It sounds huge.
China is on the cusp of its biggest move yet to open up its vast commodities markets, after the Shanghai Futures Exchange unveiled an internationalization plan to streamline access for overseas investors.
The country’s biggest raw materials bourse is soliciting views on a proposal to let participants post foreign exchange as collateral for yuan-denominated trades, according to a statement on Tuesday. Restrictions on foreigners and their capital are an oft-cited reason for China’s failure to punch its weight in international markets.
The much-anticipated move would serve a number of purposes, including China’s long-held ambition to more directly influence the price of the imported commodities on which its economy relies. It would also help burnish the yuan’s appeal as an international currency to rival the dollar in financial markets.
Really, would it? I mean, this is pissant stuff. Commodities trade about USD1.4tr per annum.
Big? Not really? Forex trades about 200 quadrillion, 88% in USD.
This amounts to two thousand trillion dollars in transactions. And that’s only forex, though it is by far the biggest.
I suppose what this suggests is that China wants to shield its most sensitive corner of foreign trade – dirt and food – from USD risks.
In any conflict scenario in which commodities flow can just be shut down at the flick of a switch, it’s none too comfortable.
But as for internationalising the yuan? There’s a better chance of making the Martian @!#$#%$$% rise as an alternative.
Which, now I think about it, makes me wonder why I’ve been so skeptical of US assets and worried about EM dynamics emerging in that currency.
Trump, too, will pass.
