China, OPEC and Europe aim for de-Americanized world

HSBC predicts that the Chinese currency will be the third-largest unit used for trade by 2015 and fully convertible within the next five years as the People’s Bank of China gradually liberalises policy.

There are various driving factors
* China’s is the largest trading country and this will increase
* China will buy most of the world’s commodities
* The US is producing more oil and natural gas domestically and will buy less from OPEC and elsewhere
* Europe will trade more directly with China.
* There are financial, economic and political advantages for China, Europe and OPEC to internationalize the yuan

OPEC wants a shift from US dollars as China imports more oil than the USA

Organisation of Petroleum Exporting Countries, which controls a third of the world’s supply of crude, members such as Iran – constrained by sanctions – are already agitating for a shift away from pricing in US dollars. China’s oil imports set a record last month, with official figures showing that 6.47 million barrels a day of crude flowed into the country.

The US imported 7.6 million bpd in crude oil but exported 1.7 million bpd in refined oil products. The net imports were less than 6 million bpd.

The US is importing less than 2 million bpd from OPEC

Light oil extracting by fracking and horizontal drilling is continuing to boom in the USA. The US is on track to add 3 million bpd in oil from Texas and 600,000 bpd in oil in North Dakota by 2020. The net imports of crude oil is heading to about 2-3 million bpd and that can all be supplied by Canada and Mexico.

US dollars buying foreign oil has already been halved from 12-13 million bpd and will shrink even more.

The scale of China’s existing and forecast demand for resources almost makes any attempt by the US to maintain the dollar’s status as the world’s primary trading currency for resources entirely nugatory. Wood Mackenzie estimates that China will account for 52pc of base metals demand by 2017, compared with 46pc of the 96m-tonne global market this year.

The Edinburgh-based company forecasts that the world’s second-largest economy, will be consuming more base metals than the rest of the world combined by 2017 as the process of urbanisation that started at the beginning of the last decade continues.

China surpassed the U.S. to become the world’s biggest trading nation in 2012 as measured by the sum of exports and imports of goods, official figures from both countries show.

U.S. exports and imports of goods last year totaled $3.82 trillion, the U.S. Commerce Department said last week. China’s customs administration reported last month that the country’s trade in goods in 2012 amounted to $3.87 trillion.

HSBC Predictions on China’s RMB

HSBC has a report on the RMB HSBC expects 30% of China’s trade to settled in RMB by 2015. This should be about $1.5 trillion as China’s trade in goods will increase from 2012 to about $5 trillion.

More Currency deals and more Yuan trading financial centers

Singapore and China will introduce direct trading between their currencies, helping the city-state compete with Hong Kong and London as an offshore yuan hub.

The two nations also agreed on a 50 billion yuan ($8.2 billion) quota for financial institutions in Singapore to invest in China’s domestic securities under the Renminbi Qualified Foreign Institutional Investor, the Monetary Authority of Singapore said in a statement.

The announcement comes a week after China approved direct trading between the yuan and the British pound, helping establish London as the European hub for its currency.

Singapore doubled a currency swap with China to 300 billion yuan in March, and started yuan clearing services in May. HSBC Holdings Plc and Standard Chartered Plc sold the city-state’s first Dim Sum bonds in the same month. Yuan deposits in Singapore totaled more than 140 billion yuan at the end of July

The European Central Bank and the People’s Bank of China (the country’s central bank) are establishing a “currency swap” mechanism. The deal facilitates commercial exchanges between the Eurozone and China by giving European banks access to 350 billion yuan (42.4 billion euros) and giving Chinese banks access to 45 billion euros.

Tripling China RMB usage by 2015 would put the RMB as about the 6th most used currency. China seems likely to get to 4th most used by 2018-2020 even with a conservative plan of capital liberalization.

The full 2013 currency trading bank survey report is here

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