China's crude oil futures, the country's first domestic futures product tradable by overseas investors, will be priced and settled in yuan, the central bank said on July 24. Overseas traders and brokers can open yuan-denominated accounts at designated banks for settlement, and the funds cannot be used for other purposes, according a statement from the People's Bank of China (PBOC). The move helps china increase its say in the energy market.

China’s oil trade has long been settled in U.S. dollars by reference to prices in the U.S. crude oil futures market. The statement by PBOC indicates China tries to vie for more pricing power in the global oil market, according to insiders.

Statistics show that China is one of the world's largest oil buyers. It has imported 310 million tons of crude oil, up 9.5% compared to last year, and imported more crude oil than the US in April and June this year. Despite this, it doesn’t have much pricing power in crude oil. Thus, China has to spend more money in importing crude oil than other countries.

The lack of the pricing power is mainly because there is no globally influential oil futures market and price benchmark, said Li Runsheng, vice chairman of China Petroleum and Chemical Industry Federation

Settlement of China’s crude oil futures in yuan will promote internationalization of renminbi (also known as yuan). As renminbi becomes one of top five world’s payment currencies, settlement in yuan plays an important role in beefing up China’s influence in ithe nternational commodity market, said Hu Yuyue, head of the securities and futures institute of Beijing Technology and Business University.

This article was edited and translated from 《“中国油”布局国际定价权（市场观察）》,source:People's Daily Overseas Edition