Digital Yuan e-CNY Revolutionizes Crude Oil Transactions

In an unprecedented move, the digital version of China’s currency, the e-CNY, has facilitated a landmark crude oil deal, emphasizing its growing prominence in international trade.

A Pioneering Transaction in Crude Oil

PetroChina International Corp Ltd solidified its place in history by procuring 1 million barrels of crude oil using the digital renminbi (e-CNY). This transaction, which occurred at the Shanghai Petroleum and Natural Gas Exchange (SHPGX), marks a paradigm shift in the domain of international crude oil trade.

While the SHPGX was transparent about the deal’s existence, it refrained from revealing the monetary worth or the seller’s identity.

Advancing e-CNY in Cross-border Trade

The SHPGX expressed that this groundbreaking deal aligns with the Shanghai municipal government’s directive to incorporate the e-CNY in international trade. Through their official platform, the SHPGX emphasized its commitment to optimizing trading channels for both domestic and international market players. This enhancement is expected to simplify international capital’s access to the burgeoning Chinese market.

Ming Ming, CITIC Securities’ Chief Economist, echoed this sentiment. He highlighted the potential of e-CNY in bolstering the global presence of the Chinese currency and cross-border settlements.

Momentum in Energy Sector Settlements

This landmark transaction with e-CNY came hot on the heels of another significant deal: a yuan-settled liquefied natural gas trade. Facilitated by the SHPGX, this deal saw the China National Offshore Oil Corp team up with France’s Engie. As part of this agreement, Engie will be shipping 65,000 metric tons of LNG to CNOOC come November. This isn’t a first for China, as a prior yuan-based LNG purchase was made with France’s TotalEnergies.

RMB’s Growing Global Footprint

Recent data from the Society for Worldwide Interbank Financial Telecommunication painted a promising picture for the RMB. As of September, it held its rank as the fifth most active global currency, boasting a 3.71% market share. This achievement is even more impressive considering the value of RMB payments rose by 2.77% from August, while other currencies witnessed a decline.

Moreover, China’s central bank, the People’s Bank of China, unveiled data highlighting a 35% YoY surge in cross-border RMB settlements, which amounted to 10.16 trillion yuan (approx. $1.39 trillion) in the year’s first three quarters.

Wang Youxin, a notable researcher from Bank of China, opined that this growth trajectory is a result of favorable policies introduced lately and China’s consistent monetary policy. The rising acceptance of the yuan in emerging markets also fuels this ascent.

Global Embrace of the RMB

Earlier this year, the Ministry of Commerce, in collaboration with the PBOC, released guidelines to bolster cross-border RMB’s use in trade and investment. Similarly, international entities like the Central Bank of Argentina have embraced the yuan, allowing RMB deposits and withdrawals. In Brazil, the yuan’s importance is evident as it recently surpassed the euro to claim the title of the country’s second-largest international reserve currency.