CHINA-ECONOMY

An article posted on April 18, 2018 on  the Council on Foreign Relations website showed that even though the RMB is the 7th most widely used in global payments, settling 1.6 percent of transactions, it is only the 20th most “globalized” among major currencies—as measured by adjusting for how much trade each country does. The Hungarian forint, Turkish lira, and Mexican peso are more widely used in global payments, relative to their issuing country’s share of global trade. It said that on March 26, China set out to give the RMB a boost by launching its first oil futures contract—denominated in RMB. As the world’s largest oil importer, China hopes that exporters will begin setting prices in RMB to track their new benchmark. Such a shift would, China also hopes, help kick-start wider use of its currency and reduce global reliance on the U.S. dollar, in which the vast majority of oil trading is currently done. But, the article assesses, China's prospects are poor because oil exporters, especially, rely on U.S. Treasury markets to invest profits safely. This reliance in turn encourages many of them to peg their currencies to the dollar. Accepting non-dollar payment for oil thereby increases their foreign exchange risk. It said RMB oil futures, therefore, look to be a non-starter.





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