On Feb. 9, the China Securities Regulatory Commission announced that China would launch its crude oil futures contract on March 26. The Shanghai International Energy Exchange will operate the contract.
Why it matters: China’s new crude oil futures contract is part of the Chinese Communist Party’s (CCP) plan to internationalize the renminbi (RMB).
1. In our December in-depth article, we wrote that CCP’s Belt and Road Initiative and RMB internationalization serve to resolve China’s overcapacity issues and an oversupply of currency. The introduction of yuan-denominated oil and gold futures contracts thus form a crucial part of the CCP’s economic strategy because countries now have an incentive to keep some RMB as a reserve currency.
2. The CCP is interested in expanding its economic influence to resolve domestic financial problems and challenge U.S. economic hegemony. This means that a trade war between China and the U.S. is unavoidable, and may have already begun.