Australia's shift to RMB signals accelerating challenge to US dollar dominance

Australia is increasingly settling commodity trades in Chinese Renminbi, marking a significant move away from US dollar reliance amid shifting geopolitical and economic dynamics, and signalling a potential realignment in global financial power.

The long dominance of the US dollar as the central currency for global trade, particularly in commodities, is facing a significant challenge, catalysed by shifting geopolitical and economic realities. While much attention has bee...

n given to the efforts by China and Russia to erode dollar hegemony, a more unexpected and impactful development is unfolding—the beginning of a major US ally, Australia, moving away from the dollar in favour of the Chinese Renminbi (RMB). This transition, often described as “dorization,” reflects deep economic pragmatism and highlights the evolving multipolar nature of global finance.

Australia, a top global commodity exporter and a cornerstone US strategic partner in the Indo-Pacific, has recently entered a landmark $10 billion deal with China wherein approximately 30% of iron ore trade transactions will be settled directly in RMB. This move signals a decisive shift away from the US dollar system, driven by the increasing costs and volatilities associated with dollar-denominated finance. Australian mining giant BHP Group has been at the forefront of this trend, borrowing $2 billion in RMB to fund green energy projects, thereby benefiting from cheaper loans and reduced exchange rate risks. Fortescue Group, Australia’s third-largest iron ore exporter, also underscored this transition by securing a record syndicated loan worth 14.2 billion yuan ($2 billion), supported by major Chinese and Australian banks—a first for an Australian firm—emphasising broader financial cooperation between the two nations. Fortescue’s CFO Apple Paget highlighted how this deal not only deepens China-Australia resource ties but also aligns with the growing demand for diversified and resilient funding models that support green industrial outcomes.

China’s economic clout as the world’s manufacturing hub and largest commodity buyer is a primary driver behind this currency shift. Australia’s iron ore exports to China are vital—Prime Minister Anthony Albanese noted that around two-thirds of China’s steel industry’s iron ore consumption comes from Australia, with trade revenue expected to reach A$105 billion ($68.45 billion) this fiscal year. The evolving trade relationship increasingly integrates green steel and sustainable technologies, signalling cooperative growth areas beyond traditional commodities.

However, this reorientation exists amid complex trade tensions. For instance, state-owned China Mineral Resources Group (CMRG) has exerted significant influence over iron ore imports, notably banning BHP’s iron ore cargoes earlier this year amid pricing disputes, which pressured one of the world’s largest miners. Conversely, China recently lifted its ban on iron ore imports from Hancock Prospecting, signalling more nuanced and strategic trade management. Meanwhile, Mitsui & Co’s $5.34 billion acquisition of a 40% stake in the Rhodes Ridge iron ore project underlines the broader regional competition and infrastructure integration aimed at securing stable exports to Asian markets.

This shift away from the US dollar is also partly a response to the volatility and unpredictability of American trade policies, including tariffs and sanctions, which complicate economic stability for key allies. The diminished effectiveness of US sanctions—such as those against Russia’s energy sector—exacerbates global uncertainty, with India continuing to import discounted Russian crude despite sanction regimes, thereby undermining US geopolitical strategies while simultaneously pushing global energy prices higher. These developments encourage nations, even those closely allied militarily with the US such as South Korea, to prioritise economic stability through enhanced trade and financial relations with China.

The US, recognising the strategic importance of securing critical mineral supply chains amid growing Chinese restrictions, signed an $8.5 billion critical-minerals agreement with Australia earlier in October, aiming to mitigate dependence on China’s dominant rare earth exports. This deal, signed between former President Donald Trump and Prime Minister Albanese, includes $3 billion in joint investments and highlights the ongoing security partnership under the AUKUS alliance. Yet, Beijing has warned against escalating economic bloc confrontations, reflecting ongoing tension beneath these strategic shifts.

Together, these developments point to a global economic landscape that is becoming increasingly multipolar and fluid, with currency choices reflecting practical economic calculus over traditional political allegiances. As commodities trade gravitates towards RMB settlement, the era of unchallenged dollar dominance appears to be diminishing. The key question now is not if, but how rapidly the world will adapt to the irreversible rise of “dorization” and the profound realignment of economic gravity it represents.

Source: Noah Wire Services