Almost all of Beijing’s purchases of crude oil, gas, coal and certain metals from Moscow are now settled in Chinese yuan, Reuters reported on Thursday, citing trading executives.
China has been pushing for wider international use of its currency for more than a decade but the level of global settlements in yuan had remained relatively low until recently. The country’s currency, also known as the renminbi (RMB), has been used occasionally in big Chinese commodity deals as most global trading in energy and metals is priced in US dollars.
China’s attempts to move away from the dollar in international trade have accelerated against the backdrop of sweeping sanctions imposed by Western nations against Russia, which is a major global energy producer and exporter.
“It becomes tremendously complicated dealing in USD under the price cap regime. It means a lot more compliance work for the banks,” one source told Reuters. China has opposed unilateral penalties on Russia but remains wary of secondary sanctions.
The US-led embargoes on exports of Russian oil and petroleum products have scared away Western buyers and have sped up energy payments in yuan as China has started ramping up imports of discounted Russian crude. The proportion of Russian import settlements in yuan during 2022 surged to 23% from 4% in the previous year.
“For now, and for the foreseeable next few years, I think the trade using RMB will predominantly be used for commodity and energy trade,” predicted Chi Lo, senior investment strategist at BNP Paribas Asset Management.
“This is a very long-term development stretching into the coming one or two, even three decades” as more nations join the “RMB bloc” to reduce risks of dollar exposure, “especially after they’ve seen what the US-led sanctions against Russia have done,” he added.
China’s commodity imports from Russia soared by 52% in value terms last year with shipments of crude and fuel oil reaching $60.3 billion, Chinese customs data has shown.
Nearly all crude exports from Russia to its Asian neighbor, including some volumes of fuel oil, are now settled in yuan, Reuters said, citing trading executives with direct knowledge of the matter.
“All seaborne Russian oil sales to China are now settled in renminbi since the price cap, sidelining the last small number of banks that were handling US dollars,” one trading executive told the outlet.
The yuan surpassed the dollar to become the most-used currency in China’s cross-border transactions in March, according to calculations based on data from the State Administration of Foreign Exchange.
The Chinese currency was used in 48.4% of all cross-border transactions, reflecting a strong trend of shifting away from the dollar.
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