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De-dollarization continues accelerating with news of the Shanghai Petroleum and Natural Gas Exchange (SHPGX), a Chinese-backed exchange for trading energy-related products, settling its first cross-border transaction in digital yuan.

Chinese-based financial news outlet “Yicai” first reported PetroChina International bought one million barrels of crude oil using digital yuan on Thursday. It was the exchange’s first overseas oil settlement in digital yuan. However, the name of the seller was not disclosed.

SHPGX has made several transactions in yuan earlier this year: In March, PetroChina and TotalEnergies completed a yuan-denominated liquefied natural gas transaction on the exchange. According to the exchange, four such LNG transactions have occurred this year.

China’s central bank began the digital yuan project in 2014 and has piloted the electronic currency in numerous regions across China. The world’s second-largest economy has been preparing to use the yuan and its digital version in international trade and finance as an alternative to the dollar.

In August, Brazil’s President Luiz Inacio Lula da Silva called for BRICS nations to create a common currency as the world furiously searches for ways to circumvent the dollar-based financial system.

Brazil’s president said a BRICS currency “increases our payment options and reduces our vulnerabilities.”

The US shutting Russia out of the SWIFT messaging system that underpins most global payments in response to its invasion of Ukraine has supercharged the de-dollarization trend.

It remains to be seen who exactly PetroChina paid digital yuan for the crude oil, but it might not be out of the question that it was Russia, considering it’s been shut out of the SWIFT system, plus oil exports to China have hit a record high.

Peter Schiff: Americans Are in for a Rude Awakening

January 15, 2020

Peter Schiff: Americans Are in for a Rude Awakening

On Jan. 13, Peter Schiff appeared on RT Boom Bust with Bubba Horwitz to talk about the yuan, the dollar, the stock market and the US economy. Peter said the dollar is eventually going to collapse and it’s going to be a rude awakening for Americans.

The Chinese yuan has been gaining strength against the dollar in recent weeks, in part because of optimism that there will eventually be a resolution to the trade war. But the Chinese currency is still over 17% lower than it was when the US imposed its first tariffs. Does this mean the markets are cautiously positioning for a deal, or is there still skepticism about the phase 1 deal? Peter focused on the bigger picture.

Well look, a phase one might happen because a phase one is insignificant. The real deal is supposedly phase two. That’s the one that’s not going to happen. So, if anybody thinks we’re going to have a substantive deal, they’re wrong. But the reality is, I think the Chinese yuan is undervalued relative to the dollar and I expect it to rise rather dramatically over time.”

Peter said this is not good news for the US.

It’s going to make imports more expensive for Americans, so it’s going to reduce our standard of living. And I do think ultimately, it’s going to push up interest rates as well, as the Chinese and a lot of other creditors are no longer lending money to Americans, and so we have to draw from our own savings pool, which is extremely shallow. It means the Federal Reserve is going to be printing a lot more money as it monetizes the debt that the Chinese and other nations no longer want to buy, and this is further going to lower the American standard of living.”

…click on the above link to read the rest of the article…

China Cuts Required Reserve Ratio Releasing $126BN In Liquidity; Yuan Surges

September 6, 2019

China Cuts Required Reserve Ratio Releasing $126BN In Liquidity; Yuan Surges

As had been widely previewed in China’s official financial press in recent days, on Friday the PBOC announced it would cut the required reserve ratio (RRR) for all banks by 0.5% effective Sept. 16 (and by 1% for some city commercial banks, to take effect in two steps on Oct. 15 and Nov. 15), releasing 900 billion yuan ($126 billion) of liquidity, helping to offset the tightening impact of upcoming tax payments.

While today’s rate cut was more than the previous cuts in January and May, which released 800 billion yuan and 280 billion yuan, respectively, the PBOC stated that “China won’t adopt flood-like monetary stimulus” and that they will continue “prudent” monetary policy to “keep liquidity at (a) reasonably ample level” and will “strengthen the counter-cyclical adjustment” which is basically gibberish for it will do whatever it sees appropriate.

