After Creating Dollar Exclusion Zones In Asia And South America, China Set To Corner Africa Next

Tyler Durden's picture

By now it really, really should be obvious. While the insolvent "developed world" is furiously fighting over who gets to pay the bill for 30 years of unsustainable debt accumulation and how to pretend that the modern 'crony capitalist for some and communist for others' system isn't one flap of a butterfly's wings away from full on collapse mode, China is slowly taking over the world's real assets. As a reminder: here is a smattering of our headlines on the topic from the last year: ""World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says", "India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees", 'The USD Trap Is Closing: Dollar Exclusion Zone Crosses The Pacific As Brazil Signs China Currency Swap", and finally, "Chile Is Latest Country To Launch Renminbi Swaps And Settlement", we now get the inevitable: "Central bank pledges financial push in Africa." To summarize: first Asia, next Latin America, and now Africa.

Yep: the Yuan may not be the reserve currency by default, but at this rate China will have bilateral, read USD-bypassing relations, with all countries in Asia, South America and shortly Africa (where none other than Goldman Sachs has been pushing harder than anyone). Once the entire world is trading in CNY, it will be merely a matter of flipping the switch and all those fancy three-letter economic theories that explain why the uber-welfare state works just becayse the US can print an infinity+1 in debt, will all suddenly find themselves completely and totally bidless.

From China Daily:

China is to promote the yuan's use in settling trade and investment with Africa, and encourage the more active development of Chinese financial institutions across the continent, a senior central bank official said on Friday.

 

Li Dongrong, assistant governor of the People's Bank of China, said Africa has the capability of becoming a new hub of international capital flow, and the yuan's use there should be further improved in accordance with rising demand for the currency there.

 

"We will continue to encourage domestic financial institutions to increase their presence and business across the continent," Li told delegates at the Forum on China-Africa Financial Cooperation in Beijing, adding that the cooperation potential between the two sides is huge, as Africa's economy continues to take off.

 

According to Li, yuan-denominated settlement between China and some African countries has already started, with 4.3 billion yuan ($156.5 million) worth of settlement made with South Africa and 2.3 trillion yuan with Mauritius, for example.

 

The popularity of using the yuan has been increasing in Africa, and more central banks are considering including the currency in their reserve portfolios, reported various governors of African central banks at the forum.

For China, Ghana is not Spain. It is far, far more valuable.

Millison Narh, second deputy governor of the Bank of Ghana, said the bank's board of directors has decided to use the yuan as part of its settlement and reserve currencies in January, but has yet to finalise details with the People's Bank of China

 

"We have looked at the currency rate risk management of the reserve portfolio. I think the yuan has performed very well, supported by the huge international reserves of China. It makes sense to use the yuan as both the settlement currency and the reserve currency."

 

More African central banks will make similar decisions, and in five years about 20 percent of African central banks' foreign reserve portfolio would be yuan assets, he said.

So is Zambia:

Michael Gondwe, governor of the Bank of Zambia, added that his country is yet to decide on including the yuan in its foreign reserve assets, but it is expecting increased usage of it to settle trade between China and Zambia.

 

Franklin Kennedy, a non-executive director of the African Export-Import Bank, said he believed using the yuan on the continent was "a natural evolvement - it has to happen", and expects more African central banks to include the currency in their foreign reserve portfolios.

Of course the French, who are not used to being snubbed in what is rapidly becoming a second Congress of Berlin, only this time one without any European participation, are not very happy:

One trade finance manager at Societe Generale (China) Ltd, who declined to be named, said he has seen little demand among traders to settle deals in yuan, because there is no sound channel to make investment or purchases in yuan after holding the currency.

As for the truth:

Babacar Ndiaye, the former president of the African Development Bank, said he saw "no reason" why traders would refuse to settle transactions in yuan "when the trade flow increases" between China and Africa.

 

"It is logical that very soon more and more central banks of Africa will follow Nigeria to include the yuan into their reserves," he said

 

He added at present it is just the beginning, and central banks would also prefer to buy treasury bonds from China in the future if possible.

But... but... if the whole world suddenly realizes that the CNY is the defacto reserve currency and "would also prefer to buy treasury bonds from China in the future if possible"... who does that leave as natural buyers for US paper? Aside from the Fed of course...

