"De-Dollarization" Continues - China Starts Direct Trade With UK

Tyler Durden's picture




 

Following the initial de-dollarization meeting, there has been a slew of anti-dollar moves around the world (including Gazprom's shift of 90% of its clients to non-dollar payments). However, on the heels of the "anti-dollar alliance" discussions yesterday, DW reports that China would start direct trade between the renminbi and the British pound on Thursday. China's Foreign Exchange Trade System (CFETS) confirmed Sterling and yuan would be directly swapped without using the US dollar as an intermediary.

 

Via DW,

China's Foreign Exchange Trade System (CFETS) said Wednesday the Asian nation would start direct trade between the renminbi and the British pound on Thursday.

 

Sterling and yuan would be directly swapped without using the US dollar as an intermediary, the trade platform noted.

 

"The move will promote the bilateral trade and investment between China and the United Kingdom and facilitate the use of renminbi and pound in the cross-border trade settlement," CFETS commented.

 

China has long had direct currency trade with the US and has recently added Japan's yen, the Australian, New Zealand and Canadian dollars, Russia's ruble and the Malaysian ringgit to its options.

 

Wednesday's announcement came during a visit to the UK by China's Prime Minister Li Keqiang and after the signing of various bilateral business contracts.

 

Britain for its part has been looking to make London a European hub for overseas yuan trading in competition with Frankfurt and Paris. China's central bank announced Wednesday that a subsidiary of China Construction Bank had been chosen to undertake yuan clearing business in London.

Still - there's always Iraq to trade USDs with...

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Thu, 06/19/2014 - 22:30 | 4876556 LetThemEatRand
LetThemEatRand's picture

Red coats?  Hey, whatever funds the good looking Prince and his bride are okay by me.  Because in this day and age we're over Royalty and all that.

Thu, 06/19/2014 - 22:33 | 4876576 Xibalba
Xibalba's picture

God save Queeny and all. 

Thu, 06/19/2014 - 22:35 | 4876585 BlackChicken
BlackChicken's picture

Save or embalm?

Thu, 06/19/2014 - 22:50 | 4876613 COSMOS
COSMOS's picture

China is the 900lb gorilla in the room, they have the world by the balls literally.  Nothing the USA can do about it and the Australians and New Zealanders are worried about what the Pacific will look like once the dollar folds.  It ain't gonna be pretty.

And very interesting that London wants to be a center of Yuan trade.  Those little bastards better not be hoping for any moral support in the Falklands war part 2.  I hope Argentina gets its shit together and kicks their little treacherous asses back to those overpopulated Unuinted Kingdom Isles.

And I hope the Scots give the Brits a final kick in the balls with their independece from those POS

Thu, 06/19/2014 - 22:53 | 4876624 LetThemEatRand
LetThemEatRand's picture

I often agree with you, but not here on the first paragraph.  China has more than 1 billion mouths to feed.  It is the 900 pound chihuahua fed by American consumers.  If we cut off their trade advantage tomorrow, they would have civil war.  But we won't, because the status quo is too profitable for the oligarchs.

Thu, 06/19/2014 - 23:11 | 4876708 cbaba
cbaba's picture

Right input but wrong logic.

China can buy anything cheaper if the dollar system resets and renbinmi is overnight backed by gold( which will happen in near future when a crisis hits the markets).

Thats why all countries one by one signing deals with china to exclude dollar and use renbinmi, one day their saved renbinmis will have a backing by gold, but not us dollars, even in future us dollar is also backed by gold, then it will loose more than half of its value ( due to less gold reserves).

Yes China has many mouths to feed but they have the money to pay for it which is gold.

Its more US's advantage right now to sell as much food as possible. US is selling all its food with very expensive dollars.

Thu, 06/19/2014 - 23:20 | 4876733 LetThemEatRand
LetThemEatRand's picture

China is the ultimate expression of the new normal.  A very small percentage of the population is doing very well.  Formerly self-sufficient farmers are going broke and their kids are moving to the cities hoping to join the elusive middle class or even more elusive upper class.  The wealth is created by banker ponzi schemes enforced by oligarchs who control a centralized government that stays in power because of the illusion of upward mobility and the power of a military funded by the bankers who spend the People's money.

