Pakistan is the latest country to jump on the anti-U.S. dollar bandwagon, Reuters reports. Pakistan is considering a proposal to replace the U.S. dollar with the Chinese yuan for bilateral trade between Pakistan and China.
Between 2015 and 2016, bilateral trade between the two countries totaled $13.8 billion.
According to Reuters, Pakistan’s Interior Minister, Ahsan Iqbal, who has been doing a lot of work in planning and implementing China-Pakistan economic ties, was reportedly discussing this recent proposal after unveiling a long-term economic development cooperation plan between the two nations.
Much in the same way that Syria is Russia’s roadmap to the Middle East, Pakistan is but just one of China’s pathways into the region and beyond. In the middle of this year, it was reported that China is considering its own military bases in the Islamic nation and just recently granted hundreds of millions of dollars in aid to Pakistan, as well.
According to Reuters, China has already committed to invest $57 billion in Pakistan to finance the China Pakistan Economic Corridor (CPEC) as part of Beijing’s overall Silk Road initiative, which will create land and maritime trade routes across more than 60 countries in Asia, Europe, and Africa.
The development will rattle China’s counterparts in Washington. Iran is already trading oil with China in return for Chinese yuan, and Qatar has conducted billions of dollars’ worth of transactions in yuan, as well. Just this year, as a means of bypassing U.S.-led sanctions, a Chinese state-owned investment firm reportedly provided a $10 billion credit line to Iranian banks, which will specifically use yuan and euros — not the U.S. dollar.
Venezuela, a country that sits on the world’s largest oil reserves, also recently announced it had abandoned the U.S. dollar in response to American-imposed sanctions. It has now begun publishing its oil prices in — wait for it — yuan.
The list goes on. According to Carl Weinberg, chief economist and managing director at High-Frequency Economics, China is in the process of trying to “compel” Saudi Arabia to also trade oil in Chinese yuan.
“I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it — as the Chinese will compel them to do — then the rest of the oil market will move along with them,” Weinberg stated, as quoted by CNBC.
Not to mention that China has also begun launching a crude oil futures contract priced in Chinese yuan that will be completely convertible into gold. As the Nikkei Asian Review reported, analysts have referred to this move as a “game-changer” for the oil industry.
On top of all this, China has just successfully completed its fifth round of testing yuan-backed oil futures with speculation that the futures are to start over the Christmas period. There is only one final hurdle to attain: China’s State Council’s approval.
“Oil futures in Shanghai would be a very, very interesting product and I can’t wait for them,” Yuan Quwei, a speculator helping to pump trillions of yuan into the country’s commodities bourses, told Bloomberg. “An official launch during Christmas would be appropriate. The western market would be quiet and allow the Shanghai exchange as well as Chinese investors to adjust in the early days.”