The Shanghai Petroleum and Natural Gas Exchange (SHPGX) recently unveiled that it executed its first-ever oil transaction settlement using China's central bank digital currency (CBDC), commonly referred to as the digital renminbi. On October 19, PetroChina International acquired 1 million barrels of crude oil through this digital renminbi-based transaction, marking a significant milestone. This move aligns with the call from the Shanghai Municipal Party Committee and Municipal Government to utilize China's CBDC for international trade. It represents a substantial step forward for the digital yuan, demonstrating its application in real-world international business scenarios.
While the specific terms of the transaction, including the seller and the transaction price, were not disclosed, it represents a momentous shift in the global oil market. Notably, the "OPEC basket" price for oil from 13 producing countries on October 19 stood at $95.72 per barrel. The Shanghai Petroleum and Natural Gas Exchange's use of the digital yuan in this context marks a significant milestone, not only in the adoption of digital currencies but also in the broader trend of global de-dollarization.
The increased use of the Chinese yuan (RMB) in international markets is a testament to its growing importance. The first three quarters of 2023 witnessed a 35% year-on-year growth in RMB cross-border settlements, reaching a total of $1.39 trillion. This underscores China's commitment to internationalizing its currency and expanding its influence in the global financial landscape.
It's worth noting that earlier in March, the yuan was first employed to purchase liquefied natural gas (LNG) on the SHPGX. At that time, France's Total Energies made an agreement to supply LNG to the China National Offshore Oil Corporation (CNOOC). This trend is continuing as last week, CNOOC entered into a second yuan-denominated LNG deal with France's Engie, demonstrating the broader adoption of the Chinese currency in global energy markets.
On October 19, the First Abu Dhabi Bank announced a digital currency agreement with the Bank of China during the third Belt and Road International Business Forum. Both China and the United Arab Emirates, represented by Abu Dhabi, are participants in the mBridge platform, which aims to support cross-border transactions involving CBDCs. The platform intends to launch as a minimum viable product in the coming year. These developments underline the ongoing shift toward digital currencies and non-dollar-based transactions in international trade and energy markets.
