China has passed another milestone in its efforts to promote the global use of its currency, with the Australian metals giant Fortescue agreeing to borrow a record 14.2 billion yuan (US$1.98 billion) in a syndicated loan agreement arranged by one of China’s biggest state-owned banks.
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The deal is the first ever offshore yuan syndicated loan to an Australian company and the largest ever to a non-Chinese firm, lead arranger Bank of China said in a statement on Tuesday.
Fortescue – the world’s fourth-largest iron ore producer – will use the capital to purchase clean energy technology and other machinery from China and repay the loan using the yuan income it earns from selling iron ore to China, creating a “cross-border closed-loop yuan financing solution”, according to the bank.
“This syndicated loan will facilitate the expansion of the company’s business cooperation with Chinese suppliers, effectively control exchange rate risks and reduce overall financing costs, providing a strong demonstration effect,” the Bank of China said.
The loan agreement comes as China is ramping up its efforts to internationalise the yuan, as the country tries to hedge against potential US financial sanctions and investor confidence in the US dollar falters amid President Donald Trump’s aggressive tariff and spending policies.
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The US dollar index has slumped by more than 9 per cent so far this year, while the offshore yuan has strengthened by around 2 per cent against the dollar.