With the Chinese economy slowing drastically in recent months, with various economic indicators at multi-decade lows, the RRR cut was aimed at supporting demand by funneling credit to small firms and echoes the earlier cuts this year. Indeed, as Bloomberg notes, China’s economy softened substantially in August after poor results in July, and will likely deteriorate further in the remainder of the year. Trade tension between China and the U.S. expanded onto the financial front recently after China allowed the currency to decline below 7 a dollar, prompting the U.S. to name it a currency manipulator.

Anticipating cries of foul play from Trump’s twitter account which is just minutes away from unleashing hell at the Fed for not doing what China is doing, the cut “doesn’t reflect an aggressive easing,” said Commerzbank economist Zhou Hao. “In fact, China has recently massively tightened property financing. Hence this is still a re-balancing – to lower the funding costs for the manufacturing sector but tighten liquidity in the property sector due to asset bubble concerns.”

…click on the above link to read the rest of the article…

Tumbling Yuan Sends Ripples Through Petrochemical Market

August 27, 2019

Tumbling Yuan Sends Ripples Through Petrochemical Market

The trade war between China and the United States has triggered a global economic slowdown thanks to far-reaching tensions between the world’s two biggest economies. Last Friday China lobbed their most recent retaliation back at the United States by announcing tariffs on an additional $75 billion worth of goods. This is just the most recent counterattack in a now yearlong tit-for-tat spat that has seen both countries confront each other again and again with hard-hitting tariffs (you can see a detailed timeline here) and even culminated in Beijing allowing the Yuan reach its lowest value in years, making Chinese goods cheaper to export and, conversely, making U.S. goods more expensive and therefore less desirable in Chinese markets.

Because of the far-reaching economic implications of the trade dispute, United States president Donald Trump has been put under a great deal of pressure from global leaders to de-escalate tensions with China. In response, Trump has announced that he will soon begin trade talks with Beijing in order to reach an accord and end the trade war, but the reality is not so simple, especially as the U.S. president seems to be talking out of both sides of his mouth. In a report titled “Trump sends mixed signals on China trade war as pressure mounts to de-escalate” the UK’s Independent points out that, “on Sunday, [President Trump] seemed to express regret over escalating the trade dispute, but the White House later said his only regret was that he didn’t impose even higher tariffs on China.”

Even if Trump does follow through on his public promises to make peace with China, in many sectors of the economy the damage is already done. One of the most recent casualties of the trade war is the Asian petrochemical market, which just hit its lowest profit margin in months.

…click on the above link to read the rest of the article…

The Reality of Trade Between USA & China

August 6, 2019

The Reality of Trade Between USA & China

We are clearly cascading toward the Monetary Crisis Cycle as the USA wrong accuses China of manipulating its currency for trade advantages. All one needs do is look at the trend of the dollar against other major world currencies and you will quickly see that the trend of the dollar against the yuan is in line with the global trend. This is the problem we face when politicians simply follow the academic view of currencies when they are still teaching Keynesianism based upon fixed exchange rates. About 80% of China’s trade is with the rest of the world other than the United States. One does not lower its currency to impact 20% of its trade at the expense of the rest of the world.

I have written before that I was asked if I would teach at one of the top 10 universities in the world. I was surprised, to say the least. When I asked why would they even ask me the response was even more shocking. They actually said to me over lunch that they “knew” what they were teaching was wrong!. They also said the problem they face is those who have real-world experience are NOT INTERESTED in teaching classes in school. I said I would be glad to do a guest lecture, but I too had no interest in teaching a class every day.

China has been doing the exact opposite of what the US is accusing it. They have been supporting their currency and if they stopped and allowed it to float freely, then the US would witness probable new record highs in the dollar which will bring about the crisis we see coming by 2021.

…click on the above link to read the rest of the article…

Russia, China Prepare To Dump Dollar, Agree To Bilateral Trade In National Currencies

June 5, 2019

Russia, China Prepare To Dump Dollar, Agree To Bilateral Trade In National Currencies

Just one month after conducting joint military exercises, Russia and China are set to sign an agreement which would boost the use of their national currencies in bilateral and international trade in an attempt to mmove away from the current dollar-denominated financial system, according to Russian state-owned news outlet TASS.

