China's Digital Yuan Challenges Dollar Hegemony with First Global Oil Trade
Historic oil trade signals the yuan's challenge to dollar dominance.
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China’s state-owned oil company PetroChina has completed the first-ever international crude oil transaction settled in China’s digital currency, the digital yuan or e-CNY, a China Daily report revealed.
Last week, PetroChina purchased 1 million barrels of crude using the digital yuan on the Shanghai Petroleum and Natural Gas Exchange (SHPGX). This landmark trade signifies China’s intent to internationalize its currency and slowly chip away at the dominance of the US dollar in global oil markets.
For decades, global oil trade has been conducted almost entirely in US dollars, entrenching what is known as the Petrodollar system. This has allowed the US to maintain significant geopolitical influence and enjoy persistent demand for its currency.
China, the world’s largest oil importer, has long wanted to increase the global use of its currency, the renminbi. By conducting more oil transactions in the digital yuan rather than dollars, China could potentially weaken the petrodollar system and expand its monetary power.
Recent moves by some central banks signal growing openness to the Chinese currency. In June, the Central Bank of Argentina announced it would allow e-CNY deposits and withdrawals, making it one of the first central banks outside China to adopt the digital yuan. Brazil’s central bank followed suit in March, adding the yuan to its international reserves.