The war in Iran is spurring a fresh wave of enthusiasm over prospects for China¡¯s currency to more effectively rival the U.S. dollar.
Although still dwarfed by the greenback in international trade, the yuan saw an uptick in demand after Iran took control of the Strait of Hormuz and began accepting payments in China¡¯s currency to allow freighters to sail through safely. Even as Trump began to blockade Iranian ports after peace talks collapsed over the weekend, the war more broadly has revived talk of a ¡°petroyuan¡± ¡ª a concept President Xi Jinping advocated with little success on a 2022 trip to the Middle East.
A Chinese government-affiliated scholar last week said the volume of yuan-denominated crude oil has picked up due to the conflict, while official media reported that the nation¡¯s Cross-Border Interbank Payment System (CIPS) recently recorded a single-day transaction record of 1.22 trillion yuan ($179 billion), surpassing the 1 trillion mark for the first time. Deutsche Bank AG strategist Mallika Sachdeva captured the sentiment in a recent note, saying the war ¡°could be remembered as a key catalyst for erosion in petrodollar dominance, and the beginnings of the petroyuan.¡±
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