It is planned that Russia and China will be developing bilateral payments in national currencies, encourage and expand the use of national currencies, particularly through promotion of their use when signing international trade contracts. According to the draft agreement, the sides will also assume required measures to lift barriers for payments in national currencies. –TASS

The Kremlin released a draft decree on Wednesday outlining “settlements and payments for goods, service and direct investments between economic entities of the Russian Federation and the People’s Republic of China are made in accordance with the international practice and the legislation of the sides’ states with the use of foreign currency, the Russian currency (rubles) and the Chinese currency (yuan).”

According to the draft, Moscow and Beijing will cooperate to develop a national payments system, along with cross-border payments in national and other currencies.

“The sides deepen the cooperation in the field of national payment card systems and within the framework of the Russian and Chinese legislation provide support to commercial banks in their independent decision-making on joining the payment system in the state of the other side,” reads the document.

Last November, Russian Prime Minister Dmitry Medvedev said that discussions were under way to allow the use of China’s UnionPay credit card in Russia, and Russia’s Mir card in China. Russian Prime Minister Dmitry Medvedev (left) and Chinese Premier Li Keqiang in Beijing’s Great Hall of the People in November. Photo: EPA

…click on the above link to read the rest of the article…

De-Dollarization Accelerates: Central Banks Dump Dollar In Q4, Buy Yuan

March 30, 2019

De-Dollarization Accelerates: Central Banks Dump Dollar In Q4, Buy Yuan

The dollar’s share of global central-bank reserves slumped to the lowest level since 2013 while holdings of the Chinese yuan rose for the fifth quarter in the past six, IMF data showed Friday.

The U.S. currency accounted for 61.7% of global allocated foreign-exchange reserves in the fourth quarter, down from 61.9% and the tenth decline in the past 12 quarters according to the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) for Q4 2018 report. The drop occurred despite a 1% jump in the value of the dollar in the fourth quarter. The euro, yen and yuan each gained as a share of allocated reserves. While modest at just 1.9%, reserve allocation to the Chinese Yuan has been increasing rapidly and is now almost double where it was two years ago.

The chart below shows the main takeaways from the report: reserve managers actively decreased their allocation to USD—the share of USD reserves declined despite modest Dollar appreciation—while they actively added to EUR and CNY reserves. According to Goldman calculations, the drop in Q4 USD reserves was equivalent to just over $50 billion in dollar reserves sold.

More specifically, the reported USD share of allocated reserves declined by another 0.3% in Q4. Cumulatively, the USD share has fallen by 3.7% since the end of 2016 and by 1.0% in 2018 (despite supportive Dollar price action). Against this, reserve managers continued to add to their EUR reserves with the reported EUR share increasing by 0.2% this quarter, and by 1.6% on net since the end of 2016. Both in Q4 and 2018 as a whole, reserve managers more than offset a weaker Euro to keep the share of EUR reserves on a rising trend, despite a number of political and growth tensions and concerns.

…click on the above link to read the rest of the article…

China’s Economic Slump Accelerated In October, Early Indicators Show

October 29, 2018

China’s Economic Slump Accelerated In October, Early Indicators Show

As corporate defaults surge, forcing a desperate PBOC to reverse its deleveraging efforts and threaten more interventions to stave off a more serious retrenchment in growth in the world’s second largest economy, it seems like not a day goes by without another warning sign that China’s economic precarious situation is even worse than we thought.

The impact this has had on the mainland investors’ psyche has been obvious to all. Repeated interventions by China’s ‘National Team’ have done little to arrest the inexorable decline in mainland stocks in October, leaving the Shanghai Composite, the country’s main benchmark index, on track for one of its worst months since the financial crisis, and its worst year since 2011. Meanwhile, a flood of FX outflows has pushed the Chinese yuan dangerously close to the 7 yuan-to-the dollar threshold which, if breached, could unleash another wave of chaos across global markets.

