Author: admin

In October, media reports suggested mining giant BHP had accepted a deal to settle about a third of its spot iron ore sales to Chinese customers in China’s own currency, the renminbi (RMB), rather than US dollars.

Those reports still haven’t been officially confirmed, amid ongoing closed-door negotiations between the mining company and China’s state-owned iron ore buyer, China Mineral Resources Group (CMRG).

But headlines quickly jumped to the spectre of “de-dollarisation” and geopolitical turning points.

The reality is less dramatic, but in some ways, more important for Australia.

Changing the invoicing currency doesn’t change how much iron ore China buys. What it changes is who carries the currency risk, which banking systems sit in the middle, and which financial centres earn the fees, deposits and lending business that flow from that trade.

In a new report released today, we find RMB use in Australia is still surprisingly modest. But BHP’s reported deal matters because it exposes how unprepared many Australian banks and firms are for a future where China’s currency plays a much larger role.

The US dollar still dominates

Given China is by far Australia’s largest trading partner, you might expect its currency to loom large in our trade data. It doesn’t.

Australian Bureau of Statistics invoicing data show only a sliver of Australia’s imports and exports are settled in RMB. In the 2023-24 financial year, only 1.4% of merchandise imports by value were invoiced in RMB, and 0.2% of exports.

Across Australia’s total merchandise trade with the world, the Australian dollar (AUD) and US dollar (USD) still dominate.

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Even in Australia’s trade with China, RMB settlement has grown only cautiously. It is far more common on the import side (consumer goods and intermediate inputs) than for bulk commodity exports, such as iron ore.

That’s why reports of a deal with BHP drew so much attention. Iron ore is the backbone of Australia’s exports – worth more than A$100 billion a year.

If settling transactions in RMB became the standard for a significant slice of that trade, the flows involved would dwarf today’s RMB usage in Australia’s financial system.

We built the plumbing – but not the capability

You might think we would be well placed to do more business in China’s currency. Over the past decade, Australia has ticked many of the boxes you would associate with becoming an “RMB hub”.

We have a bilateral currency swap line with the People’s Bank of China – meaning our central banks can exchange currencies directly. There’s an official RMB clearing bank in Sydney – offering direct access to China’s onshore RMB and foreign exchange markets.

On paper, there’s also a supportive policy framework. Yet the on-the-ground reality is underwhelming.

As of mid-2025, total Australian investment in assets in onshore Chinese financial markets was about A$40 billion. This is tiny compared with Australian holdings of US securities (around A$180 billion) and still small relative to the scale of our trade with China.

Only a few dozen bonds denominated in RMB have been issued in Hong Kong, with relatively modest amounts outstanding.

Interviews with corporations for our report tell a consistent story. Australian firms that want to borrow, hedge or hold RMB often increasingly find it easier to do so through Chinese banks.

They either transact through the Australian branches of the Chinese banks, or in Hong Kong and Shanghai.

Who gets to cash in?

If more transactions come to be conducted in China’s currency, the most interesting question for Australia is: where does that business land?

If RMB settlements are routed mainly through Chinese banks, then a growing share of the fees, deposits and lending associated with Australia–China trade will sit on their balance sheets, not those of Australian institutions.

Over time, that could erode the role of Australian banks in servicing the country’s largest trading relationship.

There are also implications for regulators. Greater use of RMB in big-ticket exports would deepen Australia’s financial linkages with China’s currency and banking system.

That brings commercial opportunities, but also new channels of vulnerability in a world of sanctions, financial fragmentation and geopolitical tension.

Balancing opportunities and risks

BHP is unlikely to be the last major exporter to consider RMB settlement. As Chinese manufacturers, electric vehicle makers and renewable energy companies expand their presence in Australia, more firms will have both revenues and costs tied, directly or indirectly, to China and its currency.

For Australian banks, the RMB needs to be treated less as an exotic add-on and more as a core capability, alongside the US dollar and the euro. Otherwise, Australian corporations will keep bypassing them in favour of Chinese banks.

For the Australian government, the task is to join up trade and financial policy. If Canberra is serious about both diversifying trade and stabilising relations with China, then RMB usage cannot be left entirely to foreign banks and overseas markets.

For businesses, the RMB is above all a practical tool. It can reduce currency mismatch when both customers and suppliers are in China, and sometimes improve commercial terms.

But it also comes with political and financial stability risks that need to be understood, stress-tested and managed.

OBJECTIVE

To accelerate the decarbonization of China’s road transport sector by supporting the faster adoption of electric vehicles (EVs) and enhancing the associated infrastructure.

