Sou Hu Cai Jing·2025-10-27 00:43Core Insights - The shift towards using the Chinese yuan for iron ore and soybean trade signifies a challenge to the long-standing dominance of the US dollar in global commodity pricing [1][6][20] - China's significant purchasing power as the largest importer of iron ore and soybeans is being leveraged to negotiate favorable trade terms, including yuan settlements [3][4][10] Iron Ore Trade - China imports over 70% of the world's iron ore, with Australia supplying more than 60% of that, traditionally priced in US dollars [3][4] - In August 2025, China proposed that long-term iron ore contracts be settled in yuan, leading to a significant concession from Australian companies like BHP and Rio Tinto, who agreed to a 30% yuan settlement for spot trades by Q4 2023 [3][4][6] - The proportion of iron ore trade settled in yuan has increased from 5% in 2023 to an expected 40% in 2024, indicating a shift in pricing power towards China [3][6][8] Soybean Trade - China has shifted its soybean imports from the US to South America, signing agreements for 9 million tons to be settled in yuan, which has drastically reduced US soybean exports to China [10][12] - The US soybean industry is feeling the pressure, with reports indicating a complete halt in soybean exports to China for the first time in seven years, prompting US farmers to seek flexible payment options, including yuan [10][12][14] - The transition to South American suppliers not only stabilizes China's supply but also mitigates currency exchange risks, enhancing operational efficiency for Chinese companies [12][14] Global Currency Dynamics - The acceptance of yuan in commodity trade is seen as a significant step towards reducing reliance on the US dollar, with the yuan's share in global transactions rising to 8.5% [6][14][16] - The trend is expected to influence other emerging markets, potentially leading to a broader adoption of yuan settlements in global trade [8][20] - The Chinese economy's strength and trade volume are key factors driving the yuan's internationalization, with a target for 10 major commodities to have over 30% of their trade settled in yuan by 2025 [16][20]