PetroChina recently made history by completing the first international crude oil trade using China’s central bank digital currency (CBDC), the Digital Yuan. This groundbreaking transaction has significant implications for both the global oil market and the increasing role of digital currencies. The deal was reported by China Daily, a media outlet owned by the Chinese Communist Party, further highlighting its significance.
A Milestone in CBDC Applications
PetroChina, the Chinese oil and gas conglomerate, successfully acquired 1 million barrels of crude oil at the Shanghai Petroleum and Natural Gas Exchange (SHPGX) using the Digital Yuan. While the exact value and seller remain undisclosed, this transaction represents a milestone in the application of CBDCs in global trade. It demonstrates the Chinese government’s interest in expanding the international reach of the renminbi, its official currency. By utilizing the Digital Yuan for large-scale commodity trades like crude oil, China aims to strengthen this strategy.
As of June, the Digital Yuan’s trading volume reached an impressive 1.8 trillion yuan ($250 billion), accounting for 0.16% of the circulating cash, according to earlier data. China’s CBDC is one of the most advanced in the world, with other major economies also exploring the development of their own central bank digital currencies. However, China appears to be ahead in terms of actual implementation.
The former governor of the People’s Bank of China revealed that the Digital Yuan had already processed 950 million transactions by July 2023, showcasing its growing popularity. Moreover, China has integrated smart-contract functionality into its CBDC, expanding its usability. The increasing transaction volumes and advancements make the Digital Yuan ready for broader applications. Although primarily focused on the domestic market, its potential for cross-border transactions has attracted significant attention.
Implications and China’s Influence
The PetroChina deal could pave the way for more global commodities trades using CBDCs. Furthermore, it exemplifies China’s rising influence in the digital currency space, particularly as the country accelerates the development and application of its CBDC through initiatives like the digital yuan industrial park in Shenzhen. This transaction offers real-world evidence of how digital currencies like the Digital Yuan can be integrated into the global trade framework, showcasing the viability of CBDCs in large-scale international transactions.
As CBDCs continue to evolve, their integration into various sectors, including the energy market, will be a crucial factor in evaluating their success and usefulness. The PetroChina deal serves as an additional data point for analysts, policymakers, and industry leaders who are assessing the practical implications of digital currencies in international trade.
