Chinese yuan

The Chinese yuan (renminbi, CNY) is China's official currency, issued by the People's Bank of China. In international trade it occupies a modest but growing share of global payments; the IMF added the yuan to the Special Drawing Rights basket in 2016, recognising it as a reserve currency. Its share of global trade settlements remains well below the US dollar and euro, but it has expanded significantly since 2022 as Beijing and its trading partners have sought alternatives to dollar-denominated transactions, particularly following Western sanctions on Russia and the 2026 Iran conflict.

In the sanctions-evasion architecture that has emerged from the Iran conflict, the yuan's structural role is twofold. First, it bypasses dollar-clearing rails, removing OFAC's ledger visibility. In April 2026 Hengli Petrochemical restructured its Singapore trading Arm to insulate physical refining from OFAC reach, confirming it would continue settling Iranian crude procurement in yuan and transferring 95% of the Singapore entity to a Chinese local government vehicle. Second, it functions alongside Iran's Shetab-Mir corridor (Iran's interbank network linked to Russia's Mir payment system, third stage completing around August 2026) as part of a broader dollar-bypass infrastructure that makes successive sanctions rounds progressively harder to enforce. The Foundation for Defense of Democracies estimated in June 2026 that roughly one-third of Iran's annual oil revenues, approximately $12.4 billion, flows to the IRGC and armed forces, and that General License X functions as a 60-day SAFE harbour for Chinese refiners already using yuan settlement.

The yuan's role as a sanctions bypass is limited by Beijing's own exposure: Chinese state-adjacent entities that process sanctioned Iranian crude remain vulnerable to US secondary sanctions if they maintain any dollar-clearing relationships. The Hengli restructuring represents a structural bet that Beijing will protect state-adjacent refining from OFAC reach, and that yuan settlement strips the US of the dollar-ledger visibility needed for enforcement. OPEC producers increasingly accept yuan for Chinese oil purchases, though none has fully abandoned dollar denomination.