MNI INTERVIEW: China Policy Support For Yuan Commodity Pricing

China is expected to intensify efforts to expand the yuan’s role in global commodity pricing and settlement during the 15th Five-Year Plan period, as part of a broader strategy to gain greater influence over key commodity prices and address profit imbalances between foreign resource producers and domestic consumers, a government advisor told MNI. 

Beijing aims to leverage its position as the world’s largest importer of bulk commodities to promote yuan-based pricing and settlement, said Wang Yongzhong, director and research fellow at the Department of International Commodities under the Chinese Academy of Social Sciences (CASS), citing this week’s Five-Year Plan policy recommendations promoting currency internationalisation and further capital account liberalisation.

“Market demand will be leveraged to negotiate partial yuan settlement,” Wang said, noting that progress in commodities where China has stronger bargaining power, such as coal and agricultural products, will likely move faster.

The development of domestic commodity futures markets and pricing agencies will also help, Wang added. However, he cautioned the transition will be gradual due to capital controls, limited yuan-denominated investment channels, and exporters’ low willingness to hold the currency. Established U.S. dollar-based settlement practices and reliance on Platts and western futures quotations also remain major obstacles. “China’s rigid demand for commodities such as copper has traditionally weakened our pricing leverage,” Wang said.

IRON ORE CHALLENGE

Iron ore, where China accounted for about 72% of global imports in 2024, was a key challenge. Despite its dominance as a buyer, pricing power has long been controlled by Australian mining giants and profits in China’s steel sector remain only a fraction of those earned by Australian miners.

Mainstream media reported this month that Australian miner BHP Billiton and China Mineral Resources Group were negotiating partial yuan settlement for iron ore contracts, following reports in September that Beijing would block BHP iron ore shipments.

Wang said China’s bargaining position is improving, as the country’s economic transition away from real estate and steel-intensive growth reduces its reliance on the commodity, while new supply sources, notably Guinea’s Simandou iron ore project, begin to diversify import channels.