Fri, 06/20/2014 - 00:03 | 4876874 Jerk_Store
Jerk_Store's picture

China is the ultimate expression of the new normal.  A very small percentage of the population is doing very well.  Formerly self-sufficient farmers are going broke and their kids are moving to the cities hoping to join the elusive middle class or even more elusive upper class.  The wealth is created by banker ponzi schemes enforced by oligarchs who control a centralized government that stays in power because of the illusion of upward mobility and the power of a military funded by the bankers who spend the People's money.

 

Are you talking about China or the USA?

Fri, 06/20/2014 - 00:05 | 4876881 LetThemEatRand
LetThemEatRand's picture

"Are you talking about China or the USA?"

Yes.

Fri, 06/20/2014 - 06:10 | 4877227 Squid-puppets a...
Squid-puppets a-go-go's picture

U.S.:  et tu, BrU.K.us?

Fri, 06/20/2014 - 04:01 | 4877164 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

it's funny

in one article, it will be highlighted how corrupt all the policymakers of China are, and in an attempt to show China as bearish, it will be shown how all the Chinese policymakers and executives are abandoning China and transfer their wealth to USD or USD-based assets (though AUD CAD GBP are common too)

and yet in another article, it will be highlighted that China is trying to destroy the USD as a reserve currency which would essentially crush the value of the USD and therefore all their money

 

so which is it? why would China be trying to destroy the USD and yet at the same time abandoning China and transfering all their wealth to USD?

 

one is obviously more symbolic politics than the other...

Fri, 06/20/2014 - 04:49 | 4877183 zhandax
zhandax's picture

Bad form to keep your loot in the same place you stole it.  US property dollar prices will suffer during a dollar collapse, but property values are a different story.  Learn to understand the difference and exploit divergences therein.  The US pols understand rich people, and this is and will continue to be a place that attracts them regardless of what fantasy said pols are indulging in on any particular week.

Fri, 06/20/2014 - 07:23 | 4877277 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

if dollar collapses so will real estate because enough foreigners have it as investments that this would start flight

especially when the market is already frothy and looking for any excuse to collapse

Fri, 06/20/2014 - 07:42 | 4877301 Never One Roach
Never One Roach's picture

Another reason gold is rising. The fear of dollar devaluation relative to other currencies. Both the UK and China have long histories dealing with all these issues, including currency. UK is diversifying. Plus, the City of London folks have loyalty to no country ... their only loyalty is to money and accumulating and preserving their wealth.

Fri, 06/20/2014 - 06:20 | 4877231 mc225
mc225's picture

'the ocean calledthey're running out of shrimp.'

Fri, 06/20/2014 - 07:31 | 4877289 new game
new game's picture

and the sharks will be lean and mean (could they eat each other when the shrimp are gone?)-haha

history has a way of going full circle as shimp are a vital part of the food chain-haha again...

Fri, 06/20/2014 - 14:59 | 4878869 screw face
screw face's picture

+1.....both US and China

 

bank on it

Fri, 06/20/2014 - 00:08 | 4876886 TheReplacement
TheReplacement's picture

Well done.  And just what do those in power do when they seem to have this unstoppable inertia, too many mouths to feed, an excess of young males with no prospects for a family, and a distant receding... imploding empire?

March! 

I've decided that the US going to war after WWII is like the old saying about better to keep your mouth shut and be thought a fool than to open it up and prove you are a fool.  We would have been so much better served by projecting strength through a defensive posture along with the same from our so-called allies.  But noooo.  We had to go everywhere and fight every battle to protect everyone.  We did develop the best military ever but we also depleted it in ways for which you cannot buy fixes.  All of that so we would have extremely weak allies who then turn and cut us off at the knees to make a pound with our rivals. 

All that and the reality is that we've debased our currency to the point of having forced our allies to abandon us. 

Hari-kari!

