Renminbi offers a way out of US trade weaponisation

Source: Edge Singapore

Update: Mar 20th, 2026, 6:20 PM

Busi­ness rela­tions with China have been almost totally obscured by the Israel and US attack on Iran, the appar­ently unex­pec­ted block­ade of the Strait of Hor­muz by Iran and instant­an­eous global fuel short­ages.

Confidence in renminbi-denominated trade and China’s role in the global trade system is increasing. Photo: Bloomberg

However, on a broad scale, there is a need to look bey­ond the fog of war to explore what this means for global trade and trade set­tle­ment.

Iran has per­mit­ted pas­sage through the Strait for Chinese-flagged ships. This is no dif­fer­ent to the free pas­sage afforded to neut­ral-flagged ships in World War II.

More sig­ni­fic­antly, Iran has gran­ted free pas­sage to com­pan­ies that agree to settle their oil pur­chases with the ren­minbi. India is the first coun­try to take advant­age of this offer. This is part of a wider trend.

Most of Aus­tralia’s iron ore pro­du­cers have accep­ted China’s new ren­minbi-based iron ore pri­cing ref­er­ence meth­od­o­logy and many are now set­tling with the ren­minbi. BHP, one of Aus­tralia’s largest iron ore miners, has not accep­ted this and, as a res­ult, has found its ship­ments lim­ited and con­tracts not renewed.

Both situ­ations sig­nal increased con­fid­ence in ren­minbi-denom­in­ated trade and China’s role in the global trade sys­tem. Under­stand­ingly, China is grow­ing increas­ingly wor­ried about the poten­tial for US per­fidy regard­ing trade set­tle­ment in US dol­lars.

They are not alone in this worry. The US has shif­ted from weapon­ising the Swift trade set­tle­ment sys­tem to the out­right freez­ing of sov­er­eign reserves held in US dol­lars. Many are wor­ried that it is just a mat­ter of time before there are select­ive defaults on US Treas­ury hold­ings or a freeze on with­draw­als.

These are not just issues for the gov­ern­ment. There are issues for busi­nesses, large and small. The basic ques­tion is: “How do I get paid for my busi­ness in China? How do I get my money out?”

If Trump decides to halt US dol­lar Swift trans­fers ori­gin­at­ing in China, then US dol­lar-denom­in­ated Chinese con­tracts become very dif­fi­cult to settle. While unlikely, this is not bey­ond the bounds of pos­sib­il­ity given Trump’s erratic and vin­dict­ive approach to trade.

If busi­nesses are forced to accept set­tle­ments in ren­minbi and con­duct other trans­ac­tions in ren­minbi, how will this impact oper­a­tions? How easy will it be to con­vert the ren­minbi into Singa­pore dol­lars, given that any Swift pro­cess may be hijacked by the US? Sev­eral Singa­pore banks have dir­ect ren­minbi exchange and set­tle­ment pro­ced­ures in place, but are they robust enough to handle a surge in trans­ac­tions? It is an open ques­tion, and the answer also depends on what action the US takes to block any major shift to yuan set­tle­ment.

This is per­haps our more imme­di­ate prob­lem for those who export to both China and the US.

This is not to say that these scen­arios are highly likely, but where once they were unthink­able, now they fall within the bounds of pos­sib­il­ity. Busi­nesses would be wise to start think­ing about their responses and develop a plan for the inev­it­able dis­rup­tion that would flow from this cor­rup­tion of global trade set­tle­ment.

Tech­nical out­look of the Shang­hai mar­ket

The Shang­hai Index has slipped below the lower edge of the long-term group of aver­ages in the Guppy Mul­tiple Mov­ing Aver­age (GMMA) indic­ator. This is the first of sev­eral bear­ish signs sug­gest­ing a trend change is devel­op­ing.

The GMMA cap­tures the activ­ity of traders and investors in the mar­ket.

We noted last week that a nervous mar­ket would be accom­pan­ied by com­pres­sion in the long-term GMMA as investor buy­ing activ­ity slowed. This is begin­ning to develop.

The second fea­ture is the way the long-term GMMA has turned down and star­ted to com­press. This shows that some investors are becom­ing sellers. This com­pres­sion may quickly accel­er­ate as the sell-off con­tin­ues.

The third fea­ture is that the lower edge of the short-term GMMA is at the same level as the lower edge of the long-term GMMA. Addi­tion­ally, the short-term GMMA is rap­idly expand­ing. This shows traders have become strong sellers.

This rela­tion­ship is bear­ish. Des­pite the rebound shown on the chart, the over­all mar­ket pres­sure is down. Any rebound has sig­ni­fic­ant res­ist­ance near the 4,100 level. This is also close to the upper bound of the long-term GMMA. The two fea­tures com­bine to cre­ate a sig­ni­fic­ant res­ist­ance fea­ture.

On the down­side, there is a weak sup­port level near 4,020. This has served as a rebound point in the past, but only in the con­text of a rising trend.

The strongest his­tor­ical sup­port level is near 3,900. This must now be con­sidered as a reas­on­able tar­get if there is a sus­tained close below 4,020.