And as Chinese policy makers are probably already scrambling to pad the official stats, Bloomberg has released its own proprietary preliminary gauge of Chinese GDP in October which showed that the slowdown unleashed by the US-China trade war worsened in October.

The Bloomberg Economics gauge aggregates the earliest-available indicators on business conditions and market sentiment, and unequivocally affirmed that the Communist Party’s efforts to stabilize the country’s economy and markets – the party this month introduced a raft of measures to stabilize sentiment, including steps to boost liquidity in the financial system, new tax deductions for households and targeted measures aimed at helping exporters – haven’t been successful – at least not yet.

Kyle Bass and the other prominent China bears across the US hedge fund community will be pleased to see the latest early indicator from Bloomberg, which suggests that economic growth in China remained (relatively) sluggish in October after slowing to its weakest level since the crisis during the third quarter.

…click on the above link to read the rest of the article…

Weekly Commentary: “Whatever They Want” Coming Home to Roost

October 27, 2018

Weekly Commentary: “Whatever They Want” Coming Home to Roost

Let’s begin with global. China’s yuan (CNY) traded to 6.9644 to the dollar in early-Friday trading, almost matching the low (vs. dollar) from December 2016 (6.9649). CNY is basically trading at lows going back to 2008 – and has neared the key psychological 7.0 level. CNY rallied late in Friday trading to close the week at 6.9435. From Bloomberg (Tian Chen): “Three traders said at least one big Chinese bank sold the dollar, triggering stop-losses.” Earlier, a PBOC governor “told a briefing that the central bank would continue taking measures to stabilize sentiment. We have dealt with short-sellers of the yuan a few years ago, and we are very familiar with each other. I think we both have vivid memories of the past.”

The PBOC eventually won that 2016 skirmish with the CNY “shorts”. In general, however, you don’t want your central bank feeling compelled to do battle against the markets. It’s no sign of strength. For “developing” central banks, in particular, it has too often in the past proved a perilous proposition. Threats and actions are taken, and a lot can ride on the market’s response. In a brewing confrontation, the market will test the central bank. If the central bank’s response appears ineffective, markets will instinctively pounce.

Often unobtrusively, the stakes can grow incredibly large. There’s a dynamic that has been replayed in the past throughout the emerging markets. Bubbles are pierced and “hot money” heads for the exits. Central banks and government officials then work aggressively to bolster their faltering currencies. These efforts appear to stabilize the situation for a period of time, although the relative calm masks assertive market efforts to hedge against future currency devaluation in the derivatives markets.

…click on the above link to read the rest of the article…

“The Central Bank Will Intervene”: PBOC Said To Sell Reserves If Yuan Drops Below 7.00

October 26, 2018

“The Central Bank Will Intervene”: PBOC Said To Sell Reserves If Yuan Drops Below 7.00

According to the latest data from China’s SAFE, net FX outflows from China picked up to US$21BN in September (vs. US$11BN in August) and the highest since mid-2017 with Goldman noting that “outflow might have increased moderately further in October, but has unlikely reached the level seen in late 2015/early 2016 in our view.”

It may not have reached the furious outflows from the peak of the post-depreciation period, but as Goldman concedes, this risk will rise over time if the authorities continue to resist interest rate differential-driven depreciation pressure.

And, to counter the risk of a return to China’s dramatic outflow phase, Reuters writes this morning that China is likely to resume selling some of its vast $3 trillion currency reserves to stop any precipitous fall through the psychologically important level of 7 yuan per dollar “as it could risk triggering speculation and heavy capital outflows.”

Indeed, as noted in our morning wrap, on Friday the yuan hit a fresh 22-month low of 6.9641 against the dollar. Additionally, earlier in the session the offshore Yuan tumbled as low as 6.9769 after the PBOC fixed the onshore Yuan north of 6.95 and weaker than consensus expected, at which point however Beijing intervened, when at least one big China bank sold the US dollar in the afternoon, prompting the yuan to reverse loss, and triggering stop-loss orders by short-sellers of the yuan.

