TAIPEI (Taiwan News) — China is expanding the global use of the yuan in trade and finance, a shift that is helping countries such as Iran and Russia reduce exposure to Western sanctions, The Wall Street Journal reported Tuesday.
The US has opened talks with Iran over a potential nuclear deal that could include sanctions relief and access to roughly NT$3.17 trillion (US$100 billion) in frozen assets. However, Washington’s leverage is complicated by Tehran’s growing use of China’s yuan-based financial system.
In late April, the US escalated its Economic Fury campaign by sanctioning Chinese refinery Hengli Petrochemical, which it said had bought billions of US dollars’ worth of Iranian oil. Hengli said its supplier had guaranteed the crude was not Iranian, but it also signaled that future payments would be settled in yuan rather than US dollars.
The move highlighted a broader trend: more transactions linked to sanctioned activity are being conducted in yuan, reflecting China’s efforts to build alternative financial channels that operate outside US-linked systems, per The Wall Street Journal.
The dominance of the US dollar, which accounts for roughly 80% of global trade finance, has long given Washington significant power to monitor and restrict international transactions. Payments routed through dollar clearing systems can be tracked by US banks and disrupted through sanctions.
By contrast, yuan-based transactions can bypass US-linked financial infrastructure, limiting Washington’s visibility and enforcement capability. That shift has complicated sanctions targeting countries such as Iran.
Even under sanctions pressure, Iran generated up to NT$1.36 trillion in oil revenue in 2024, according to the US Energy Information Administration. US lawmakers estimate discounts on those sales averaged about 13% last year, with most transactions settled in yuan, according to the US Treasury.
Iran uses the proceeds to import goods from China, including car parts, solar panels, and other dual-use materials that could have military applications. Many of these transactions occur outside US jurisdiction through intermediaries and front companies.
Some payments are processed through China’s Cross-Border Interbank Payment System, or CIPS, a yuan-denominated alternative to the SWIFT messaging network. Launched in 2015, CIPS remains far smaller than SWIFT but has expanded rapidly in recent years, per The Wall Street Journal.
According to the Atlantic Council, daily activity on CIPS has risen to about NT$3.69 trillion in recent months, compared with NT$3.18 trillion last year. Analysts say the system is evolving into a more global payments channel, even as SWIFT still handles more than NT$158.5 trillion a day.
A similar pattern emerged after Russia’s invasion of Ukraine in 2022, when Western sanctions pushed more Russian trade with China into yuan. Russian officials now say more than 90% of bilateral trade is settled in yuan and rubles, compared with just 2% before the war, according to the Centre for Eastern Studies.
Overall, the yuan’s share of global trade finance has tripled over the past five years to 6%, making it the second most used currency after the US dollar, according to SWIFT data. China also now settles about half of its cross-border transactions in yuan, up from almost zero 15 years ago.
China has expanded tools such as swap lines and CIPS, as well as digital payment initiatives including mBridge, which enables central banks to settle cross-border transactions using digital currencies. Analysts say these systems make it easier for countries under pressure to move money outside the US-led network.
Beijing says it does not seek to replace the dollar but instead aims to expand the international use of the yuan in selected trade channels. However, Chinese officials and central bank leaders have also argued that reliance on a single dominant currency can be risky in times of geopolitical tension.
