Europe & China Start Direct Trading In Euros & Yuan As De-Dollarization Expands

Tyler Durden's picture

De-dollarization has been an ongoing theme hidden just below the surface of the mainstream media for more than a year as Russia and China slowly but surely attempt to "isolate" the US Dollar. Until very recently, direct trade agreements with China (in other words, bypassing the US Dollar exchange in bilateral trade) had been with smaller trade partners. On the heels of Western pressure, Russia and China were forced closer together and de-dollarization accelerated from Turkey to Argentina as an increasing number of countries around the world realize the importance of this chart. However, things are about to get even more dramatic. As Bloomberg reports, China will start direct trading between the yuan and the euro tomorrow as the world’s second-largest economy seeks to spur global use of its currency in a "fresh step forward in China’s yuan internationalization." With civil unrest growing on every continent and wars (proxy or other) at tipping points, perhaps, just perhaps, the US really does want rid of the weight of the USD as a reserve currency after all (as championed here by Obama's former right hand economist)... now that would be an intriguing 'strategy'.


As Bloomberg reports, China will start direct trading between the yuan and the euro tomorrow as the world’s second-largest economy seeks to spur global use of its currency...

The euro will become the sixth major currency to be exchangeable directly for yuan in Shanghai, joining the U.S., Australian and New Zealand dollars, the British pound and the Japanese yen. The yuan ranked seventh for global payments in August and more than one-third of the world’s financial institutions have used it for transfers to China and Hong Kong, the Society for Worldwide International Financial Telecommunications said last week.


“It’s a fresh step forward in China’s yuan internationalization,” said Liu Dongliang, an analyst with China Merchants Bank Co. in Shenzhen.


The move will lower transaction costs and so make yuan and euros more attractive to conduct bilateral trade and investment, the People’s Bank of China said today in a statement on its website. HSBC Holdings Plc said separately it has received regulatory approval to be one of the first market makers when trading begins in China’s domestic market.




China’s trade with European Union nations grew 12 percent from a year earlier to $404 billion in the first eight months of 2014, according to data from the Asian nation’s customs department. That compares with just $354 billion with the U.S. during the period.


French and German companies lead among countries outside of greater China in the use of the yuan, according to a July report by HSBC that was based on a survey of 1,304 businesses in 11 major economies that have ties with mainland China. Some 26 percent of French corporates and 23 percent of German companies were using the currency to settle trade, the highest proportions apart from mainland China, Hong Kong and Taiwan.




“Given the appointments of renminbi clearing banks in Frankfurt and Paris, today’s announcement is largely expected,” Australia & New Zealand Banking Group Ltd.’s economists led by Liu Li-gang wrote in a research note today. The agreement marks a “significant milestone” in yuan internationalization as the euro is the only G3 currency that has not had direct conversion with the yuan, Liu said.

The chart below suggests the increasing push for de-dollarization across the 'rest of the isolated world' may be a smart bet...


The internationalization of the Yuan (or implicit de-dollarization by the rest of the world) appears to go unnoticed by the administration (and mainstream media)... which makes one wonder - is this the strategy after all? As Obama's former chief economist noted:

what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles.


To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.

As Deutsche Bank previously concluded:

Given this analysis it strikes us that today we are in the midst of an extremely rare historical event – the relative decline of a world superpower. US global geopolitical dominance is on the wane – driven on the one hand by the historic rise of China from its disproportionate lows and on the other to a host of internal US issues, from a crisis of American confidence in the core of the US economic model to general war weariness.


This is not to say that America’s position in the global system is on the brink of collapse. Far from it. The US will remain the greater of just two great powers for the foreseeable future as its “geopolitical multiplier”, boosted by its deeply embedded soft power and continuing commitment to the “free world” order, allows it to outperform its relative economic power. As America’s current Defence Secretary, Chuck Hagel, said earlier this year, “We (the USA) do not engage in the world because we are a great nation. Rather, we are a great nation because we engage in the world.”


Nevertheless the US is losing its place as the sole dominant geopolitical superpower and history suggests that during such shifts geopolitical tensions structurally increase. If this analysis is correct then the rise in the past five years, and most notably in the past year, of global geopolitical tensions may well prove not temporary but structural to the current world system and the world may continue to experience more frequent, longer lasting and more far reaching geopolitical stresses than it has in at least two decades. If this is indeed the case then markets might have to price in a higher degree of geopolitical risk in the years ahead.

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InjectTheVenom's picture

You didn't de-dollarize that !"

Supernova Born's picture

You abuse it, you lose it.

...and all to "save" the TBTF banks.

Richard Chesler's picture

What's gonna happen with all the Bernankos that were printed during the corrupt Obozo administration?


medium giraffe's picture

If you are buying gold, there might be a sale on soon - Bloomers reports that gold ETF holdings are lowest since Dec '08.

