On the Road to Yuan Internalization: Petrochina Completes First Digital Yuan Settlement

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Petrochina, the largest Asian oil and gas producer, has completed a settlement using the Chinese central bank digital currency (CBDC), the digital yuan. The operation, which involved a purchase of 1 million crude barrels through the Shanghai Oil and Gas Trading Center platform, marks the first time the digital yuan has been used as payment in the commodities market.

Petrochina Completes First Commodities Settlements Using the Digital Yuan

Petrochina, one of the largest Asian oil and gas companies, has announced the purchase of one million crude barrels using the digital yuan. The company, headquartered in Shanghai under the control of the China National Petroleum Corporation (CNPC), used the Shanghai Oil and Gas Trading Center platform to complete this purchase, which enabled the use of the digital yuan to complete commodities transactions.

The landmark settlement represents an advancement in the use of the digital yuan for commodity payments, as it is the first time that China has completed a payment of this magnitude with its central bank digital currency (CBDC).

The inclusion of digital yuan settlements in the Shanghai Oil and Gas Trading Center is part of a regional push to promote the use of the currency by the Shanghai Municipal Party Committee and Municipal Government. The counterparty of the operation was not revealed.

Internationalization of the Chinese Yuan

Most of the work introducing the digital yuan involves improving its use in retail applications, with the government recently introducing an interoperable QR code to allow direct payments using several payment providers, including the digital yuan wallet.

However, the Shanghai Clearing House had announced before that it would also support using the digital yuan to settle bulk commodities payments without adding processing fees.

Petrochina’s transaction is part of an advancement of China in lessening its reliance on the U.S. dollar to make payments and settlements. The possibility of the digital yuan helping China to chip away at the dollar’s dominance in international markets has been debated extensively, with experts supporting and discarding this thesis.

In May, Oriol Caudevilla, a financial and web3 speaker, stated:

With enough penetration and acceptance of the digital yuan in a jurisdiction or region outside China, a trade and finance system parallel to the dollar system could gain critical mass, allowing countries to bypass the global banking system and US sanctions.

On the other hand, François Chimits, an analyst at Merics (Mercator Institute for China Studies), declared:

The e-CNY (digital yuan) looks extremely unlikely to appreciably increase foreign access to or trust in the yuan.

However, even in its fiat form, the yuan is gaining ground in international markets, recently dethroning the euro as the second most used currency in trade finance markets.

What do you think about the commodities transaction settled using the digital yuan? Tell us in the comments section below.