Sunday, 20 May 2018

Yuan oil contracts to strengthen China's currency status to compete with US dollar – analyst Published time: 19 May, 2018 11:24 Get short URL Yuan oil contracts to strengthen China's currency status to compete with US dollar – analyst © Tyrone Siu / Reuters 91 As more countries pay for oil in yuan, the standing of the Chinese currency in global finance has grown, an analyst tells RT. However, its future path won’t be completely smooth, he warns. “If people started to pay for oil in yuan, central banks would need to hold reserves in yuan, leading to a massive increase in the global demand for yuan, reducing the cost of financing the Chinese economy,” IISS Singapore Senior Fellow for Economic & Energy Security Pierre Noel told RT. Read more © Jason LeeChina’s petro-yuan ‘thundering into action’ as Iran ditches US dollar in oil trade “This, in turn, is only possible if the yuan is a truly international currency. Therefore, the most likely pattern is that the shift to yuan-denominated oil trading will happen alongside the internationalisation of the yuan, which is (for the most part) a function of Beijing's monetary policy and financial regulatory decisions.” The share of yuan-backed crude oil contracts has soared to 12 percent of global trading since the US withdrawal from the Iran nuclear deal, compared to eight percent in March, when they were launched. According to Noel, the promotion of yuan as a leading currency will not be easy, since it is not a freely convertible currency. While the exchange rate setting has become more flexible, it is still administratively controlled, the analyst said. “The internationalisation of the yuan could be more advanced than it is, if the Chinese government wanted it so. And the internationalisation of the currency is a key enabler of oil being paid for in yuan. Producers, consumers, traders, brokers – all need a deep and liquid foreign exchange market to manage risks,” Noel said. For the time being, the dollar will remain as the most-used currency on the oil market, he said. “The reason oil is paid in dollars is because the dollar is the dominant international currency, not the other way around. Oil is a relatively small fraction of the total value of international trade.”

Published time: 20 May, 2018 06:53

EU economies hit by collapse in investment

Capital investment in 24 of the EU’s 28 member states has fallen dramatically over the past ten years, according to data from statistical agency Eurostat.

Investment decreased on average by 2.3 percent, falling to 20.1 percent of GDP last year. It stood at 22.4 percent from 2007 to 2017 period. Countries in Europe’s east and south, which were more vulnerable to the crisis, experienced the biggest drops in investment in the years following the crisis, Eurostat reports.

Statistics showed that only three EU countries have seen their investments increase. Those are Sweden (from 23.9 percent of GDP in 2007 to 24.9 percent), Austria by 0.6 percent and Germany by 0.2 percent.

Last year, all EU countries invested around €3 billion ($3.5 billion) in public and private investments. The construction industry accounted for nearly half of investments, while machinery, equipment and weapons systems accounted for 31 percent. Investments into intellectual property products were 19 percent.

The EU’s investment fund (the European Fund for Strategic Investments), which was set up in the aftermath of the financial crisis to address the investment deficit, has mobilized €284 billion ($335 billion) to date. It plans to raise €500 billion ($590 billion) by 2020.

According to the European Investment Bank’s website “it aims to mobilize private investments in projects which are strategically important for the EU.”

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