And with the Yuan just inches away from the key level of 7.00 vs the dollar, dropping 6% against the dollar so far this year, reflecting its slowing economy as well as pressure on exports due to an ongoing tariff war with the United States, Beijing is starting to sweat.

…click on the above link to read the rest of the article…

US Dollar Refuses to Die as Global Reserve Currency — But Loses Ground

October 1, 2018

US Dollar Refuses to Die as Global Reserve Currency — But Loses Ground

Chinese RMB gains, but is inconsequential as central banks remain leery. Euro hangs on.

Those who’re eagerly awaiting the end of the “dollar hegemony,” or the end of the dollar as the top global reserve currency, well, they’ll need some patience, because it’s happening at a glacial pace – according to the IMF’s just released data on the “Currency Composition of Official Foreign Exchange Reserves” (COFER) for the second quarter 2018.

What it confirms: Global central banks are ever so slowly losing their appetite for being over-exposed to US-dollar-denominated assets, though they’re not dumping them from their foreign exchange reserves; they’re just tweaking them.

They’re not dumping euro-denominated assets either; au contraire. But they’re giving up on the Swiss franc. And they remain leery of the Chinese renminbi though they’re starting to dabble in it – it seems at the expense of the dollar.

In Q2 2018, total global foreign exchange reserves, in all currencies, rose 3.2% year-over-year, to $11.48 trillion, well within the range of the past three years. For reporting purposes, the IMF converts all currency balances into US dollars.

US-dollar-denominated assets among these reserves edged up to $6.55 trillion, but given the overall rise of total foreign exchange reserves, the share of dollar-denominated assets among these reserves edged down to 62.25%, the lowest since the period 2012-2013. In this chart of the dollar’s share of reserve currencies, note its low point in 1991 with a share of 46%. And note the arrival of the euro:

The euro became an accounting currency in the financial markets in 1999, thereby replacing the former European Currency Unit (ECU). Euro banknotes and coins appeared on January 1, 2002. At the end of 2001, the dollar’s share of reserve currencies was 71.5%. In 2002, it dropped to 66.5%. By Q2 2018, it was down to 62.25%.

…click on the above link to read the rest of the article…

Is China Losing Control? Yuan More Volatile Than Euro For First Time Ever

August 30, 2018

Is China Losing Control? Yuan More Volatile Than Euro For First Time Ever

As Bloomberg notes, the offshore yuan has been more volatile than the euro all month after first overtaking the shared currency in July, according to 30-day realized data. And while euro uncertainty remains relatively bracketed between 6 and 8 for the last two years, yuan volatility has soared from 2 to almost 9 – the highest since 2015’s devaluation.

The narrow spread (lower pane) shows China is moving to a more “flexible arrangement” when it comes to managing its currency, Bank of America analysts wrote in a note, predicting the yuan will weaken more this year.

For now it appears the temporary respite from Yuan’s freefall, that ‘mysteriously’ occurred right before the US-China trade talks, has begun to lose momentum.

But while Yuan has become increasingly volatile, the realized volatility of gold (when priced in yuan) has collapsed to record lows…

Perhaps supporting the idea that the Chinese care more about the ‘stability’ of the yuan relative to gold then to the arbitrary US dollar fiat money.

So is China losing control? Or is this just as they planned?

China “Weaponizes Yuan” – Weakens Fix By Most Since 2016

July 20, 2018

China “Weaponizes Yuan” – Weakens Fix By Most Since 2016

On the heels of its ‘stealthy’ easing.. and not so stealthy:

In the past 48 hours China has:
– Cut its 7-day Treasury rate by 103bps
– Launched quasi QE
– told banks to flood the system with liquidity
– Sent the Yuan tumbling
– Warned more easing is coming

9:50 PM – Jul 19, 2018

The PBOC just lowered the ax on the Yuan Fix – slashing their reference rate by the most since June 2016.

Offshore Yuan is tumbling to new cycle lows after the fix…CNH is down over 1250 pips this week – the biggest weekly devaluation since August 2015’s plunge.

President Trump is gonna be pissed!!

Will China’s chaotic capital markets ripple across the world?

