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.
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.
