I get the irony, though in our case, our xenophobia is us acting against our principles, whereas in the Chinese case it is pretty much acting with their principles.
Also, our history is about 200 years long (400 if you include our time as a British colony), the Center Kingdom’s is at least 2000 and arguably up to 5000 years, with a population that is around 92% ethnically homogeneous, so they’re quite a bit better and more experienced at it.
That isn’t to say that their complaints about Western and Japanese imperialism in the late 19th and early 20th centuries don’t justify a certain attitude of “Never Again.” But it would be silly to forget that this is one of the leadership’s favorite tools to justify authoritarian control.
Americans keep acting like their perceptions matter and determine the future. We all know what Americans think, but they are stuck on the USD no matter what…what matters is what everyone else does. Everyone else wants to diversify off the USD, and get away from USA oppression and financial bullying (particularly Asia).
No, I’m not saying that at all. I’m saying the future is here right now, and there was not “a particular issue” that was a “key deciding factor” that determined state current, nor will there be one in the future. It just sneaks up.
Another small event that nobody (in America) will notice…
DJ News Wire – “HSBC and BPC HK completed their issuance of 2 billion yuan bonds, the first foreign commercial banks to sell yuan-debt on China’s domestic market. It was considered a sign Beijing is pressing ahead with its market opening despite recent volatility.”
The Asian Infrastructure Investment Bank is a good example of how the US can’t do anything to stop the world changing. Obama decleared defeat, everyone joined, except him. You either get onboard, or you get left behind, that’s life.
The U.S. allegedly tried to keep Australia and South Korea from becoming prospective founding members, after they expressed an interest in it. However, both Australia and South Korea applied to join the bank…
Hong Kong’s Financial Secretary John Tsang announced in his budget speech in February 2015 that the territory would join the AIIB… In early March 2015, the United Kingdom’s Chancellor of the Exchequer, George Osborne, announced that the UK had decided to apply to join the Bank… The announcement was criticised by the U.S. Obama Administration. A US government official told Financial Times, “We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power.” The official further stated that the British decision was taken after " no consultation with the US." Three other European states: Germany, France and Italy – followed the UK’s decision to join the AIIB in March. https://en.wikipedia.org/wiki/Asian_Infrastructure_Investment_Bank
Another small step, most likely it gets added to the SDR basket this year…
“China’s yuan overtook Japan’s yen to become the fourth most-used currency for global payments, shrugging off a surprise devaluation to rise to its highest ranking ever and boosting its claim for reserve status.”
I don’t disagree that people want to diversify out of USD, and have felt this way and posted as such for the better part of a decade. I just disagree that CNY is an attractive substitute. China is a big enough economy that it’s not surprising that there will be some of that in the basket, depending on what rules China has on who can own Chinese government debt, but that’s a different story than a rush out of the USD to own CNY.
So you started this thread with “Okay, isn’t this rather a big deal?” and now you are saying it’s not really a big deal at all, it’s just a small step that is part of some orchestrated symphony of small moves.
I think you have to make a decision on what you are claiming. Either it’s a big deal, or it isn’t.
No one’s arguing that China’s rise isn’t a big deal in world politics and economics, and that the US is likely to have a smaller influence in over time, but the settlement of oil contracts in CNY - while a part of that story - is unlikley to be particularly important.
It seems like a big deal, especially in context with the other moves. Still not sure why settlement of oil contracts in RMB by the world’s largest oil buyer wouldn’t be a big deal.
because it doesn’t result in more RMB being held. this is what matters. just because something is priced in RMB doesn’t mean people change their entire operation to hold more RMB. people will just convert USD to RMB on the date of purchase as USD is what they own and want to own, as per the way the world works presently. this news is not just a small step, it is meaningless.
if apple starts pricing its phone in some proprietary apple currency, is the Fed, ECB, PBOC, any household or corporation going to start holding this apple currency on their balance sheets? will the demand for this apple currency rise? no.
if the LMX switch their settlement currency to frozen orange juice, is anyone going to start holding frozen orange juice as a reserve currency? will the demand for frozen orange juice rise? no.
based on your argument, you must be the biggest fan of bitcoin on the planet. your reasoning is “because bitcoin exists, and some things are now priced in bitcoin, it must be something that is a good replacement for every other currency, and every central bank will soon be holding trillions of USD in bitcoin”.
you’re saying, “oil being priced in RMB will result in more RMB being held” and then you say “RMB will be held because more people want to hold RMB”. what is it? RMB demand will rise because oil is priced in RMB or because people want to hold RMB? i guarantee you nobody will hold more RMB because oil, in one port and one exchange is priced in RMB. if south africa starts pricing oil in rand, is rand demand going to go up because of this? no. but hey, south africa is growing and more people are going to want to own rand right?
You guarantee me? Can I monetize this somehow when you end up being wrong?
Big picture, CN receives a lot of dollars because of the US trade deficit, they use these to buy oil, but still have too many dollars and so they buy USG debt. In the Middle East they sell oil, and receive dollars. Obviously people around the world want to diversify, since the US is financially irresponsible, a ticking time bomb. So CN can buy from the Middle East directly using RMB, and this solves both their problems.
I can’t keep up, these guys really know how to get stuff done…
CIPS launched today (China International Payment System). It’s a cross-border payment system for financial institutions – reduced transaction costs and processing time.
Xi visiting UK, London drooling at the thought of becoming a RMB trading hub…
“London is in a strong position to become a major hub for offshore RMB trading,” said Yang Du, head of Thomson Reuters’ China business desk.
“We’re seeing the internationalization of the renminbi growing at a pretty brisk pace here,” said Standard Chartered Europe Chief Executive Officer Richard Holmes. “There’s a lot of runway. There’s a lot further to go. And that’s due to what I view as the end of U.S. dominance.”
This is more of a big thing than the oil stuff. Though not entirely unexpected: they’ve been making noises about this for at least the last five or ten years.
What’s interesting is that China must be opening up the ability for foreigners to own government bonds for this to appeal to the IMF. That in itself is an interesting change.
Yeah lots of stuff happening – IMF reserve currency is a done deal, the “Panda bonds” issuances have been a success so we’ll see more of that, still waiting for the oil futures thing to launch, UK getting serious about their RMB business.
One interesting thing to observe was how much more intelligently the UK handled Xi’s visit. The UK accepts that CN becomes the largest and most influential economy, in our lifetime, and thus aligns with CN, and if that offends the US they just shrug. Meanwhile the US is still in this old “cold war” type of mentality, they want to coerce, hold onto power, try to get everyone to isolate CN, but in this action they are the one’s isolating themselves, actually.