The end of Triffin's dilemma: Yuan-denominated gold convertible oil contracts (English, 2017-09-03)

The global monetary system may be rapidly moving toward a new order. According to Nikkei Asian Review:

DENPASAR, Indonesia -- China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.

The contract could become the most important Asia-based crude oil benchmark, given that China is the world's biggest oil importer. Crude oil is usually priced in relation to Brent or West Texas Intermediate futures, both denominated in U.S. dollars.
China's move will allow exporters such as Russia and Iran to circumvent U.S. sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.

Why are the Chinese doing it? In the short term, it is to circumvent trade sanctions by the US and potential allies. In the long term, it is to circumvent Triffin's dilemma (Wikipedia). As China has been building up a domestic productive capacity that is capable of exporting everything from toys, clothes, cars, mobile phones, and computers, the payment of these exports have largely been made in USD denominated assets, as indicated by the three trillion pile of USD foreign exchange reserves (Wikipedia).

China is dependent on American benevolence (notably in the form of access to SWIFT) in order to be able to use these USD assets to buy goods on the global commodity markets, such as oil. Perhaps not for long.

For those who are interested in global macroeconomic history, I'd put this event in the same league as the London Gold Pool collapse in 1967 (Wikipedia) that presaged the unilateral cancellation by Richard Nixon of the direct international convertibility of the United States dollar to gold (Wikipedia). I would not put this event in the same league as the Genoa conference in 1922 (Wikipedia), nor the Bretton Woods conference in 1944 (Wikipedia). For that kind of ranking to be achieved, it would have to be preceded by a world war.

Enjoy your Sunday!