- On Friday, Chinese President Xi Jinping pushed for the settlement of energy transactions in yuan.
- At a summit with Arab leaders, Xi said China would continue to import large amounts of oil.
- The establishment of more yuan exchanges could weaken the US dollar’s global dominance in the long run.
At a summit with Arab leaders on Friday, Chinese President Xi Jinping pushed for the settlement of energy trade in Chinese yuan – a move that could weaken the U.S. dollar’s global dominance in the long run.
At the summit, Xi said China would continue to import large amounts of oil and gas from Gulf states and settle in Chinese yuan, or RMB, according to a Chinese foreign ministry statement. Most world trade is now denominated in US dollars.
“The Shanghai Oil and Natural Gas Exchange Platform will be fully utilized for RMB settlement in oil and gas trade,” Xi said, according to a transcript of his speech released by China. Daily, owned by the government. He did not say when the change would take effect.
It is unclear whether any of the Gulf countries will accept the proposal, but Saudi Arabia – the world’s top oil exporter – is in talks to use the yuan to settle its energy sales to the main Chinese consumer.
Such a move would undermine the role of the US dollar as the world’s reserve currency, spurring “de-dollarization.”
“The Saudis have a lot to buy from China and China has a lot to buy from Saudi Arabia. Why should they transact in a third currency and bear all these exchange fees?” Gal Luft, director of the Institute for the Analysis of Global Security think tank, told CNBC on Friday. China already uses the yuan to buy Russian energy.
China has ambitions to make the yuan the world’s most dominant reserve currency, but it still has a long way to go, mainly because Beijing still tightly manages its value. It is also not fully convertible into other currencies in the global market at this time.
Xi was speaking in Saudi Arabia during a state visit at a time of heightened tensions between Riyadh and Washington.
About $50 billion in investment deals were signed during Xi’s visit, Khalid Al Falih, the kingdom’s investment minister, told Bloomberg on Sunday. He did not say whether the amount includes agreements with other Arab countries.