A citizen counts the US dollars in Houma City, north China's Shanxi Province, Oct. 11, 2011. The Chinese currency renminbi, or the yuan, strengthened 103 basis points to a record high of 6.3483 against the US dollar on Tuesday, according to the China Foreign Exchange Trading system.Photo: Xinhua

Brazilian mining giant Vale has signed a contract with a Chinese steel enterprise based on iron ore futures at the Dalian Commodity Exchange (DCE), according to the exchange's website. Vale is the first overseas miner to diversify its iron ore sales based on yuan-denominated futures pricing, the DCE said.

Pricing power is usually in the hands of Western countries. That's not a good situation, and it has to change to ensure China's resource security. 

Economic growth has led to surges in China's need for many imported commodities, and its rise as an important buyer of these products means that its influence on iron ore prices is projected to expand even more.

Some behemoths in the global mining industry have begun to sell iron ore denominated in yuan. The yuan-denominated contract is the first step in gaining pricing power in commodities. Some statistics show that China was the world largest importer of iron ore in 2018, accounting for a 65 percent share of global iron ore imports by value. If half of those iron ore deals were made and settled in yuan, it would add up to a huge figure in trade settlements. The time has come, and China should spare no effort to promote yuan-denominated cross-border trade settlements.

This means China must deepen financial reforms to allow the free flow of capital and offer effective risk management tools for cross-border settlements involving the yuan. 

The DCE announced in August that it was working to speed up iron ore options and optimizing relevant rules, according to the Xinhua News Agency. China's reforms continue while the authorities maximize their efforts to prevent systemic risks.

Uncertainty surrounding the China-US trade war is hitting bilateral ties. At this critical moment, more Chinese people feel the urgency of de-dollarization for the trading of strategic commodities like iron ore. 

Boosting global use of the yuan will help ensure China's energy security amid the trade war.

The global market has welcomed more cross-border yuan settlements. China should take advantage of the trend to promote use of the yuan and challenge the US dollar's hegemony.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn