The world’s biggest importer of crude oil and other energy related products, China has reportedly decided to undertake a major step to challenge the dominance of the dollar in the global market. The country, as per sources, will begin by introducing a new pricing strategy in the oil sector and hopes that the growing adoption of Chinese currency may shake up the status of the world’s most powerful currency.
For the record, the US dollar has a powerful status in the global economy, post its emergence in the oil sector. In consequence, China has apparently decided to price oil in Yuan through gold-backed futures contracts. Speaking about the same, the co-director of the Institute for the Analysis of Global Security has stated that this strategy is likely to freeze the dominance of dollar, but it won’t become the game changer of the global economy.
If reports are to be believed, earlier this year, the Chinese government had already declared to commence the pricing of crude oil futures contracts in Yuan, which can be converted to gold. Through this contract, Chinese government has framed few provisions in favor of its trading partner, who may be liable to pay with gold or may convert yuan into gold without the need to convert it into U.S. dollars. This new benchmark will apparently enable oil exporters such as Russia, Venezuela, and Iran to avoid U.S. sanctions, which as per experts, is likely to lower the authorization of U.S. in oil trading.
In order to support the new benchmark in oil trading, China has opened over 6000 trading accounts for futures crude contracts. China is likely to obtain considerable benefits from the same, cite experts, owing to the acceptance for the Yuan as a mode of payment from oil suppliers in the Asia, Russia, and Middle east.