SAT 800's picture

When the holdings are lowest; it indicates a bottom; a loss of interest on the part of the mass mind. It's impossible to say when the lowest price day will be but the probability that we have already seen the lowest daily price is about 50% right now. How much of a bargain are you waiting for and how likely is it that you will get it? Will the price have a day when it's 10% less than last week? what is the probability of this? I don't know. maybe 30%? What difference will it make to you in 2018 whether it had a 10% lower day price, or not ? Not much, eh? Old, old, wisdom in the market; all markets; is that nobody gets all of the move in price. are you close to a bottom? yes. do you understand that breaking news might at any week cause an upward explosion in PM prices? Yes. Do you understand that some forms of anouncement are impossible; such as; "we made a mistake, the dollar is actually worth twice what we thought it was". Yes. Do you understand that the devaluation of the dollar is a process and that it must continue ? Yes. Well, then why would you be waiting for a sale? the sale is already on.

medium giraffe's picture

Waiting? No. Shopping, my dear fellow.

SAT 800's picture

Carry on; there's a steady chap.

Theosebes Goodfellow's picture

I'm curious to see how this plays out. The Chinese have been screwing the pooch with their own currency manipulations as it relates to exchange rates, which it tightly controls. Are they going to allow their currency to float freely against other world currencies? I doubt it very much. That would cause Chinese goods to skyrocket in price overseas.

As an aside, yesterday, (Sept. 29th), was the day the Chinese began a gold exchange in Shanghai with direct gold for yuan sales. Anyone hear anything on that?

Lastly, Obama must feel a very proud man today. This move by the Chinese is certainly inline with his desire to knock America down a peg or two in the world. That'll fucking show us.

Squid-puppets a-go-go's picture

dont be silly. The US currrency as the world's fiat is a burden that is not worth the effort. The decline in Americas manufacturing base and standard of living is baked into its fiat status as hard as duco on a mustangs bonnet.

If you look forward to the day where america rejuvenates itself, it will only ever be on the other side of a global dedollarization. If this is obamas strategy (and i dont beleive it is) you should be thankful

zhandax's picture

Guess it is almost time to find out if the Triffin dilemma is the curse of the nominal owner of the reserve currency, or the defacto owner.  If it is possible to split a pair, we may have just found the sucker at the table.

SAT 800's picture

Sadly enough; and I wouldn't want to change places with him; he will never feel like a proud man. He's an errand runner; a finger puppet, and he knows it.

RafterManFMJ's picture

I'm starting to detect something here; a common theme, almost a trend.

"How did you lose the Reserve Currency?"

Slowly, then all at once.

Dame Ednas Possum's picture

...and all to "save" the greedy Nazionists puppeteers.


ebworthen's picture

Looks like Russia has been relatively stable over time.

SAT 800's picture

refreshingly sober and commonsense article.

Dame Ednas Possum's picture

If only the truth held these features more often.

These days it seems that the truth is all too often repulsive.

Despite their arrogantly deluded beliefs and their reliance on the seemingly infinite stupidity of the meat-bags inhabiting Earth, TPTB cannot defy the laws of science and nature, not for long anyway.

I'm looking forward to watching the show.

SAT 800's picture

"--the infinite stupidity of the meat bags inhabiting the Earth-"  I have a feeling we're on  the same team, here Lady Possum. I wonder what it's called ? The flying circus cricket forwards. hmm. no too long, I think.

eddiebe's picture

The trade is: You give us your goodies and we give you paper promises and 'democracy'.

SgtShaftoe's picture

Should start getting interesting soon.  That looks like a pretty steep trajectory of both points.  If it continues, or increases speed and momentum, hyperinflation is no longer a possibility, but a certainty. 

fauxhammer's picture

Yes, the western hegemonical belligerence that marked the "world reserve status" period will be replaced in the post-reserve status period with a more "fair and balanced" belligerence the greater world can share.



SAT 800's picture

I don't see any information leading to conclusions about hyper-inflation in this chart.

El Vaquero's picture

We're the world reserve currency, and there are a fuckton of FRNs floating around outside of our boarders.  When people quit using them less to settle international trade, what will those pesky foreigners do with them?  The info is the GDP chart.  The higher China's relative GDP gets, the more weight it has to throw around.

SAT 800's picture

Well, as I've said before, you are a smart Penguin. I hope you're a penguin, otherwise I'm being politically incorrect, or something. Alright; I accept your reply as responsive, and with no sense of the thing, one way or the other, I'll just have to wait and see, I suppose.

El Vaquero's picture

There's not much else we can do, but sit and wait, and hope the apocalypse doesn't come, while being ready for it.


And yes, that's a penguin.

SAT 800's picture

Okey-dokey. Sort of like the Linux mascot, trademark, hood ornament, or whatever it is? I'm a Linux user; but actually all I know about it is where the on switch is. i seem to remember it has something to do with Penguins, though.

El Vaquero's picture

Yes, Linus Torvalds got attacked by a penguin.  Supposedly.


Ignore the annoying techno.

SAT 800's picture

Lord love a duck; who'd a thunk ?

SAT 800's picture

I suppose the "Techno" refers to the "music". God save us all. But the rest of it is very confusing also; big tuna fish with holes in the tops of their heads and people making strange noises with their mouths. Probably Icelandic Tuna scientists, I suppose. (not much of a biologist, either).

starman's picture

Well well well. History prevails after all. 

