alt Hacker NewsThe problem with that plan is that no one wants to trade hard commodities for a currency that can’t be spent. One part of the dollars appeal is that it spends the world over. The sanctioned countries frequently have more liberal access to dollars than to unsanctioned yuan.
So no one is going to take up a lot of yuan trade unless that changes or they are forced to.
But that puts China in a bind. Liberalizing their currency is going to require very careful and slow actions, China threads this needle now in a very fraught way. If they openly start trading oil at any real size in yuan that will break their peg as you’ll be able to trade through the oil markets.
This is the main reason there isn’t more petro yuan already, it’s bad for China.
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You can buy from China though. And China is the largest import trading partner for the majority of countries in the world. They literally don't need to do anything to prop up a "petro-yuan".
> a currency that can’t be spent
You can spend it in China, right?
> The problem with that plan is that no one wants to trade hard commodities for a currency that can’t be spent
You can't spend US dollars either, in 99% of the world.
Literally buy from PRC... most of worlds largest trade partner. That's why the system should work, it's closed loop. And we know world aktually fine with yuan denominated trade since PRC increased yuan settlement from 10 to >50% in a few years after US went sanction happy. PRC basically super costco, apart from chips and commercial aviation (both coming) they sell everything country needs for modernity, at discount.
They do not need to liberalize currency. They just need to have stuff people want, and leverage to force them to transact in PRC preferred currency. Previously this was hard, PRC had goods, and affordable prices = reduce friction/switching cost vs USD liquidity, but USD liquidity still made USD transaction preferred. PRC had no leverage for others to transact in yuan.
But in persistent high global energy environment, if PRC controls basically global supply of cheap renewables... and 30% of GCC oil vs Iran enforcing petro-yuan, they have stupid leverage to snow ball system. Again key is this for 30% of GCC oil exports if Iran locks down (big if), it's not global petro-yuan, it's Costco membership only access petro-yuan.
30% of global oil is inelastic existential survival leverage, if PRC wanted to charge in blowjobs countries would pay in blowjobs, currency liberalization doesn't matter when selling water in desert.
> The problem with that plan is that no one wants to trade hard commodities for a currency that can’t be spent. One part of the dollars appeal is that it spends the world over.
> So no one is going to take up a lot of yuan trade unless that changes or they are forced to.
Related on the “forced to”point, this is where Russia is stuck with its crude oil sales to India where the payments have been made to it in Indian Rupees. There’s almost nothing that Russia can do with the Indian Rupee. This is a huge and growing problem because India’s imports from Russia eclipse its exports to Russia by more than 10 times. [1]
[1]: https://www.financialexpress.com/india-news/india-russia-sum...