The renminbi is starting to gain ground in the dollar-dominated global commodity trade, as recent deals highlighted the Chinese currency's expanding role in offering a diversified option for pricing and settlement, economists and executives said.

Breakthroughs in RMB-denominated commodity transactions, regarded as one of the most difficult frontiers for the RMB's global use, may signal a faster phase of the currency's internationalization, as demand rises for alternatives to the US dollar and China's role in global trade grows, they added.

The RMB ranked the fifth in global payments with a share of 3.1 percent in March, up from a sixth ranking in February, as calculated by global financial messaging services provider Swift.

The Cross-Border Interbank Payment System, or CIPS — the primary platform for cross-border yuan clearing and settlement — recently recorded a single-day transaction volume of 1.22 trillion yuan ($179 billion), a record high, according to Shanghai Securities News.

Meanwhile, Reuters reported last month that Indian refiners were settling payments for specific oil cargoes purchased under a US sanctions waiver using the Chinese yuan, while mining giant BHP Group has reportedly adopted a Chinese pricing benchmark in its iron ore trade with China, signaling a broader acceptance of RMB settlement and pricing in commodity markets.

Zhang Bin, a national political adviser and a nonresident senior research fellow at the China Finance 40 Forum, said these developments suggest that the RMB is increasingly providing global trading partners with a more diversified currency option for commodity trade.

"The dollar has long served as a dominant currency for pricing, settlement and investment. However, intensified geopolitical tensions and changes in global economic governance have led some countries to reconsider the assumption that the dollar is reliable," Zhang said. "As countries seek to add an extra layer of safeguard in investment and business operations, the yuan is a particularly promising option, given China's significant and expanding role in global trade and investment."

Huang Yiping, dean of Peking University's National School of Development, highlighted the potential of the RMB in playing a bigger role in commodity pricing, as China is one of the world's largest importers of commodities and a leading exporter of manufactured goods.

"Promoting the use of the RMB to price more of our economic activities is both possible and an indispensable step of RMB internationalization," Huang said.

China launched yuan-denominated crude oil futures trading in Shanghai in 2018, an early step toward expanding the RMB's role in global commodity pricing. In recent years, countries like Russia have increasingly used the Chinese currency in oil trade with China.

"The fundamental conditions for the formation of a 'petroyuan' cycle — in which oil is increasingly priced, settled and reinvested in RMB assets — are gradually taking shape after China has become the world's largest crude oil importer," said Zhang Ming, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

However, analysts cautioned that how far the Chinese currency's role in commodity trade can evolve may ultimately depend on the depth of China's financial reforms and opening-up, the country's long-term economic strength, and the resilience of the US dollar's dominance.

"Part of the recent increase in RMB usage in commodity trade has been driven by short-term geopolitical factors, and the longer-term trajectory still needs to be observed," said Shao Yu, chief economist at the innovation center of Fudan University's School of Management.

Wu Xiaoqiu, former vice-president of Renmin University of China, said the key still lies in deepening market-oriented reforms to enable freer trade of the currency if a petroyuan system is to be established.

Pan Gongsheng, governor of the People's Bank of China, the country's central bank, said China has worked to enhance institutional arrangements and financial infrastructure to support broader cross-border RMB usage to offer more diversified currency choices for all entities.

The yuan's rising role in commodity trade is part of a broader expansion of the currency's international use, with a Deutsche Bank report saying that the process of RMB internationalization is likely to accelerate.

Renminbi assets are becoming increasingly attractive, underpinned by China's strong growth prospects and the rapid development of future-oriented industries, said Stefan Hoops, CEO of DWS — Deutsche Bank's asset management arm.

Hoops pointed to a structural shift in trade invoicing: Whereas the vast majority of Chinese exporter invoices were denominated in US dollars five years ago, a growing share are now denominated in RMB.