empty
10.01.2023 02:32 PM
Oil for yuan, Gold as a decisive asset for China

This image is no longer relevant

Gold will be a deciding factor for China as the country seeks to bolster the yuan's international standing and continues to advance its plans to buy oil from Saudi Arabia.

In early December, during a visit to Saudi Arabia, Chinese President Xi Jinping urged the leaders of the largest oil-exporting country to accept the yuan for oil as the two countries seek to strengthen their geopolitical ties.

Saudi Crown Prince Mohammed bin Salman called the talks a "historic new phase in relations with China."

If Saudi Arabia starts trading oil in yuan, this will create additional incentive for the Chinese currency, bringing it one step closer to reaching critical mass at the international level.

Gold is a key factor in the further development of the petro-yuan system.

A gold-backed petro-yuan does not require full renminbi convertibility to function, so it allows China to both maintain control of its capital account and stimulate the internationalization of the yuan.

Support for oil trading in yuan with gold will play an important role in building the petro-yuan system.

The convertibility of the yuan into gold effectively turns the currency into a global investment asset for foreign renminbi holders, increasing their confidence in and demand for the Chinese currency.

Last December, China bought 30 tonnes of gold. A month before, they have already purchased about 32 tonnes. This was the first officially registered purchase since September 2019. China's gold reserves currently stand at 2,010 tonnes.

Analysts at the French bank said China has already made strategic progress in global currency markets as it seeks to weaken the U.S. dollar's position as the world's reserve currency.

They noted that because of Western economic sanctions, primarily from the U.S., Russia has adopted China's CIPS (Cross-Border Interbank Payment System) for its oil transactions, bypassing the global payment system SWIFT (Society for Worldwide Interbank Financial Telecommunication), which is dominated by the U.S. dollar.

Countries such as Iran, Venezuela and Indonesia currently settle some of their oil transactions in yuan.

The volume of trade and the ability to use the yuan for international payments may grow as more countries diversify to avoid the risk associated with the U.S. dollar. This event may eventually challenge the U.S. dollar-based global financial system, as the dollar's status and importance is largely based on energy and commodity markets.

Irina Yanina,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

USD/CAD. Analysis and Forecast

Today, the USD/CAD pair is showing signs of recovery, rising toward the 1.3700 level and approaching the weekly high reached earlier. Fundamental factors point to bullish dominance and the potential

Irina Yanina 12:46 2025-07-09 UTC+2

Markets unfazed by Trump's new tariff threats

Donald Trump's bark is louder than his bite. Markets have grown so accustomed to his rhetoric that the S&P 500 barely flinched at the White House's latest threat to slap

Marek Petkovich 11:53 2025-07-09 UTC+2

AUD/USD. Analysis and Forecast

The AUD/USD pair is holding steady at current levels with a bullish bias but limited movement following the release of inflation data from China—Australia's key trading partner. In June

Irina Yanina 11:35 2025-07-09 UTC+2

USD/JPY. Analysis and Forecast

On Wednesday, the Japanese yen extended its decline for the third consecutive day, pushing the USD/JPY pair to a new two-week high above the key 147.00 level during the Asian

Irina Yanina 11:23 2025-07-09 UTC+2

Consumer lending in the US is slowing down

According to data, consumer lending in the U.S. grew at its slowest pace in three months in May amid a decline in outstanding balances on credit cards and other revolving

Jakub Novak 10:43 2025-07-09 UTC+2

The ECB Is in a Good Position

While the euro remains under pressure against the dollar, risking a complete loss of its bullish momentum, one European policymaker believes the European Central Bank should not be overly concerned

Jakub Novak 10:33 2025-07-09 UTC+2

What to Watch on July 9th: Fundamental Events Breakdown for Beginners

There are no macroeconomic publications scheduled for Wednesday. The week began fairly actively, with both currency pairs declining, even though the fundamental backdrop rather points to another decline

Paolo Greco 08:57 2025-07-09 UTC+2

GBP/USD Overview on July 9, 2025

The GBP/USD pair continued its downward movement on Tuesday, which continues to puzzle observers. As we've repeatedly noted, no instrument in any market can move in the same direction indefinitely

Paolo Greco 08:18 2025-07-09 UTC+2

EUR/USD Overview on July 9, 2025

The EUR/USD currency pair maintained a corrective tone throughout Tuesday. There were no macroeconomic events that day, but Donald Trump "listed" all the countries for which tariffs will be raised

Paolo Greco 07:47 2025-07-09 UTC+2

XAU/USD. Analysis and Forecast

Today, gold remains under pressure; however, several factors are limiting further decline. Expectations that the tariffs imposed by U.S. President Donald Trump will support inflation in the United States

Irina Yanina 19:23 2025-07-08 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.