The rise and the fall of Empires. 

petkovplamen's picture

No wonder riots started in Hong Kong now. Just another coincidence, indeed it is.

trulz4lulz's picture

It appears 'Merika has reached terminal velocity. Please stand by, while system reboots.....please stand by, while system reboots....

SAT 800's picture

"Open the pod bay door, Hal"

SAT 800's picture

as a matter of fact it is a co-incidence; and of essentially no meaning.

El Vaquero's picture

We have entered times when you will not know what is real and what is not.  Muslim terrorists?  We've bombed a fuckton of them.  Think there aren't some legitimately aggrieved Muslims who would fuck us up given an opportunity?  Think again.  Think false flags are out of the question?  Think again.  Think some aggrieved Muslims would plan an attack, our intelligence agencies would know about it and would not sit on the sidelines while some shit gets blown up?  Think again.  You have to take everything on a case by case basis.

SAT 800's picture

Well, I'll certainly salute that idea. If only more of us would try to evaluate things on a case by case basis, I think we'd be far better off.

Apostate2's picture

Funny that. Take your own advice. Mr Blanket all Chinese are deranged on another thread. Hoisted on your own petard.

Ignorance is bliss's picture

Let's hope for a Bretton Woods type of  accord in 2014 or 2105. Otherwise we'll be in the midst of WWIII the war to end all life as we know it.

RattNRoll's picture

I'd rather deal with Nukes than a fucking post economic zombie crash...sounds fucked up but im near a ground zero target anyways. God help us.

Oldwood's picture

You may get both. Any collapse will not be a reset other than starting over from scratch. Base line. There can be no collapse without mayhem. Violence, disease, hunger. The people of the world will burn this fucker down pursuing life and....justice, as defined by each and every survivor.

Squid-puppets a-go-go's picture

a reset may not be so chaotic, so long as the status quo dont fight tooth and nail for every inch of their privelege

a global agreement to reduce any and all debt by 50% accompanied by an immediate reset of interest rates to 8% would be very manageable


El Vaquero's picture

I live near a ground zero target too, and I'd rather deal with a post economic zombie crash.  Nukes are no fucking joke.  They're the gift that keeps on giving, and I say that as somebody who lives near enough that I may or may not have to deal with local fallout, but not heat and blast.

Freddie's picture

Obam and the ZWO destroying America.  Ukraine was a setup to go to war with Russia but is more of an attack on Europe too.

Oldwood's picture

We will be presented an ultimatum, similar but far worse than the one the bankers and Bush presented us with. We will be forced to succumb to international rule, bank and currency, or face a true meltdown, stone age, Armageddon type shit. The majority will go for it as they have submitted to every other evil fucking choice, leaving everyone else as outlaws, terrorists or maybe something worse. The choices are going to be bad, but we will have to choose. Not like staying home on election day convinced that your protest of absense will leave one blameless. We will all suffer the burden. Its coming.

SAT 800's picture

We already have an interna tional currency system; and mechanism; it sucks; but it exists. there won't be any Bretton Woods type systems; which was a negotiated and designed system. However; this doesn't necessarily mean we need to have any type of war.

yogibear's picture

Yellen and the Federal Reserve can BS for limited time.

The Fed's monetizing US debt until the dollar collapses.  It's stuck keep rates at 0 until a currency crisis.  Japan blows up first.

alexcojones's picture
   "We live in an exciting, scary time. But then collapsing empires, much like imploding skyscrapers, are visually compelling events, complete with dozens of theories about how and why they collapsed and who profits and who loses by that collapse.
"America is an empire whose karma has finally caught up with it. The bad overwhelmed the good. The barbarians are at the gates and they are us. If the road to hell is paved with good intentions, our dominatrix nanny state is doomed to imperial collapse under a mountain of bad debt and good intentions, most of them masquerading as importing democracy and free market enterprise to subservient foreign states. Dominatrix overseas, nanny state at home, we told ourselves we were the good guys, while we gorged on fast food and distracted ourselves with American Idol, NASCAR and Dancing With The Stars, indifferent to the erosion of our Bill of Rights. Useless feeders electing the same old leaders, naively expecting different results.
"ALL dying empires collapse mysteriously slow and, yet, predictably fast. They smolder for awhile and then collapse suddenly, surrounded by highly suspicious events well beforehand. ALL dying empires were burdened by enormous debt. But primarily they were guided to their deaths by numerous powerful and clever psychopaths making piles of money, while aided and abetted by a few million silent servants who should have known better but sacrificed ethics for a healthy paycheck and government pension. Exactly as happened here in good old America."


So What Really Happens When the SHTF?


Apostate2's picture

You might find this of interest. The Chongqing Bus service alone reported (urban pop. about 6-7 million with  28.9 million under its municipal jurisdiction) raking in 56 million Yuan in fake money recently. Now just for laughs multiply that times the 660 urban 'places'--i.e. cities.

Got Yuan? 

Let's trade.

trulz4lulz's picture

Long Chinese print presses?

Apostate2's picture

Yes in every lilong and dingzi hu. One paper for the masses another for the foreigners. Back to the future. After all, posters on ZH has told us that China is the master of fiat. LOL.