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VonManstein's picture

Good. people in the west have a severe case of normalcy bias and are too scared too admit its over. its the leaders fault but the populations have become pathetic. Information is free and accesible and whoever hasnt been preparing for this, to some extent, deserve to get shafted.

China will be king

This just in's picture

Ate at China King last night.  Love the dumplings.

akak's picture

Funny how there never seem to be any pigeons in the vicinity of Chinese restaurants.  Or stray dogs and cats, for that matter.

CrazyCooter's picture

This is something I think about because at my age "what the next money is" pretty much makes or breaks my ability to care for myself in oldage through working my ass off now.

So, with that caveat, let me throw my carrots in the stone soup as it were.

Jim Rickards did a long series of audio interviews over at KingWorldNews. 54 to be exact. They tended to be 15 to 20 minutes minimum, some as long as an hour. You can get them all by patiently going through the KWN interview archive page. Starting with this series in chronological order is very educational and interesting.

This parallels his book subject matter, but goes off on many, many tagents never discussed in his book. If you liked Currency Wars, this is a freebie and must listen material.

He has an interview where he basically describes the "outcomes" of fiat implosion. In short (if I didn't screw this up), they are:

  • Chaos
  • SDRs
  • Gold
  • Multiple reserve currencies

Given that China has no gold (it all belongs to the west in general - at least at the central bank/government level), I do not see Yuan replacing the Dollar so much as the Yuan competing with the Dollar.

My thinking is like this; as a new reserve currency comes onto the stage, the Dollar will get beat into shape by market forces. And the Dollar will feel the pain necessary to keep it relavent, or it will die. I don't think its handlers would let it die, so that implies "market forces" type corrections in behaviors by its handlers.

I watch these developments as closely as I can (thanks ZH for the growing history of links). Gold is a good bet, but multiple reserve currencies may very well be where things are heading, at least for a while.

Regards,

Cooter

cranky-old-geezer's picture

 

 

Two thoughts:

1) Stop falling back on what other people say.  Educate yourself about the subject, present your own views.

2) Death of USD will not be just for monetary reasons.  It will actually be more for hatred reasons.  Many nations around the world hate and despise what the US government is doing, especially in Asia, which just happens to be where the new currency (and trade clearing system) will come from that knocks USD off its throne. 

Other nations will gladly walk away from USD and "sign on" to that new currency (and trade clearing system) because they also hate and despise what the US govt is doing.

This massive hatred around the world against the US govt and USD doesn't show up on forex charts nor any sort of charts.  That's why chart watchers won't see it coming.

 

Freegolder's picture

Actually, China has much gold, they mine their own, and import a lot through Hong Kong, much of it from the USA.

But the currency with free-floating physical gold reserves in abundance is the Euro.

You are right, gold is a very good bet!

good luck.

Amish Hacker's picture

"given that China has no gold..."

Actually, while it is true that China holds a smaller percentage of its exchange reserves in gold than many other countries, China has also been the world's largest producer of gold for the past 5 years.  http://www.bullionstreet.com/news/china-gold-production-hits-1407-tons-i...

Be suspicious of numbers claiming to be the real level of Chinese central bank gold buying. China has been understating this number for years, with occasional revisions upwards. While the exact number is unknown, it's clear the CB has been aggressively converting some of their UST's into gold, and private citizens in China have surpassed India as the world's largest gold consumers. http://www.ft.com/intl/cms/s/0/d735e8cc-58c5-11e1-b118-00144feabdc0.html...

So, put these data together with the article on the expansion of the yuan as a trade-settling currency, and the outlines of a global strategy begin to emerge. China is planning ahead for major, global changes; we're assuming we'll be able to maintain our current, privileged status forever. Place your bets.

Diogenes's picture

The dollar is already dying. China is buying gold all the time, from their own mines plus foreign sources, and encourages their people to buy it too.

Tom Green Swedish's picture

DaGong has China rated at Triple A.

 

I say let them pretend they are not a third world shitbasket. Let them use their own shit money which is essentually pegged to the dollar to trade.  WHen they reach their level of prosperity sucking up every last resource on the planet we will all know who to blame.  Not China, but the USA and Europe.  We are the ones feeding this pile of crap. 

akak's picture

Get it on, bang DaGong, get it on.

