China’s yuan has increasingly played a central role in circumventing U.S. sanctions against countries like Iran and Russia, reflecting a broader shift in global trade finance toward alternative currencies and payment systems. Data from Chinese authorities and financial institutions show that the yuan’s use in cross-border transactions has surged significantly in recent years, driven partly by efforts to bypass U.S.-led financial restrictions.

Since the onset of Russia’s invasion of Ukraine in February 2022, trade between Russia and China has shifted predominantly to yuan and ruble settlements, with Russian officials reporting that more than 90% of bilateral trade now uses these currencies. This marks a substantial increase from February 2022, when the yuan accounted for only 2% of Russian trade, according to the Centre for Eastern Studies. Overall, the yuan’s share of global trade finance has tripled over the past five years to approximately 6% as of April 2026, positioning it as the second most utilized currency in this arena after the U.S. dollar, surpassing the euro.

China’s financial infrastructure supports this trend through platforms like the Cross-Border Interbank Payment System (CIPS), launched in 2015, which serves as a yuan-denominated alternative to the Swift messaging network. CIPS daily transaction volumes have nearly doubled since early 2022, with participation by financial institutions more than doubling by mid-2025. Another prominent initiative is mBridge, a digital currency platform developed in collaboration with the Bank for International Settlements and several central banks, enabling cross-border payments settled directly between central banks without transiting U.S.-based financial institutions.

The expanded use of yuan-based trade financing facilitates the circumvention of U.S. sanctions, which the Chinese government rejects, asserting that its trade relations comply with international law. Beijing has made clear it does not seek to replace the dollar globally but aims to establish specific trade channels that operate outside U.S. dollar dominance. Chinese officials and former U.S. Treasury personnel note that this strategy partially serves to undermine U.S. influence and reduce exposure to economic coercion, particularly in contexts involving allies like Iran and Russia.

In the case of Iran, sanctions have significantly hampered its economy and restricted oil export revenues. Nevertheless, China has become Iran’s primary purchaser of crude oil, accounting for over 90% of Tehran’s oil sales by the end of 2022, according to U.S. sources. Rather than direct payments, Chinese buyers often route yuan-denominated funds through entities such as Chuxin, which then allocate money to Chinese firms conducting infrastructure projects in Iran. Additional mechanisms involve channeling payments through special purpose vehicles and intermediaries supplying Iranian imports, including dual-use goods.

U.S. Treasury officials have described a clandestine network established by Iranian military and commercial actors, involving shell companies, middlemen, and a shadow tanker fleet designed to obscure the origin of Iranian oil on its way to China. Although some payments are still denominated in U.S. dollars and processed through the American financial system — estimated at about 10% of Iran’s oil-related transactions — most funds settle in yuan via smaller Chinese financial institutions, effectively insulating China’s major banks and the broader system from sanction risks.

China’s yuan internationalization efforts trace back to the aftermath of the 2008 financial crisis, when Beijing sought to reduce reliance on U.S. dollar reserves and associated vulnerabilities. Over time, China expanded swap lines with other countries, developed yuan-denominated financial products, and promoted yuan-based oil contracts traded in Shanghai. These moves facilitated broader yuan adoption and enabled countries facing sanctions to access alternative financial channels.

Despite the challenges facing negotiations over Iran’s nuclear program and ongoing geopolitical tensions stemming from Russia’s war in Ukraine, the global financial system is increasingly characterized by competing sovereign currencies. Chinese officials, including People’s Bank of China chief Pan Gongsheng, emphasize the risks of a dollar-centric system in times of geopolitical conflict, advocating for a diversified currency landscape.

While U.S. sanctions continue to exert pressure on Iran’s economy and restrict Tehran’s access to dollars, the expanding yuan-based mechanisms underscore the evolving complexity of global sanctions enforcement and the shifting contours of international financial networks.