Is the world even ready for a petroyuan?

The Petroyuan is no longer some fringe idea people throw around, thanks to the war Israel and America started with Iran.

But we aren’t here to talk about that, nor about whether China/Jinpingwants a bigger role for the yuan in oil deals or not (It clearly does, duh).

We’re here to understand whether the market, the banks, the exporters, and the governments tied to the dollar are actually ready for a petroyuan system that could chip away at the dollar’s grip on energy trade.

China launched the petroyuan after building its power as the world’s top crude buyer

This article is gonna get messy fast because even the basic terms confuse people. Petrocurrency, often called petrodollar, gets used in three different ways, according to Wikipedia:-

1. Dollars paid to oil-producing nations (petrodollar recycling)—a term invented in the 1970s meaning trading surpluses of oil-producing nations.

2. Currencies of oil-producing nations which tend to rise in value against other currencies when the price of oil rises (and fall when it falls).

3. Pricing of oil in US dollars: currencies used as a unit of account to price oil in the international market.

After 1971, when U.S. President Richard Nixon ended the dollar’s convertibility into gold, countries started looking for new ways to rebuild monetary power and find a substitute for the old order.

The most ambitious attempts came from the late Libyan leader Muammar Gaddafi, who pushed a plan for a multinational African currency backed by gold, but as you know, that project collapsed after Gaddafi was murdered in cold blood during the 2011 military intervention in Libya by the United States and its allies.

China came later, but with far more trade weight and far more room to test the idea in real markets.

In June 2017, the People’s Bank of China and the Central Bank of Russia signed a memorandum meant to make crude oil trade in yuan easier. A few months later, in September 2017, China officially rolled out the petroyuan.

China was already dominating crude imports. Sinopec said China imported about 400 million tons of crude in 2017.

That gave Beijing room to try something bigger than a symbolic challenge to the dollar.

China was not just a large buyer. It was the largest force on the demand side of the oil trade.

The political use was obvious too. A petroyuan could help countries like Russia, Venezuela, and Iran cut around U.S. sanctions. It could also give producers such as Saudi Arabia another path if they wanted less exposure to U.S. financial pressure and less reliance on the dollar system.

That made the petroyuan a huge part of a sanctions story and a power story at the same time.

Trade surpluses and bank forecasts are lifting the yuan in currency markets

The backdrop looks stronger for China now than it did when the petroyuan first went official.The yuan has climbed to a three-year high against the dollar.By the end of February, it reached 6.831 per dollar, its strongest level since April 2023.

In March, it stayed in the upper 6.8 range. Since the end of 2025, the currency has gained 1% against the dollar. Since the end of 2024, it is up 6%.

One major reason is China’s trade surplus.It rose 20% in 2025 to $1.18 trillion, the first time it moved above $1 trillion.Exports to the United States dropped 20% last year as the tariff fight with the Trump administration got worse.

But China made up ground by selling more goods to Southeast Asia and Europe, especially cars and solar products. The surplus kept growing year over year in January and February 2026 too.

Big banks have noticed.Union Bancaire Privée made the yuan one of its strongest calls and said it expects the currency to keep rising against the dollar over the next decade because of stronger fundamentals and policy reform.In a March report, the Swiss private bank raised its conviction on yuan gains to the highest level.It put that view on the same level as its bullish position on gold.

UBP, which manages more than CHF150 billion, or about $190 billion, now expects the onshore yuan to reach 6.70 per dollar by the end of 2026.

Carlos Casanova, senior economist at UBP, told Bloomberg News, “We believe the yuan will enter a decade long secular bull rally, favored by fundamentals and policy reforms.”

Carlos also said, “Moreover, the yuan appears to be undervalued by 10%-50%” when measured by purchasing power parity, the real effective exchange rate, or interest rate differentials. That is not a small call. It is a direct argument that the yuan still has room to run.

In December, foreign currency exchanged for yuan at banks hit a record monthly high of $317 billion.

Goldman Sachs also said the yuan could still strengthen to 6.7 per dollar over the next year.

Oil shocks and weak growth tested the yuan

The petroyuan case also got help from how the yuan held up during a fresh oil shock.China gets only 20% of its energy use from crude oil and liquid petroleum.

That is much lower than the roughly 40% seen in Japan and South Korea, based on data compiled by ING. That difference mattered after the U.S. and Israel attacked Iran at the end of February.

Since that attack, the Japanese yen has fallen 2% against the dollar.The South Korean won has dropped 4%.The yuan has slipped by less than 1%.

For a market looking at oil risk, that made the Chinese currency look steadier than other major East Asian currencies.

But there is a real limit here, and it sits inside China’s own economy.Deflationary pressure is getting worse. The economy is dragging through a long real estate recession.

Business demand is slowing.Household demand is slowing too.If the yuan keeps rising, exports could weaken. That would hit one of the biggest reasons the currency has been strong in the first place.

Beijing knows this. Since December, China’s central bank has often set its reference rate for yuan-dollar trading in a way that points to a weaker yuan.

That leaves the petroyuan in a strange spot. Only the future can tell though