China is getting ready to launch oil futures contracts priced in renminbi, aka yuan.

The dollar's dominant role as the currency used to price commodities such as oil and gold has been jolted by reports that China will shortly launch a crude oil futures contract priced in the renminbi, aka yuan.

Such a move by China could allow oil exporters such as Iran and Russia to bypass US and European sanctions by trading in the renminbi. According to the Nikkei Asian Review, the reminbi will be full convertible into gold on exchanges in Shanghai and Hong Kong.

The Shanghai International Energy Exchange has started to train potential users and is carrying out systems tests following substantial preparations in June and July, the NAR reported, adding that this is China's first commodities futures contract open to foreign companies such as investment funds, trading houses and petroleum companies.

The new renminbi-based oil futures market can be seen as part of how China is trying to reduce reliance on dollar-based contracts and ultimately, is a threat to the dollar's status as the world's main reserve currency. That status has for decades enabled the US to finance its large debt pile.

China has taken a number of steps to open up its economic and financial system to foreign investment, and the renminbi is now included in the basket of currencies used by the International Monetary Fund for Special Drawing Rights. (See an article on that issue here.) However, China has recently imposed certain curbs on outflows of capital from China, seen as a measure to stem weakness in its currency.