JPMorgan highlights that the use of the yuan in commodity settlements is steadily expanding, with the share of China's goods trade settled in yuan reaching a record 29% in 2025. The bank acknowledges that the internationalization of the yuan is making real progress, but suggests that direct comparisons to "petroyuan" may be misleading. The most likely outcome is a larger role for the yuan within a multipolar system, rather than a replacement of the US dollar.

From the Simandou iron ore mine to pricing agreements with BHP Group Ltd (ASX: BHP), the yuan's presence in commodity markets is becoming increasingly tangible. With ongoing conflicts in the Middle East amplifying geopolitical risks associated with dollar-based payment infrastructure, the use of the yuan in transactions for oil, iron ore, and other commodities is gaining momentum. This has revived discussions around a "petroyuan" and an "iron ore yuan."

Progress is real, but the narrative needs context

Data from the People's Bank of China shows that the proportion of China's goods trade settled in yuan reached 29% in 2025, a new all-time high surpassing the previous peak in 2015. Analysts believe that in the commodity space, an "iron ore yuan" is a more realistic near-term prospect than a "petroyuan." The reasoning is straightforward: oil markets remain firmly anchored by the dollar, whereas the iron ore market is more closely tied to China's buying power, industrial demand, and state procurement.

In 2023, China completed its first full LNG transaction settled entirely in yuan with the UAE. Progress in iron ore is even more concrete—reports indicate that BHP Group Ltd (ASX: BHP) has reached an agreement with China Mineral Resources Group (CMRG) to price some iron ore sales using a basket of four benchmarks, including two yuan-denominated indexes. Analysts argue that the significance of such agreements lies not in immediately challenging dollar dominance, but in embedding yuan-linked price references into key global commodity markets. Meanwhile, Vale SA (NYSE: VALE) has incorporated Dalian Commodity Exchange (DCE) iron ore futures into some of its pricing and hedging arrangements. As the world's largest end-consumer of iron ore, China's influence is driving the growing relevance of its benchmarks.

Simandou: A key case study in yuan internationalization

The Simandou project in Guinea offers a concrete example of the commodity logic behind yuan internationalization. By early 2026, China Baowu Steel Group had secured operational control over one of the world's largest known untapped iron ore deposits. This is not an isolated event. JPMorgan data shows that by 2024, China's cumulative commodity-related outward direct investment (ODI) had reached approximately $270 billion, growing at an average annual rate of about 14% over the past decade. More importantly, the investment strategy has shifted. Early on, Chinese companies primarily took minority stakes to secure resource supply. In recent years, the focus has shifted to seeking operational control, board seats, and direct management rights. JPMorgan notes that this shift is directly linked to yuan internationalization, as greater influence over supply, financing, and long-term contracts makes it easier to embed yuan pricing and invoicing into transaction structures. In essence, currency influence is built from the upstream end of the supply chain.

Infrastructure: CIPS, swap lines, and futures markets

Supporting the yuan's role in commodity settlements is a developing infrastructure network. The daily transaction volume and number of transactions on the Cross-Border Interbank Payment System (CIPS) continue to grow. The People's Bank of China's network of yuan swap agreements is expanding, and the offshore yuan (CNH) deposit pool has grown by nearly 60% since the pandemic. On the financial market front, the Shanghai International Energy Exchange (INE) launched yuan-denominated crude oil futures in March 2018, followed by the opening of DCE iron ore futures and INE copper futures to overseas investors. Currently, regulators have designated 38 commodity derivatives contracts as "domestic special varieties," allowing foreign institutions more direct access. However, JPMorgan points out that China's commodity futures market still lags significantly behind Brent, WTI, and LME benchmarks in terms of liquidity and global pricing influence.

Not replacement, but market share expansion

JPMorgan's report draws clear boundaries around the "petroyuan" narrative, stating that the most likely outcome is not a successor to the dollar, but a larger role for the yuan in a more fragmented and multipolar system. The constraints are structural. The dollar currently accounts for 89% of global foreign exchange trading, 82% of trade finance, 57% of foreign exchange reserves, and 40%-50% of global trade invoicing. JPMorgan outlines three core constraints. First, pricing is much more difficult than settlement. A shipment can be priced against a dollar benchmark and then settled in yuan at an agreed exchange rate. This reduces dollar payment exposure but does not establish a true yuan benchmark or eliminate dollar exchange rate risk. Pricing requires deep futures markets, broad participation from producers and consumers, credible delivery mechanisms, and sophisticated hedging tools. Second, de-risking is about seeking diversification, not betting on the yuan. Most countries are not looking to replace dollar dependence with yuan dependence, but rather seeking more local currency settlements, regional payment arrangements, and bilateral netting. The yuan is one beneficiary, but not the sole one. Third, the dollar's advantage comes from an ecosystem, not a single pricing convention. Capital market depth, trade finance scale, hedging tool breadth, and safe asset supply collectively form the dollar's moat. The yuan remains constrained by capital controls and exchange rate management, with foreign investors still facing concerns about policy predictability, liquidity, and capital repatriation.

JPMorgan concludes that the yuan's opportunity lies in gaining a larger share of trade and financial transactions where China is a key buyer, financier, investor, or infrastructure provider, rather than fully replacing the dollar. This direction aligns with official policy objectives. The 15th Five-Year Plan explicitly proposes to "promote the internationalization of the yuan, increase the level of capital account openness, and build an independent and controllable cross-border yuan payment system."