The Shanghai Petroleum and Natural Gas Exchange (SHPGX) proudly announced the inaugural use of the Chinese digital yuan in settling an oil transaction. The milestone deal involved PetroChina International’s acquisition of a staggering 1 million barrels of crude on October 19.
Shanghai’s Bold Move Towards CBDC Integration
This transaction was a direct response to the visionary call by the Shanghai Municipal Party Committee and Municipal Government. Their directive aimed at applying the Chinese central bank digital currency (CBDC), commonly known as the e-CNY, to the realm of international trade.
The significance of this move was underscored by the state-controlled China Daily. They deemed it “another major step forward” for the digital yuan.
Details of the seller and the price in this historic transaction remain undisclosed. In comparison, the price of the “OPEC basket” of oil from 13 producers stood at $95.72 per barrel on the same day. This monumental crude oil deal notably sets a precedent for the use of the yuan in the international market. Further, it also aligns with the global movement towards de-dollarization.
Yuan’s Ascendance in Cross-Border Settlements
Reports from China Daily indicate that the use of the yuan in cross-border settlements has witnessed an impressive 35% year-on-year increase in the first three quarters of 2023. The total value reached a substantial $1.39 trillion, underlining the yuan’s growing prominence in global transactions.
This isn’t the first instance of the yuan making waves in energy transactions. The digital currency marked its debut in the liquified natural gas (LNG) sector on SHPGX in March. French TotalEnergies, in an earlier groundbreaking deal, agreed to sell LNG to the China National Offshore Oil Corporation (CNOOC).
Last week witnessed the second LNG deal in yuan between CNOOC and French Engie. However, these transactions did not involve the digital yuan.
International Collaborations in the Digital Currency Landscape
Coinciding with this monumental oil deal, First Abu Dhabi Bank revealed its agreement on digital currency with the Bank of China at the third Belt and Road Forum for International Corporation. This forum, which concluded a day before the announcement, showcased the commitment of China and the United Arab Emirates to the mBridge platform.
This platform aims to support cross-border transactions with CBDC, with a minimum viable product slated for launch next year.
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