In a historic move that showcases the evolving landscape of international trade and finance, PetroChina, a leading Chinese oil and gas firm, completed its first international crude oil transaction using the digital yuan. This pioneering transaction was highlighted in a report by China Daily on Saturday.
PetroChina, stepping into uncharted territories, acquired a whopping 1 million barrels of crude oil through the Shanghai Petroleum and Natural Gas Exchange (SHPGX). This deal was settled using China’s central bank digital currency (CBDC), the e-CNY or more colloquially known, the digital yuan, on October 18th. While the specifics around the value of this landmark deal and the identity of the seller remain undisclosed by SHPGX, its implications reverberate far and wide in the global financial arena.
While PetroChina’s foray into digital settlements may seem like a standalone event, it is part of a broader strategy by the Chinese government. The world’s second-largest economy is keen on elevating the global standing of its native currency, the renminbi. Leveraging the e-CNY to finalise purchases of significant global commodities, such as crude oil, is a calculated move. This tactic underscores China’s intention to magnify the international reach and influence of its currency, a move that, if successful, can shift the dynamics of global trade.
China’s trailblazing strides in the realm of CBDCs is well-documented. While the majority of the world’s economic powerhouses are in the exploratory or nascent stages of CBDC development, China’s endeavors stand out both in ambition and execution. A testament to this is the 1.8 trillion yuan worth of transactions conducted using e-CNY by the end of June. This figure, while seemingly modest, is significant as it accounts for 0.16% of the physical cash in circulation.
The move by PetroChina doesn’t merely reflect a company’s preference for a novel mode of payment. It paints the picture of a changing world order where digital currencies, backed by central banks, might become the norm for international trade. If major commodities like crude oil begin to see more transactions in CBDCs, it could alter the traditional dominance of currencies like the US dollar in global trade settlements.
Furthermore, China’s readiness and willingness to employ the e-CNY on such a grand scale may serve as a cue for other nations. It underscores the importance of accelerating their CBDC development to maintain a competitive edge in the evolving world of international finance.