Yen just snapped stronger…

The Indonesian Rupiah tumbled 0.5%, and gold is falling…

As we concluded previously, so how long before the trade war, which is already shifting to a currency war as a result of the recent record devaluation in the yuan, morphs into a central bank war and a renewed race to the bottom between the world’s two most important economies? .. or worst still as Bannon suggested, a kinetic war.

Russia is an annoyance. China is our great challenge. Russia’s economy is the size of Texas or New York State? It’s got lots of nuclear weapons…but in today’s warfare…nuclear weapons are taking a less important role. Trump is trying to end the Cold War and the Korean War…and all he is getting is grief from the globalists.

And that’s a huge problem, because not only are we adversaries with China, we are at war with China, Bannon said.

We’re in a war with China. Ray Dalio tweeted the other day. There’s three types of war: information war, economic war, and guns-up kinetic war. They’ve been at war with us for 25 years. Many people in this room have exacerbated the rise of China.”

…click on the above link to read the rest of the article…

Trump’s Trade War May Spark a Chinese Debt Crisis

July 20, 2018

Trump’s Trade War May Spark a Chinese Debt Crisis

(Bloomberg Opinion) — There’s no chance China will cut its trade surplus with the U.S. in response to President Donald Trump’s tariff threats. For starters, Washington has made no specific demand to which Beijing can respond. But its efforts may have an unexpected side effect: a debt crisis in China.

The 25 percent additional tariffs on exports of machinery and electronics looked, at first blush, like a stealth tax on offshoring. The focus on categories like semiconductors and nuclear components, in which U.S.-owned manufacturers in China are strong, recalled Trump’s 2016 promise to tax “a ny business that leaves our country.”

It seems, though, that offshoring wasn’t the target after all. Now, with the imposition of new tariffs on low-value exports that mostly involve Asian value chains, the simple fact of selling cheap products that the U.S. buys has become the problem.

Either way, the administration appears set on shrinking its current-account deficit (which, at a moderate 2.4 percent of GDP, is far lower than the 6 percent clocked in 2006-7) just as the Federal Reserve raises interest rates. Distress has already been registered in China. On July 13, the yuan (also known as the renminbi) hit 6.725 to the dollar, the weakest in a year and 5 percent lower than at the end of May.

Such a move is nothing earth-shaking for less controlled currencies. But a stable renminbi is a key plank in the leadership’s promise to its people, and the exchange rate is tightly managed by the central bank.

Chinese investors have been buying official assurances for a year that the renminbi would be a fortress, but now they’re not so sure and are exporting money again: May saw net capital outflows and a decline in the foreign-exchange reserves.

…click on the above link to read the rest of the article…

Trade War With China Morphs Into Currency War: Biggest Loser is the EU

July 19, 2018

Trade War With China Morphs Into Currency War: Biggest Loser is the EU

Those who think “trade wars are good and easy to win” need to stop and reflect on currency wars.

Trade Wars Easy to Win

✔

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

6:50 AM – Mar 2, 2018

Trump’s “logic” rests on the notion that China has a huge trade surplus and the US can hurt China more than China can hurt the US.

Such logic is seriously misguided.

Trade is not a zero sum game. One does not gain by losing less. Losing is losing.
Yes, Trump is correct that the US can place more tariffs on Chinese goods than China can place on US goods. However, Trump cannot ignore US farmers, but the unelected leaders in China can suppress all dissent.
The US dollar floats, the Renmimbi (Yuan) doesn’t. Thus, China can manipulate it currency, albeit with risks of capital flight, to mitigate some or all of US tariffs.

Currency charts can be confusing. Sometimes up is down and sometimes down is up, It depends on which currency is fist. The lead chart shows a 7.4% decline in the yuan vs the US dollar since April 16.

Meanwhile the dollar index itself has advanced.

US Dollar Index

Relative to the overall US Dollar Index Weighting, the Yuan has effectively declined 13.8%.

Combined with China’s counter-tariffs on US goods, that relative decline effectively counteracts most, if not all, Trump’s tariffs.

…click on the above link to read the rest of the article…

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