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China’s push for trade in yuan has downsides for Gulf states

Paying for the import of Gulf fossil fuels in yuan is at the top of China’s list to lay the foundations for a greater global adoption of its currency.

A Chinese vendor displays notes during a cash transaction in Beijing 14 January 2007. The yuan was pegged to the US dollar until 2005 when Beijing decided to revalue it by 2.1 percent and place the unit in a currency basket, allowing a greater but still very tightly controlled margin of flexibility, but the yuan has since slowly but steadily risen in value on the back of China's booming economy and the breaching of the 7.80 level. AFP PHOTO (Photo credit should read STR/AFP via Getty Images)
To:

Al-Monitor Pro Members

From:

Sebastian Castelier

Business journalist covering Gulf economies

Date:

May 30, 2023

Bottom Line:

“Don't kiss your dollars goodbye just yet,” the International Monetary Fund’s managing director Kristalina Georgieva warned on Wednesday during the Qatar Economic Forum in Doha. Beijing struck its first-ever yuan-settled energy deal involving Emirati liquified natural gas in the first quarter of 2023. Paying for the import of Gulf fossil fuels in yuan is at the top of China’s list to lay the foundations for a greater global adoption of its currency, officially known as renminbi. But should the practice become more common, Gulf countries would ​​get “most of the downsides.” Yet a global surge of interest in de-dollarization — with a 600% increase in discussions on Twitter and Reddit in the first three months of 2023 — is offering Gulf countries an opportunity to display yuan-settled trade to warn the United States.