Fri, 06/20/2014 - 03:19 | 4877136 RafterManFMJ
RafterManFMJ's picture

Perhaps the Ukrainian action is also about the control of it's agriculture; if food production can be locked down, the hungry masses of China and the Middle East could be controlled / influenced by throttling food supplies...

Fri, 06/20/2014 - 06:12 | 4877228 Headbanger
Headbanger's picture

BINGO!   Fuck with the almighty U.S. Dollar and we cut off your food supply!

Which is one big reason Putin wants Ukraine so he can help feed China and sell them gas too.

 

Thu, 06/19/2014 - 23:35 | 4876795 RaceToTheBottom
RaceToTheBottom's picture

"one day their saved renbinmis will have a backing by gold, "

China has recently printed 3x what the US has printed (as reported here at ZH).  Why and more importantly how would a country that does that, back their currency with GOLD.

Sorry, not going to happen, without a lot more preparation on their part, and probably will never happen.  They want the same advantages the US had.

Fri, 06/20/2014 - 00:04 | 4876875 COSMOS
COSMOS's picture

Look I agree everyone has dirty hands, nobody is clean, but the freakin Chinese have our entire infrastructure which was shipped to them over the past thirty years.  I remember growing up seeing story after story of places closing down and the equipment being moved to China courtesy of the slime balls on Wall street with their buyouts and structured deals for LBOs and whatever other parasitic scheme that drained this country on know how and production ability.  We are an empty shell.  Sure we make military equipment but the Chinese are cutting us out on that too.  No wonder everyone is doing the currency deals with the Chinese.  Its not like you are going to find any hair dryers made in the USA.  Or smartphones, or microwaves or whatever other shit you need in your house.  The Chinese have won period.  We have a country full of people with no skills and no jobs for them out there.

Fri, 06/20/2014 - 01:12 | 4877018 starman
starman's picture

Cosmos if everyone coud see the way you do. Unfortunately they dont.

game over USA.

Fri, 06/20/2014 - 01:14 | 4877019 AmCockerSpaniel
AmCockerSpaniel's picture

We did it to our self's when we bought in to "Free Trade". Now the USA has nothing to sell in the market save food, and that's not aloud because the rest of the world

is not as dumb as the USA, and will not let there farmers be put out of business. All these "Free Trade agreements that the one percent want will just come about at the cost for the ninety nine percent. The MSM is not helping us, so it's every man/ woman for them selves. 

Fri, 06/20/2014 - 08:33 | 4877383 S73
S73's picture

We did it to ourselves when we bought into allowing politicians and unions to give themselves and Wall Street a giant chunk of every worker's earnings.

Fri, 06/20/2014 - 05:28 | 4877205 RaceToTheBottom
RaceToTheBottom's picture

It is not an either or situation.  And it certainly isn't one uses Fiat and the other doesn't.  

I don't disagree with your post of China having infrastructure, but that is not really tied to is a Fiat backed by GOLD.

They both will try and use Fiat for the next 100 years

Fri, 06/20/2014 - 00:03 | 4876873 LostandFound
LostandFound's picture

There is too much interdependance between all trading countries for any one country to back their currency with gold. If the Chinese did this, then the exports would tumble and both them and the US would go into a deep recession. Unfortunately it is a marriage of convenience. 

With China now starting to change there economy to more consumption based, they may in time be able to do something like this, but it wont be for a long time.

My bet is that this is a race to the bottom until a global reset is put in place, then hopefully a sound monetary system will prevail.

A smart chinese man said to me, that i cant beleive the world is allowing us to buy gold with printed pieces of paper......

 

Fri, 06/20/2014 - 00:06 | 4876884 COSMOS
COSMOS's picture

Exactly but the Chinese dont need to back their currency with gold, they back it with the stuff that everyone needs in their house, like microwaves, tv, hair dryers, hardrives, computers, furniture, textiles, utensils, dishes, and so on and so on.  The Chinese are the manufacturing dynamo for the world.  Their products back their currency. 

Fri, 06/20/2014 - 10:31 | 4877783 atomp
atomp's picture

"A smart chinese man said to me, that i cant beleive the world is allowing us to buy gold with printed pieces of paper......"

