Iran Moves to Expand Yuan-Based Trade with China

Why It Matters

Expanding yuan trade gives Iran a strategic alternative to the dollar, weakening the impact of sanctions and signaling a broader move toward a more multipolar financial system.

Key Takeaways

• Iran plans to settle most imports with Chinese yuan
• Yuan's trade share exceeds 7% and could reach 15% by 2030
• CIPS links 1,700 banks, processing $24 trillion in 2024, up 43%
• Yuan accounts for only 4% of cross‑border payments versus dollar's 50%
• Beijing's bond tools and e‑Bridge network boost yuan international use

Pulse Analysis

China’s long‑term strategy to internationalise the yuan is gaining traction beyond its borders, and Iran’s recent pivot underscores the momentum. After Foreign Minister Abbas Araghchi’s May 5 visit to Beijing, Tehran announced plans to settle a large portion of its commodity imports—ranging from oil to food staples—in yuan. This move is less about immediate geopolitical tensions and more about diversifying payment channels amid persistent U.S. sanctions. By aligning with China’s currency, Iran not only sidesteps dollar‑based restrictions but also taps into a growing network of yuan‑denominated trade that has risen from under 1% to over 7% of global transactions in the past fifteen years.

The backbone of this shift is the China International Payment System (CIPS), which now connects over 1,700 banks and handled an estimated $24 trillion in 2024, a 43% year‑over‑year increase. Complementary instruments such as “Panda” and “Dim Sum” bonds, along with the e‑Bridge digital payment platform, provide additional liquidity and settlement options for non‑dollar trade. While the yuan’s share of daily foreign‑exchange turnover sits at roughly $817 billion, its penetration in cross‑border payments remains modest at 4% compared with the dollar’s 50%, highlighting both growth potential and structural constraints like capital controls.

For the broader market, Iran’s yuan adoption signals a gradual erosion of dollar dominance in niche corridors, especially where sanctions create friction. Analysts anticipate that if the yuan’s trade share reaches the projected 15% by 2030, more countries under pressure from the West may follow suit, fostering a more multipolar currency landscape. Nonetheless, challenges persist: limited convertibility, state‑driven monetary policy, and investor confidence gaps could temper the yuan’s ascent. Stakeholders should monitor how China’s financial infrastructure evolves and whether alternative currencies can sustainably carve out meaningful niches alongside the dollar.