. If this happens, the real revolution in the global economy will result. First about what futures are. This is, strictly speaking, exchange contracts for the sale of the underlying asset. By concluding such a contract, the buyer and the seller agree on the price level and delivery time.
During the second half of the twentieth century, a monopoly of the American currency was formed on the world market. Payments for oil were made in dollars, which contributed to the preservation of the economic hegemony of the United States. This position of the US currency was achieved largely due to the efforts of US leaders who managed to convince most of the oil-exporting countries of the need to sell their strategically important resource only for dollars. In return, the oil monarchies of the Persian Gulf received American political and military support, which was especially valuable during the Cold War (recall that the whole Arab world was shaken by revolutionary events, pro-Soviet forces came to power in South Yemen, bordering Saudi Arabia and Oman, were active radical left and communist organizations in other countries of the Arabian Peninsula).
Everyone knows that in Saudi Arabia, Qatar, Bahrain, the United Arab Emirates political regimes are much more “tough” in their rigidity than the same Assad regime in Syria or the Mubarak regimes in Egypt or Gaddafi in Libya that have already ceased to exist. But neither the United States, nor the United Kingdom, nor other Western countries have ever seriously puzzled about the observance of human rights in the oil monarchies, did not impose economic sanctions against them, did not support the opposition in these countries. Arab sheikhs remain “handshaking” and are fully supported by the Western elite, from the British aristocracy to the American financial magnates. This is the payment for the loyalty of the oil monarchies to the American dollar as a universal means of payment for oil.
Up to now, oil trading is carried out only on three exchanges - the New York Mercantile Exchange, the London Oil Exchange and the Dubai Mercantile Exchange. All of them are controlled by the same circles of the global financial oligarchy. The owners of the exchanges firmly hold on to the ability to manipulate oil prices in any mode. The setting of oil prices is a powerful tool in world politics. A significant part of modern military-political conflicts is connected precisely with oil prices and with attempts of some countries to go against the established organization of exchange trade in oil. For example, sanctions against Iran in 2005 were introduced by the UN Security Council not because of the specificity of Tehran’s political course (this is only a formal justification for sanctions for the near man in the street), but precisely because Iran tried to create its own oil exchange and exit, thus, from the vicious circle of dependence on the global financial oligarchy with centers in the United States and Great Britain.
The notorious “global community” responded instantly and imposed economic sanctions against Tehran, banning all other states from buying Iranian oil. Iran began to look for workarounds and, in the end, was able to do without the US dollar, supplying its oil for the national currencies of the partner countries, or for its equivalent in gold. In the case of China, we will be able to observe even more interesting developments. Nevertheless, the scale of China and Iran as states and players in the world political and economic arena is quite different.
China’s desire to abandon the use of the dollar in its “oil” calculations is not due to the consequences of sanctions, as in the case of Iran, but with the growth of Beijing’s economic ambitions. China sees itself as the leader of world politics and economics, and for this it is necessary to deliver a massive blow to the dollar. Back in 2015, the Chinese yuan gained the status of a global reserve currency. Of course, to a greater degree this is the political move of the IMF, since no real increase in the share of the yuan in the reserves of world banks followed this decision. Although some countries began to make transactions in yuan, while the Chinese currency, of course, still can not be compared with the US and even with the European.
But even this promotion of the Chinese currency says a lot. And Beijing, of course, is not going to stop there and is eager to further strengthen its position in the global foreign exchange market. Already, the Chinese stock market, as well as the raw materials market, are the largest among the markets of all the developing countries of the world. They have long caught up with the British and Japanese markets. The turnover of futures trading on China's stock exchanges last year amounted to 25,5 trillion dollars.
One of the most important tasks set by the Chinese leadership is to increase the number of countries in the world that make settlements with China and Hong Kong in RMB. This will strengthen the position of the yuan as an international currency. And it is for this purpose that China decided to start trading oil futures at the exchange. Prior to this, in April 2016 of the year, started trading in gold futures, denominated in RMB. At first, trading in gold futures began on the Shanghai Stock Exchange, and in July 2017, the Hong Kong Stock Exchange followed Shanghai. It is noteworthy that if it is impossible to buy gold on the New York and London stock exchanges, only gold futures are sold, then gold itself is represented on the Chinese exchanges. It is real, and that makes Chinese exchanges much more interesting.
