China’s pushing its digital currency to devalue the dollar

Revelations 13:16-18 “Also it causes all, both small and great, both rich and poor, both free and slave, to be marked on the right hand or the forehead, so that no one can buy or sell unless he has the mark, that is, the name of the beast or the number of its name. This calls for wisdom: let the one who has understanding calculate the number of the beast, for it is the number of a man, and his number is 666.”

Important Takeaways:

  • China’s digital currency could threaten the U.S. dollar. Should the Fed build its own?
  • “China has a digital yuan,” and it’s using it to bully its many trading partners into abandoning the dollar, which threatens to weaken American financial power and drive up the cost of imports.
  • This “e-CNY” (CNY is the trading symbol for China’s currency, the yuan), was presented to the world at last year’s Beijing Olympics and has quickly rung up billions in online payments, despite concern the government uses the system to track and bully its own citizens and businesses.
  • Without more efficient rival systems from the U.S. or other developed countries, Melchiorre said, China may “force their trading partners into their digital payments system,” replacing the U.S. dollar and threatening the benefits Americans enjoy from the dollar’s popularity.
  • “Digital currency is coming,” worldwide, Melchiorre concluded. “I hope we can get our [act] together for the dollar, before it’s too late.”

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Argentina enhances deal with China; further diminishes role of the dollar

Revelations 13:16-18 “Also it causes all, both small and great, both rich and poor, both free and slave, to be marked on the right hand or the forehead, so that no one can buy or sell unless he has the mark, that is, the name of the beast or the number of its name. This calls for wisdom: let the one who has understanding calculate the number of the beast, for it is the number of a man, and his number is 666.”

Important Takeaways:

  • Argentina Shuns U.S. Dollar: Will Pay for China Imports in Yuan
  • The measure, driven by Argentina’s leftist President Alberto Fernández, is designed to relieve the South American country’s dwindling dollar reserves, AP reports.
  • The deal further enhances China’s rise on the world stage and the diminished role of the U.S. on a host of fronts under President Joe Biden.
  • After reaching the agreement with various companies, Argentina will use the yuan for imports from China worth about U.S.$1.04 billion from next month, accelerating trade with China as Beijing seeks to gain a further foothold in South America.
  • In November last year Argentina expanded a currency swap with China by $5 billion in an effort to increase its yuan reserves.
  • It has also been working hard to build a relationship with Beijing after having officially joined China’s infrastructure-building Belt and Road Initiative (BRI) last year.

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De-Dollarization begins and France leads the way for Europe to follow

Revelations 13:16-18 “Also it causes all, both small and great, both rich and poor, both free and slave, to be marked on the right hand or the forehead, so that no one can buy or sell unless he has the mark, that is, the name of the beast or the number of its name. This calls for wisdom: let the one who has understanding calculate the number of the beast, for it is the number of a man, and his number is 666.”

Important Takeaways:

  • France brings de-dollarization to Europe by trading in yuan
  • Following news that Brazil and China agreed to trade in their local currencies, it emerged that a French company charged the export of liquefied gas (LNG) to China National Offshore Oil Corporation in the Chinese yuan. This is another sign that the inexorable process of de-dollarization has gained momentum and even spread to the European Union.
  • This should not be surprising given the difficult economic situation across the EU, meaning that companies will look after their own interests above all. None-the-less, the media has already characterized the transaction between the Chinese company and Total Energy in yuan as historic.
  • Meanwhile, the dollar, which once accounted for 70% of foreign exchange reserves, has now fallen to 59%. The process is ongoing, and will take a long time, but it cannot be halted. One of the initial goals of the BRICS association was de-dollarization.
  • The Chinese insist on payments in the yuan so that it becomes a reserve with the same respect as the dollar, Swiss franc, euro, and yen.

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Saudi’s ditching US dollar for the Yuan?

