Oil trading in renminbi (RMB) is as much about politics as practicality. 
The 2008 Global Financial Crisis (GFC) taught the world and China that an over-reliance on key commodities priced in US dollar (USD) can be risky. When USD prices of key commodities rose following the GFC, higher food and energy import bills risked supply security, something a country like China can't afford.
As well as protecting food and energy security, China wants a more active role in global politics and the global economy. As the world's second largest economy, it wants global systems, like oil trading, to reflect China's status.
Historically the US has been the dominant oil consumer, and oil trading reflects this because it is priced in USD. In the 1970s, Saudi Arabia and US bilaterally negotiated oil trade settlement in USD and this gave birth to the petrodollar world we still live in today.
This way of trading has given the US what's been described as an 'exorbitant privilege' – where oil exporters recycle their dollar receipts back into US financial markets, keeping US interest rates low and supporting persistent current account deficits.
But that's about to change – especially now that China has become the largest global oil consumer. China's role is only expected to increase too since BP forecasts annual demand will grow 30.6 per cent, to 753 million tons per year in 2040, while the US will likely reduce their reliance on oil imports by developing domestic shale oil capacity.
As the dominant customer, particularly for major oil exporters like Russia, Venezuela, Iraq, Iran, and Saudi Arabia, China's market means leverage, and many of these suppliers have either already agreed to price their sales to China in renminbi (RMB), or are actively considering it.
If, or rather when, China's total oil import bill gets priced in RMB, that's going to create large piles of RMB reserves in oil exporting countries that will either be spent on Chinese exports, or recycled into China's financial markets, giving China much more heft in the global economy.
This will have two principal effects: increased demand for RMB assets and a switch out of the USD for trading purposes, which will likely undermine the United States' dominant role in the global economy and create a sea change in global asset allocation to China's financial markets.
And that's why the launch of oil trading contracts in RMB really matters.
What does this mean for investors?
Clearly, post the decade of WTO entry and integrating itself into the global trading environment, China is now integrating itself more closely with the global financial system.
And importantly, China is attempting to expand its influence in the global economy. It's already the world's biggest trading country, has the largest forex reserves, boasts the world's biggest consumer market, and consumes the majority of the world's commodities.
Pricing oil in RMB and running a trading hub out of Shanghai is consistent with these steps, and will promote RMB internationalisation. We're confident that ongoing reforms, plus China's leverage with its suppliers to impose RMB pricing, will create a Petroyuan that will drive demand for assets on China's financial markets.
It's time to consider RMB assets as long-term investments
China has already taken important steps to offer global investors direct access to onshore asset markets.
And global institutional investors are already taking the hint, increasing their China holdings of onshore bonds threefold between Jan 2014 and December 2017.
Overseas institutional investors' RMB bond holdings (RMB100m), Jan 2014-Dec 2017
Source: Bloomberg
On top of this, we're anticipating China's onshore bond markets will be included in global bond benchmark indices within the next 18 months.
When that happens, we're expecting a major reallocation of capital into China's onshore bond markets. This follows on from other key milestones, like the IMF's inclusion of the RMB in its SDR basket, foreign central banks announcing FX reserve allocations to RMB, and the inclusion of Chinese equity markets in MSCI benchmarks.
With these trends in mind, plus the impact of Petroyuan, China's onshore bond market makes for an attractive investment, particularly in Chinese government bonds and quasi-sovereigns.
Yields on a typical RMB aggregate bond fund are currently around 4.75 per cetn, and offer excellent value relative to many developed markets and mean an attractive opportunity compared to options in the US, Europe, and Japan.
Hayden Briscoe, head of fixed income for Asia Pacific at UBS Asset Management.The views expressed above are his own and should not be taken as investment advice.