DESCRIPTION

The Project entails AIIB providing an A loan of up to United States Dollar (USD) 125 million equivalent in Chinese Yuan (CNY), complemented by a C loan up to USD125 million equivalent in CNY to be mobilized by AIIB on a best-effort basis, to Ping An International Financial Leasing Co., Ltd. (PAIFL) to support its financial leasing services for urban transport electrification in China.

The loan proceeds will support eligible subprojects through lease financing, targeting underserved segments of China’s EV ecosystem. Approximately 80 percent of the proceeds will be allocated to electric light-duty and heavy-duty trucks, as well as electric passenger vehicles in tier three and tier four cities. The remaining 20 percent will be dedicated to charging infrastructure, with a focus on charging stations for electric heavy-duty trucks, charging networks along highways and major roads, and public fast chargers across China. AIIB financing will follow PAIFL’s Sustainable Development Financing Framework, which is aligned with the Green Loan Principles and Social Loan Principles of the Loan Market Association.

ENVIRONMENTAL AND SOCIAL INFORMATION

Applicable Policy and Categorization: AIIB’s Environmental and Social Framework (ESF), including the Environmental and Social Standards (ESS) and the Environmental and Social Exclusion List is applicable to this Project. The Project is placed in Category FI and is expected to have limited adverse environmental and social (ES) impacts. Subprojects classified as Category A or Higher Risk Activities as per AIIB’s ESF will be excluded from this Project. 

Environment and Social Instruments: To manage ES impacts and in accordance with the applicable national laws and regulations and AIIB’s ESF, PAIFL has established an Environmental and Social Management System (ESMS), which shall be enhanced to align with AIIB’s ESF. PAIFL’s enhanced ESMS will exclude all Higher-Risk Activities, consistent with the ESF. Further, according to the ESMS, clients or subprojects with significant non-compliance with environmental, labor practices, health, and safety performance will not be eligible for lease financing by PAIFL.   

Environmental and Social Aspects: The operation of EVs and charging infrastructure is considered clean from an environmental perspective. However, a key environmental concern is the disposal of batteries and E-waste. In the context of leasing finance by PAIFL to retail and commercial customers, responsibility for appropriate disposal of discarded batteries lies with EV manufacturers, as guided by the regulations. EV manufacturers are legally required by the Government to take responsibility for end-of-life vehicle batteries and set up systems for collection, storage, and transferring to recycling firms. In addition, it is required that the disposal of EV chargers or charging piles must be carried out by licensed enterprises that meet specific technical, environmental protection, and occupational health and safety (OHS) standards. During decommissioning, the charging station operator engages licensed enterprises to undertake dismantling and material recovery activities. The social risks are expected to be limited to consumer protection for the retail portfolio, and labor and working conditions, gender, health and safety related risks in the business portfolio. Land ownership and/or land lease agreements of the business portfolio are verified by the business department. To align with AIIB’s strategic focus on inclusive and sustainable development, the Project has supported PAIFL in developing a gender action plan (GAP) aimed at enhancing gender equality at both the operational and institutional levels. 

Occupational Health and Safety (OHS), Labor and Employment Conditions: OHS risks are expected to be limited to vehicle safety and fire hazards resulting from manufacturing defects and poor maintenance. PAIFL’s customers (individual users and commercial entities) are responsible for ensuring timely maintenance of their EVs. Customers receive warranty documentation and guidance directly from auto dealerships, which outline safe usage practices and maintenance expectations. For charging infrastructure, the PAIFL team visits locations to review suitability. However, maintaining safe working conditions and providing fire extinguishers are the responsibility of PAIFL’s customers. PAIFL urges customers to maintain safe working conditions by implementing necessary safety measures. 

Stakeholder Engagement, Consultation and Information Disclosure: PAIFL identifies investors, regulators, and customers as its stakeholders and regularly engages and consults with them to improve its ES risk management practices. The enhanced ESMS will also address relevant stakeholder engagement activities. PAIFL has agreed to disclose an overview of the enhanced ESMS timely on their website. 

Project Grievance Redress Mechanism (GRM) and the Arrangement of Monitoring and Reporting: PAIFL has an established external communications mechanism, as project level GRM, to address ES concerns of individuals, enterprises, and other stakeholders. Ping An Insurance (Group) Company of China, Ltd. (Group) has set up a whistleblowing hotline and email address to receive non-consumer customer service-related complaints from internal and external parties. In addition to these channels, affected persons may also lodge a grievance with the local government hotline–12345. PAIFL and its Group provide an online platform for employees to lodge grievances and provide feedback. The information of the established GRMs and Bank’s Project-affected People’s Mechanism (PPM) will be timely disclosed in an appropriate manner. PAIFL will monitor and report material incidents, accidents, negative public opinion, and lawsuits. PAIFL will submit to AIIB annual ESMS performance reports using an agreed-upon template.