 

That's it right there.  The Chinese are apparently printing more than anyone else (everyone else?), and buying "real" shit with nearly worthless paper.

Fri, 06/20/2014 - 01:18 | 4877024 Buck Johnson
Buck Johnson's picture

Your totally right.  They know that the US economy is going to implode once the dollar devalues and become a non-reserve currency.  Everyone is slowly getting out and setting up their lifeboat to rescue.  Because the Renbinmi or whatever will be the next reserve currency will be backed by gold, platinum and other resources and if you don't have enough of that you won't be able to press your will around the planet.  I think what will happen in the US will be that the greenback or dollar will be used internally by the people in the US but the new reserve currency will be relegated to being used by the govt. and sanctioned companies and traders and financial companies that need to use it.  And having this new reserve currency as a person not sanctioned to have it will be against the law in the US.

 

 

Fri, 06/20/2014 - 05:49 | 4877222 lakecity55
lakecity55's picture

After WW1 and then WW2, Britain was broke.

Now, after 2 Gulf Wars, the US is broke.

China is next.

The progression of History

Fri, 06/20/2014 - 07:41 | 4877244 RaceToTheBottom
RaceToTheBottom's picture

"Because the Renbinmi or whatever will be the next reserve currency will be backed by gold, "

They will not walk quietly into the night.  The next few currencies proposed will still be Fiats, all the way including when they propose the world currency.

They got a good gig going, why would they give it up?

 

PS, I am not sure China could survive the turmoil that would be caused by fiscal discipline.

Thu, 06/19/2014 - 23:11 | 4876709 BandGap
BandGap's picture

They are skating a fine line with food and water is not to be found in some areas. And business people will not visit the highly polluted areas.

They need food first.

How ya doing, Tommy?

I like how people think that since shit is bad here it must be better elsewhere. It isn't.

Fri, 06/20/2014 - 00:21 | 4876918 Jerk_Store
Jerk_Store's picture

They are skating a fine line with food and water is not to be found in some areas. And business people will not visit the highly polluted areas.

They need food first.

How ya doing, Tommy?

I like how people think that since shit is bad here it must be better elsewhere. It isn't.

 

The difference is that there are a lot of people in the world that can deal with hardships so much easier than americans. Imagine a typical american living on rice and cabbage, sleeping in a hot room and carrying water from the river. They would last about 1 day.

Fri, 06/20/2014 - 00:45 | 4876975 COSMOS
COSMOS's picture

LOL so true Jerk, hit it right on the money.  But its not like our forefathers weren't doing that kind of stuff in the dustbowl era and before.  But at least they weren't slaves to this financial parasitical system.  Back then a silver coin meant something, its value was not manipulated by some a--holes.

Listen I agree with a lot of people around here, many folks going to wake up to an America they will not recognize and there wont be any place for them to run to get away.  My prediction is that by the end of this year gas will not be going below 4 dollars a gallon for the lowest grade of unleaded period.  I also love it how over the past few years we have been seeing less 87octane for the lowest level unleaded and now we are seeing 86 at most pumping stations.

Fri, 06/20/2014 - 01:18 | 4877023 pakled
pakled's picture

And the gas is crap as well. It's best to run highest octane regardless of your vehicle. I have some friends who run a Honda 1000 generator as their grid source. On regular gas they get 4hrs on a tank.

 

On super they get 6 hours. It may be cheaper to run better gas. It's at least worth checking on your own vehicle.

Fri, 06/20/2014 - 08:18 | 4877299 cowdiddly
cowdiddly's picture

When I was a kid we only had 2 grades at the pump, Regular and Eythl. Regular was 93 octane and Eythl was 97. This is why I don't have an old 60s muscle car. All they will do is start pinging and valve clattering when you stomp the accelerator with 86 octane without additive. You used to set the timing to ignite the fuel at 5-7 degrees before top dead center of the piston rotation on the old cars versus todays engine that are set to ignite at close to exactly 0 degrees or when the piston travel is at its highest.

