Ella 
On June 11, 2025, China took another significant step in its long-term strategy to internationalize the yuan by signing new bilateral currency swap agreements with Saudi Arabia and Argentina, expanding the global reach of the Chinese currency in key commodity and emerging markets. The People’s Bank of China (PBOC) announced that the agreement with Saudi Arabia, worth 50 billion yuan ($7.3 billion), is aimed at facilitating oil trade settlements in yuan, while the 35 billion yuan ($5.1 billion) deal with Argentina reinforces financial stability support amid the South American nation’s ongoing debt restructuring efforts. These agreements mark the latest move in China’s broader push to reduce global reliance on the US dollar and establish the yuan as a viable alternative in international trade and finance.
The deal with Saudi Arabia is particularly noteworthy, as it builds upon the growing trend of oil-exporting nations accepting yuan payments for crude. Since China surpassed the United States as the world’s largest crude oil importer, Beijing has been steadily encouraging energy suppliers to transact in yuan rather than dollars. Earlier this year, Saudi Aramco reportedly accepted its first full yuan-denominated payment for a shipment to a Chinese refinery, signaling a gradual shift in the petrodollar system. The latest swap line will further streamline this process, reducing foreign exchange risks for both Chinese buyers and Saudi sellers. Analysts suggest that if this trend continues, it could erode the dollar’s dominance in global energy markets over time, though a full transition remains distant.
Meanwhile, the agreement with Argentina represents a continuation of China’s role as a financial backstop for the economically troubled nation. Argentina has been struggling with soaring inflation and dwindling foreign reserves, making access to yuan liquidity crucial for maintaining imports and servicing debt. Under the new arrangement, Argentina can draw on the swap line to stabilize its currency reserves and pay for Chinese imports without depleting its dollar holdings. This follows a similar pattern seen in other developing economies, where China has used yuan swap lines as a tool of economic diplomacy, strengthening ties while promoting yuan usage.
Market reactions to the announcements were mixed. The offshore yuan (CNH) saw a slight uptick of 0.2% against the dollar, trading at 7.01, while the onshore yuan (CNY) remained stable at 6.98. Some traders expressed caution, noting that while swap agreements enhance yuan liquidity abroad, they do not necessarily translate into immediate demand for the currency unless accompanied by increased trade settlement volumes. Nevertheless, the long-term implications are significant, as each new swap deal expands the yuan’s potential circulation outside China’s borders.
The PBOC has been actively promoting the yuan’s use in cross-border transactions, with recent data showing that yuan settlements accounted for a record 32% of China’s total trade in the first quarter of 2025, up from 28% a year earlier. The Belt and Road Initiative (BRI) has been a major driver of this trend, with participating countries increasingly using yuan for infrastructure financing and commodity purchases. Additionally, China’s Cross-Border Interbank Payment System (CIPS) has seen steady growth, processing over 150 trillion yuan ($21.9 trillion) in transactions in 2024, further solidifying the yuan’s role in global payments.
However, challenges remain in making the yuan a truly global reserve currency. Capital controls, limited convertibility, and geopolitical tensions continue to hinder broader adoption. The US and EU have also been wary of China’s financial expansion, with some policymakers viewing yuan internationalization as part of Beijing’s strategic rivalry with Western-led financial systems. Despite these obstacles, China’s incremental approach—focusing on trade settlements, swap lines, and selective capital account liberalization—has yielded gradual progress.
Looking ahead, analysts expect China to pursue additional swap agreements with African and Southeast Asian nations, particularly those rich in natural resources. The upcoming BRICS summit in October 2025 may also see further discussions on expanding the use of local currencies among member states, potentially accelerating the yuan’s global footprint. While the dollar’s supremacy is unlikely to fade in the near term, China’s persistent efforts ensure that the yuan will play an increasingly prominent role in the evolving landscape of international finance.
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