Strictly speaking, to achieve this goal - to ensure the physical presence of gold on their exchanges - China has been going a long time, engaging in buying up gold on a huge scale throughout the world. Now the real reserves of gold in China are much more than in the USA, not to mention the leading countries of Europe. So, if in Germany gold reserves amount to approximately 3400 tons of gold, in the USA - 8000 tons of gold, in China - 20 000 tons of gold. As we understand, the difference is significant. Now oil futures will also appear on the PRC exchanges. In September, 2017, the Chinese mass media reported that trading in futures for crude oil would open on the Shanghai International Energy Exchange to foreign companies. This has become, although expected, in any case sensational. news.
What consequences may this decision of China entail for the global economy? So far, of course, it’s premature to talk about the consequences, but still some predictions can be made.
Firstly, as a result of the renminbi entering the oil market, the investment attractiveness of the US dollar will decrease. In the world market will appear currency (yuan), secured with real gold. Chinese partners will be able to buy real gold at Yuan at prices of Chinese exchanges. The dollar will be dealt a serious blow. First of all, it will feel the American economy. American banks can increase interest rates. It will become more difficult to get a loan, which will inevitably affect the American business of all levels. Entrepreneurs will have to work more actively with investors, while reducing consumer spending.
Secondly, the change in the layouts in the oil market may have a positive impact on oil prices. The cost of a barrel of oil is likely to increase, with some experts calling the figure in 70 dollars. Oil can be bought in RMB. The rise in oil prices will inevitably entail a rise in gold prices. At the same time, the purchase of gold will be simplified. After all, if an oil supplier sells oil for Yuan under a long-term contract, he will be able to acquire gold futures in parallel with the conclusion of a contract for the sale of oil on the Shanghai and Hong Kong exchanges. This, in turn, will provide the yuan with gold and significantly improve its position in the international market, attracting the attention of world business to it.
Third, strengthening the position of the yuan against the background of a weaker dollar will lead to the fact that over the next decade, the yuan will force out the dollar in other areas of world trade. Following the gold and oil will come the turn of other raw materials. China has now reached a level of development where it can already dictate terms to oil sellers. For example, Saudi Arabia has recently been asked to switch to China's settlement of accounts with China. Although the reaction of Riyadh is still unknown, it can be assumed that the Saudis were in a very difficult situation.
On the one hand, China is one of the most important buyers of Saudi oil. China needs oil in large quantities, it is not a small European "Belgium" or "Austria". To lose such a buyer would be very bad for Saudi Arabia. But on the other hand, to agree with the proposal of China means to anger the American patrons, who actually support the oil monarchies because they remain loyal to the dollar. Given that China has begun to reduce the volume of oil imports from Saudi Arabia, one can guess either Riyadh’s refusal of the Chinese proposal, or Beijing’s desire to “show the fuck’s mother” - how it will be if they don’t want to accept the PRC’s proposals.
Win countries where there are certain problems in relations with the United States and American satellites, which the media like to call "the world community." They will be able to avoid payments for oil sold in US currency. The Chinese decision will interest such countries as Iran or Venezuela, and quite possibly the same Qatar, which is now going through a difficult period in relations with the United States. Are the events taking place profitable for Russia? Of course, given the complicated relations with the United States, a weaker dollar can bring Russia considerable dividends. Moreover, Russia also needs buyers of Russian raw materials, and China is a huge market, which, given current trends in economic development, will only grow and strengthen over the years. Russia will be able to sell oil to China, while immediately exchanging the resulting yuan for gold. Thus, the gold reserve of Russia will grow, the country's dependence on the American currency will decrease.
To confront the Chinese economy, the United States is unlikely to be able, at least in the long run. After all, the main basis of the economic and political power of the United States is, until recently, the monopoly position of the dollar in the world market. If the dollar loses its position, then for the United States it will be a fatal blow. The "printing press" will no longer be able to ensure the economic prosperity and political hegemony of the American state.
The Chinese economy is already more powerful and dynamic than the American one. If the yuan turns into an international currency, the further growth of the Chinese economy will be even more rapid. What remains for the United States? Washington is clearly not satisfied with the current situation, so we should expect further attempts of political destabilization in different regions of the world, organized by the United States. The goal of Washington, in fact, is the same - to extend the existing status of the American power for a while. However move stories stop fail. In the twentieth century, the former "world hegemon" - the British Empire - lost its power and was pushed aside by the United States, and then the Soviet Union, and the PRC. In the foreseeable future, the USA expects the same scenario.
The weakening of the dollar may become a necessary “breath of life-giving moisture” for many national economies, which today are experiencing big problems precisely because of dollar hegemony. Developing countries, which have great economic potential, will also win, but the United States tried to hold back the development of the entire second half of the 20th and early 21st centuries.