China has expanded its outward looking policy and projecting himself as an alternative for new global order. Its trying to dominate global trade through BRI and ranks 2nd on Elcano Global Presence index for economy, military strategy and soft power. Yuan has also picked up global visibility after its inclusion in reserve currencies for SDR by IMF.
Oil Future Exchange are type of commodity exchange which will facilitate future contracts backed by currency. China is planning to launch PetroYuan in Shanghai INE in March 2018. Iraq, Dubai and Oman have agreed to utilize this exchange for part of their trade.
1. This will compete directly with PetroDollar where most of current oil transaction happens. US dollar currently dominates 63% of reserves in global trade.
2. Asian benchmark for crude oil which is important since Asia is largest energy consumer.
3. Russia and Iran have been trading in Yuan for some of their oil trade will get feature to trade in future contract
Way forward for China:
1. China should modify its market regulation policies to attract investors to trade in PetroYuan. Bring political reliability for investors.
2. Strengthen domestic debt market and improve corporate governance
3. Diplomatic arrangements with Saudi will help increasing global confidence in Yuan. Dominance of USD is largely attributed to Saudi backing.
CONCLUSION;Arrival of PetroYuan as an alternative to PetroDollar will help Indian market to diversify their portfolio and having Asian benchmark for crude oil. This will reduce dependence on US dollar.