It can be thought of like a modern slow burning rifle powder that takes a long time to burn versus black powder that goes instantly poof. Todays gasoline is all dinosaur farts in comparison.

I remember even the regular grade was more solvent like, if you spilled it you could see it start evaporating quickly, unlike this beady oily stuff like the unleaded today. It was RED colored and we used it  for everything from cleaning oily parts to killing weeds, it was that cheap, 25cents  a gallon which was ..07 oz of real silver for a gallon.

We had real gas, real money, real wood furniture and stuff was made here in the US and built like a brick shithouse to last. Americans took pride in their work and were compensated well for it, it started at the top. You tried to build the best that you could; today people just show up wanting a paycheck, its all about money,greed, the next qtr profit and the money only stays at the top.

I broke my straight razor the other day and needed a small piece of brass wire to make a pin for the handle. I though I would go to Walmart and buy a hanging plant basket or something to scrounge some wire off. I slowly walked the entire store looking. Not a piece of brass on anything. It was just shelves and shelves of plastic crap.

Better days for sure my friend.

Those time are gone lika a 59 Cadillac.

Fri, 06/20/2014 - 01:07 | 4877011 hobopants
hobopants's picture

Lets put two and two together then,

You have a spoiled nation with the most powerful standing military about to lose everything. They have two options left, collapse peacefully, or start world war three... Given their violent past what do you think is going to happen?

Odds are it's going to be very bad for everyone including the US, and the ability to eat cabbage and rice will not save you from nuclear fallout.

Fri, 06/20/2014 - 02:30 | 4877093 Jerk_Store
Jerk_Store's picture

"Lets put two and two together then,

You have a spoiled nation with the most powerful standing military about to lose everything. They have two options left, collapse peacefully, or start world war three... Given their violent past what do you think is going to happen?

Odds are it's going to be very bad for everyone including the US, and the ability to eat cabbage and rice will not save you from nuclear fallout."

The nation isn't spoiled, the people are. The 1% are slowly accumulating everything they need. They have no reason to start a world war 3, when they have all the assets they could possibly need. Sure they'll start wars here and there to profit making sure it doesn't destry any of their property. There is not going to be a collapse. What's going to happen is what is already happening. The 99% (myself included) are slowly going to have to learn to live with less and the poor guy in china who lives on rice and cabbage is going to have a little extra fish now and then. If gas prices rose to $10 gal, the 1% are still going to fill their tanks without even thinking about the cost. The 1% don't earn their money only in the USA, they earn (or steal)  their money in markets all over the world.

Fri, 06/20/2014 - 18:37 | 4879396 hobopants
hobopants's picture

I see where you are coming from, but I can't agree with you. You give them far too much credit, I don't think the current problems are some "Grand Plan" I think they are a result of greedy short sighted people grabbing everything they can.

I also seriously doubt the eilte trust each other, they made their fortunes by being the very oppisite of trustworthy people. So to think that a bunch of selfish power hungry people are going to hold hands in order to dominate the world is a silly Idea, World War Three is coming, there will be no peaceful fall.

Fri, 06/20/2014 - 04:03 | 4877162 SF beatnik
SF beatnik's picture

I expect this nation-versus-nation mode soon to be rendered obsolete as global elites self identify as a nation unto themselves. They see that the consumers of the developed world can't be allowed to go on polluting the biosphere and devouring natural resources as though there were no tomorrow. 

That is to say, the biosphere can no longer endure your flying off to Greece to snap pictures of the Parthenon. It can't endure your driving your SUV (or even your Prius) to the stadium just to watch a football game. It can't endure your eating steak for dinner and having still more babies.

 

The least messy fix would not be to depopulate the planet with WW III or to unleash a global pandemic.

 

The obvious fix, readily at hand, is the collapsing of fiat currencies.

 

Hence, "the Great Wealth Transfer" is likely to continue.

 Reduced purchasing power means reduced consumption, reduced pollution. 

 

The party is already winding down, folks.  This will soon be painfully clear.  Things will get worse and worse - and still worse. No tech is in the works that will save our sorry asses. 

 

Stay home, mend socks, eat rice and beans - that's our future, we who are not in the one percent. 