Saudi Arabia

Revelations 18:23:’For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • Saudi Arabia Is Open To Discuss Non-Dollar Oil Trade Settlements
  • In Davos, Saudi Arabia’s Minister of Finance Mohammed Al-Jadaan surprised the world’s oil industry by saying that they are open to the possibility of conducting oil trade in a currency other than the US dollar.
  • “There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal,” he said. This is another blow to the dominance of the dollar in world trade.
  • However, Saudi Arabia is willing to deepen its strategic cooperation in oil trade with China, the world’s largest crude oil importer.
  • Last month, China and Saudi Arabia agreed to expand crude oil trade as they upgraded their relations to a strategic partnership during the visit of Chinese President Xi Jinping in the Saudi capital Riyadh.
  • China, for its part, plans to make its own currency, the yuan, more prominent in international oil trade.
  • During a visit to Saudi Arabia last month, Xi Jinping pledged to ramp up efforts to promote the use of the yuan in energy deals, suggesting at a summit in the Saudi capital that the Gulf Cooperation Council (GCC) countries should make full use of the Shanghai Petroleum and Natural Gas Exchange to carry out its trade settlements in yuan.

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China’s choices narrowing as it burns through FX reserves to support yuan

100 yuan and 100 dollars

By Nichola Saminather

SINGAPORE (Reuters) – As China’s foreign exchange reserves threaten to tumble below the critical $3 trillion mark, the biggest fear for investors is not whether Beijing can continue to defend the yuan but whether it will set off a vicious cycle of more outflows and currency depreciation.

Data this week is expected to show China’s forex reserves precariously perched just above $3 trillion at end-December, the lowest level since February 2011, according to a Reuters poll.

While the world’s second-largest economy still has the largest stash of forex reserves by far, it has been churning through them rapidly since August 2015, when it stunned global investors by devaluing the yuan <CNY=CFXS> and moving to what it promised would be a slightly freer and more transparent currency regime.

Since then, authorities have repeatedly intervened to support the yuan when it weakened too sharply, burning through half a trillion dollars of reserves and prompting them to sell some of their massive holdings of U.S. government bonds.

They also have put a tightening regulatory chokehold on individuals and businesses who want to move money out of the country, while denying they were imposing new capital controls.

Concerns over the speed with which China is depleting its ammunition are swirling, with some analysts estimating it needs to retain a minimum of $2.6 trillion to $2.8 trillion under the International Monetary Fund’s adequacy measures.

“There has been quite a bit of anxiety and speculation because the way many people in China talk about it is ‘will the government defend the 7-per-dollar level or the 3 trillion dollars’,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.

China stepped into both its onshore and offshore yuan markets this week to shore up the yuan as it neared the 7 level, sparking speculation that it wants to regain a firm grip ahead of the Jan. 20 inauguration of U.S. President-elect Donald Trump, who has threatened to brand Beijing a currency manipulator.

But if forex reserves continue to be depleted at a fast pace and capital flight continues, some strategists believe China’s leaders may have little choice but to sanction another big “one-off” devaluation.

That could set off competitive currency devaluations by other struggling emerging economies, even as the world braces for greater trade protectionism under Trump.


To slow the yuan’s decline without depleting reserves at an ever faster pace, analysts and economists expect authorities to turn to even tighter regulatory measures, including more scrutiny of outbound investments, overseas lending and export revenues, and closing loopholes in existing capital controls.

But as fast as authorities jump to control one exit ramp, others may open up unless Beijing can reverse the market’s mind-set that the yuan is on a one-way depreciation path.

“It doesn’t matter if there’s actually enough reserves or not,” said Joey Chew, Asia foreign exchange strategist at HSBC, who believes China doesn’t need a buffer of more than $2 trillion.

“If people think there won’t be enough they’ll try to get out and it becomes a self-fulfilling mechanism.

“The authorities are already aware that trying to run down reserves will be counterproductive, which is why they’re relying on regulatory controls,” she added.

As recently as last week, authorities introduced requirements for financial institutions to report all single domestic and overseas cash transactions of more than 50,000 yuan ($7,212.72) from July onwards, down from 200,000 yuan previously.