Snidley Whipsnae's picture

Interesting monitor this Chinese bank governor has...

"Li Dongrong, assistant governor of the People's Bank of China, said..."

I wonder if that is a nickname given to him by his spouse?

 

The Monkey's picture

China has absolutely huge industrial capacity and human resources. It is extremely export dependent and especially vulnerable to slowing global growth. At the same time US corporate margins are at extreme highs.

The "this time is different" crowd sees margins at a permanently higher plateau, but, we have already spotted one of the elephants in the room.

RafterManFMJ's picture

But... but... if the whole world suddenly realizes that the CNY is the defacto reserve currency and "would also prefer to buy treasury bonds from China in the future if possible"... who does that leave as natural buyers for US paper? Aside from the Fed of course...

 

Why YOU WILL! Kiss that 401k goodbye, and say hello to Freedom Bonds! Uncle Slaver wants you - and your stash of sweet 401k cash.

economics9698's picture

And when the fiat dies in America and the troops are all called home there will be another colonization of Africa, or worse.  China is not into political correctness.  If I was going to bet Africa will be colonized, genocide, second Chinese country/continent established in the 21st century.

 

LULZBank's picture

Very true.

Americans and Europeans have killed, tortured and comitted genocide in Africa and elsewhere in a politicaly correct way. The victims always felt privileged for getting such a treatment.

Chinese on the other hand are very evil and undemocratic. Nobody wants to get abused and killed by them!

economics9698's picture

The Chinese are very intolerant of foreigners.  If they get a chance they will clear out what they consider pest from the continent.  They have done it in the past.  60 million dead, not a problem for the Chinese.  

LULZBank's picture

Like the Native Americas? And Aborigines in Australia and NZ?

LULZBank's picture

Tibetans are "terrorists" and "savages."

LULZBank's picture

For teh LULZ!!!!

Manifest Destiny was the 19th century American belief that the United States (often in the ethnically specific form of the "Anglo-Saxon race")[1] was destined to expand across the continent. It was used by Democrats in the 1840s to justify the war with Mexico; the concept was denounced by Whigs, and fell into disuse after the mid-19th century.

 

After the mid-19th century, it was evil Commies and in the late 19th century the Manifest Destiny flew into Twin Towers.

 

CrazyCooter's picture

Um, forgive my ignorance, but can I get a list of benevolent governments in history that were compassionate (or at least gave a shit) about peoples residing on the resources it needed to sustain/grow itself?

My list is precisely zero entries long, so clearly I have missed something given there is contempt towards the lion for killing for food. The second amendment was genius for this reason as it acknowledges this simple truth.

On the issue of one is less brutal than the other, I agree, however lets be clear we are talking about which abusive boyfriend is best ...

Regards,

Cooter

AvoidingTaxation's picture

Swiss Cantons, with the jointly controlled conquered territories

LULZBank's picture

Hold the FUCK on!

So it was the Manifest Destiney for American expansion and genocide in the continent of America and Promised Land for Israeli expansion and genocide in the Middle East?

Interesting...

prole's picture

LulzBank your moral equivalency exercise is pathetic.

It's as if you and us all of us can plainly see you are lying and being a pissant.

I don't believe you believe what you are writing, you must just be thinking: Got to keep the faithful stupidified with this nonsense.

LULZBank's picture

prole - Shut the fuck up with your strawmen and allegations.

Who the fuck is "all of us" that can plainly see me?

akak's picture

Oh, and don't you know that (in contrast to all non-Communist Chinese-propagandistic history) they practiced widespread slavery in Tibet before the armed forces of the People's Republic of Blobbing-Up Offuscationalizingistism generously "liberated" them? 

I guess one is supposed to feel grateful for being "liberated" just in time to be genocided.

LULZBank's picture

 

I guess one is supposed to feel grateful for being "liberated" just in time to be genocided.

Like people in Iraq and Afghanistan?

akak's picture

Yes, something like that.

But not just like that either, as I do not see millions of Americans being resettled (many of them against their will) in lands formerly occupied by Iraqis and Afghanis, unlike the Han Chinese colonization of Tibet.

But at least, as an honest if unwilling subject of the American Empire, I am willing to openly and directly condemn my rulers for their statist crimes --- unlike the hoard of mindless and boot-licking Chinese agitpropbots swarming online forums such as this one.