Thu, 06/19/2014 - 23:14 | 4876717 laomei
laomei's picture

Not really, no.  US trade with China while a decent sized chunk is increasingly insignificant.  If you cut off their trade advantage tomorrow, your stores would be empty and your population will be rioting as they find they can no longer afford even the basics they have come to expect.  Enjoy THAT chaos, far more devastating than any civil war.

Thu, 06/19/2014 - 23:34 | 4876783 LetThemEatRand
LetThemEatRand's picture

I would love to see which of us is right, but we'll never know because your central government will continue to do business with our central government, controlled by the oligarchs who make all the money.  Remind me which technologies the Chinese had before Nixon opened the free trade window, or is that an ancient Chinese secret?

Fri, 06/20/2014 - 00:20 | 4876915 pakled
pakled's picture

Good discussion you guys. I don't know who's right, except maybe you both are. The future is remarkably unpredictable, but I have a notion that the apparently upcoming pain is going to be somewhat equally distributed among all industrialized nations. Every major nation has major problems. I just hope that the system can crash without someone breaking out the big-ass war machines.

Maybe we can all mutually default -public and private debt- all of it... lick our wounds locally for a while, and then start up barter based trade. It will have to be direct, same time, trading, because even collateral will be suspect (thanx to rehypo blah blah blah) unless it is in the lender's back yard. So picture the US calling up China and saying "ok, we have a boatload of wheat ready to sail. Your people have inspected it and approved." Then China says "ok, we have a boatload of manufactured goods (thanx to the energy we traded for gold to Russia last month) ready to sail. Your people have stamped it ok".

OK, on the count of three cast off the mooring lines!!

Fri, 06/20/2014 - 00:23 | 4876922 laomei
laomei's picture

I can play that game too.  Remind me which technologies the US had before they stole them all from Europe and then pilfered Germany, or is that still off limits?

Fri, 06/20/2014 - 00:37 | 4876953 Sandmann
Sandmann's picture

You have to admit FDR played the game wonderfully......keep in contact with Churchill as Minister inside Chamberlain's Government using Naval ciphers and signals, set up a crappy operation in Narvik, get Chamberlain out and the American Churchill to bomb German cities to stop any peace overtures.....then simply keep Britain on a credit string for weapons and oil from Texas until it invites the first Occupation Army since 1066 and the US  never leaves but turns the UK into a colony - the template for Germany which now has 185,000 soldiers and 40,000 US Occupiers to keep control

Fri, 06/20/2014 - 00:41 | 4876964 LetThemEatRand
LetThemEatRand's picture

Interesting that your comeback doesn't involve either the U.S. or Europe stealing technology from China.   

Fri, 06/20/2014 - 01:12 | 4877016 Slave
Slave's picture

Like gunpowder?

Speaking of which, Rand, what's your view on guns?

Sat, 06/21/2014 - 12:35 | 4880616 laomei
laomei's picture

Funny thing about that, Europe stole a whole lot of shit from China. England stole tea from China, flat out stole it in a case of espionage.  The Byzantines stole silk.  And then there was the whole "missionary" scam where backwards Europe stole tons of technology and pretended that it invented it. Sanitation and plumbing systems? Look back to Shang dynasty, a good 1000 years prior to Rome.  The trade just flowed that way and most of the cool shit to be had was out East flowing through places like Bactria, which when the Greeks stumbled across thought it was the most advanced place ever... but compared to China, it was nothing.  Arabs essentially acted as knowledge brokers when Europe was busy burning witches and being retarded.  I don't hear anyone crying over stolen IP from that era though... oh, it's historical, it's in the past, it's different.  Once the west had stolen enough and plundered enough and gotten a leg up, well well well, time to implement a patent system and pull that ladder up along with us!  Ideas and technology get copied, deal with it.  Or be a big crybaby, and then we can talk all about how you're a hypocrite.

Fri, 06/20/2014 - 06:38 | 4877243 eurogold
eurogold's picture

Laomei, so true ! Alone the stolen patents support the U.S. economy to this day !

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