The authorities also stepped up scrutiny on individual foreign currency purchases, although they kept the $50,000 annual individual quota in place.

“Previously, capital controls had been relatively loose and authorities had turned a blind eye to individual forex purchases because of abundant foreign exchange reserves,” said Jerry Hu, an economist at Shanghai Securities.

“But they are now strengthening supervision in order to change expectations.”

With regulators also pledging to increase scrutiny of major outbound deals, “it’s not impossible to see that we’ll see further moves in that area,” Kuijs said.

China could also encourage its domestic exporters to convert more of their earnings into yuan, HSBC’s Chew said.

Chew believes new capital controls are unlikely.

“There are a lot of controls already,” she said. “They were maybe not as strictly enforced, so they’ll focus on improving that. But the tweaks may not be enough. We still expect capital outflows and we still expect RMB depreciation.”

Dwyfor Evans, head of Asia-Pacific macro strategy at State Street Global Markets, also feared authorities may be limited in how they respond.

“Chinese officials have few policy options,” he said.

“If they allow faster depreciation, this will only spur pressures for greater outflows. And a one-off devaluation risks a repeat of the market turbulence evidenced twice in the past 18 months.”

(Additional reporting by Kevin Yao in BEIJING; Editing by Vidya Ranganathan and Kim Coghill)

Exclusive: Russia may borrow in yuan this year for first time

100 Yuan Note

By Yelena Orekhova and Andrey Ostroukh

MOSCOW (Reuters) – Russia may borrow Chinese yuan for the first time ever by the end of 2016, a Russian finance ministry official said, a step towards Moscow’s ambition of using Asian credit markets to compensate for its limited access to Western funding.

Russia needs new sources of cash as low crude oil prices lead to widening shortfalls in the budget. Its access to Western capital markets is restricted by Western sanctions imposed on it over the conflict in Ukraine.

One option the finance ministry may choose is selling treasury bonds, known as OFZs, denominated in the Chinese currency, later this year, Konstantin Vyshkovsky, head of the state debt department at the finance ministry, told Reuters.

Moscow may raise the equivalent of $1 billion in yuan through the OFZs, money that the finance ministry would convert into rubles, Vyshkovsky said.

Russia has drawn closer to China, painting it as its close partner, after Moscow’s relations with the West were soured by its annexation of Crimea from Ukraine in 2014 and its support of the conflict in Eastern Ukraine.

But Moscow’s pivot towards Asia has not gone smoothly, in part because Asian credit markets are much shallower than the Western debt markets that Russia has turned to in the past when it needed to borrow.

Russia raised $3 billion through a dollar-denominated Eurobond this year, but the issue was complicated by the fact that many major financial institutions were wary of taking part because of sanctions risk.

Under a plan set by the finance ministry, Russia will not raise any more foreign debt this year, so the yuan-denominated OFZs, which are considered domestic borrowing, would be a timely supplement for the budget.

The money raised may help avoid a greater budget deficit, which this year will exceed the ceiling of three percent of gross domestic product that had been initially set by President Vladimir Putin.

Russia’s Reserve Fund is running out and low prices for crude oil, its key export, are putting pressure on the budget. The finance ministry had said it will respond by increasing borrowing and will also try to proceed with selling state stakes in major Russia companies.

The OFZ bonds would be issued as part of additional borrowing worth 200 billion rubles ($3.21 billion), Vyshkovsky said.

The extra borrowing program for the fourth quarter was approved in September after Russia had nearly reached its full-year borrowing limit of 300 billion rubles in the domestic market in the first three quarters.

Sovereign rouble bonds enjoyed strong demand this year thanks to high yields linked to the central bank interest rates . The central bank has been reluctant to cut rates quickly, given risks that inflation won’t slow to its ambitious target an all-time low of 4 percent in 2017.

($1 = 62.2255 rubles)

(Reporting by Yelena Orekhova, writing by Andrey Ostroukh, editing by Christian Lowe, Larry King)