Symmetry, dude, symmetry.

LULZBank's picture

Phase, not symmetry, dude.

Few hundred years from now, some of the Chinese will also be turning honest unwillingly, in its dying days like you.

BTW, when you invade and settle down in occupied lands, you atleast keep the local resources and treasures among the locals. Not like "colonies" where you rob and steal the wealth and let the natives either die of hunger and starvation or give them weapons and Psyops to kill each other off.

When you settle down, keeping prosperity and law and order among the occupied land is also in your own interest and also you share the destiny with the locals.

I am not Chinese, FYI.

akak's picture

Apologize for totalitarian imperialism much?

 

Apparently, yes.

LULZBank's picture

totalitarian imperialism?

How do you define that?

I was comparing 2 kinds imperialisms, not justifying either, but I guess running out of arguments make you go stupid?

akak's picture

You were apparently (if not clearly) trying to whitewash and apologize for the brutal and unjustified Han Chinese conquest and colonization of Tibet.

If you disagree with that assessment, then forthrightly come forward and condemn those actions of the Communist Chinese as the crimes against humanity that they are ---- WITHOUT reference to the crimes of the similarly imperialistic ruling US cabal. 

giovanni_f's picture

china is evil but unlike the u.s. does not send out monsanto-paid by hillary clintons to lecture the world on human rights. And now shut up, stronzo.

LULZBank's picture

You didnt answer my question moron.. and started off with your bullshit.

P.S. In US its a "cabal" like something foreign and unnatural which infiltrated good honest US citizenry. BUT in China, teh culprits are identified.. its the Communist party or the Han dynasty... or just the "Chinese." .. LULZ!!!

OpenThePodBayDoorHAL's picture

Before the Chinese it was the *British* who invaded Tibet and machine gunned down Tibetan troops, who defended themselves with prayer flags and flintlocks. Brits weren't as determined as the Chinese though.

Overfed's picture

Just like that, and maybe even just a bit more ruthless. The Chinese need liebensraum and resources.

prole's picture

Wait I am so confused- Are we talking about China or Eretz Israel?

saturn's picture

Yes, the world needs to cease powermongering. This problem has been with humans since they became apes. Maybe a bit earlier even? Can we change our genes by the strength of will? So far it seems completely impossible. Majority of people still long to be part of the food chain, not to stand over it. They may thing they are over it, but they are blind to the fact they created their own version of food chain within their society. All because they want to gain power over each other and wish to be worshipped. Quite a pathetic achievment after several thousands years of attempts to build a (scratch) sustainable (/scratch) (underline) highly polarized (/underline) societal model.

prole's picture

"WE Need" "humans apes" "Can't we change our genes and become meek little sheeplets all of us"

Thinking like that is what has led Western Civilization to its own suicide, and the reason why our daughters will be married by the dozens to whichever sheik or Rabbi gains the ultimate ownership of us.

Dear Lord: We did you place me by birth among such cowards?

falak pema's picture

so its the colonial hat on the white man's dikk that gives it a magical touch of uber -alles?

How the sheeple love to be raped; as long as its in white man's satin sheets!

Ave Caesar, morituri te salutant! 

MillionDollarBoner_'s picture

"And when the fiat dies in America and the troops are all called home there will be another colonization of..."

Canada?

Easier to reach, speak the same language (ignoring Quebec) and chock full of goodies !;o)

MillionDollarBoner_'s picture

Suck my balls ;o)

Oh yeah, and soooo true too!

dogbreath's picture

that will be interesting lots of divided loyalties up here.  If say Al Gore is president the west coast will surrender because he'll shut down the oil sands.  The west coast will insist on the military not destroying the cannabis fields like in afaganistan.   Quebec has probably already had negotiations to become the 52nd state, and the only thing you'll like about them is their women.  A month after the deal you'll be regretting it.  whine whine whine.   the east coast will add 5 milion food stamp recipients.   

timbo_em's picture

"China is not into political correctness."

What country is into political correctness? It's all about promoting one's very own interests. At least that's what I observe.

LULZBank's picture

Dont worry about him, he must be US Citizen. They have a long way to go, to get some common sense.

economics9698's picture

America has the Yid police watching our every politically incorrect comment.