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A bustling shipping port featuring container ships and crane operations under clear skies.(For reference only)
China-Iran Trade Mechanism Moves Billions of Dollars Around Sanctions
PARIS — September 10, 2026
Iran has used a secretive trade mechanism to exchange proceeds from oil sales to China for credits used to purchase Chinese goods, according to people familiar with the arrangement. The system has moved an estimated $2 billion to $2.5 billion over the past year and has helped keep trade between the two countries flowing despite international sanctions.
The mechanism allows Iranian oil revenue to be converted into credits for Chinese imports rather than being transferred directly through international banking channels. People familiar with the arrangement said Iran has used the system to obtain medicines, vehicles, communications equipment and, on at least one occasion, air defense equipment.
The arrangement has provided Iran with an alternative way to access Chinese goods as U.S. pressure on its economy has increased. At the same time, it has allowed Chinese companies to continue receiving Iranian oil proceeds while reducing their exposure to international financial scrutiny.
The United States has imposed sanctions on some Chinese entities involved in buying or facilitating Iranian oil shipments. Washington has not, however, imposed the most severe possible measures against China's broader financial system, which could have wider effects on the global economy.
The mechanism has become more important as tensions between Washington and Tehran have intensified. In August, U.S. Treasury Secretary Scott Bessent warned countries to reduce business ties with Iran or risk losing access to the dollar-based financial system.
It is unclear how the arrangement has been affected by the U.S. naval blockade of Iran. No Iranian crude cargoes have successfully passed through the Strait of Hormuz to China since the blockade was reinstated on July 14, according to reporting cited in the source material.
China and Iran have repeatedly rejected unilateral Western sanctions, describing them as illegitimate, and have pledged to protect their economic interests. The two countries have also maintained close political and economic relations, including a 25-year strategic partnership signed in 2021.
China's Foreign Ministry said it was not familiar with the arrangement described. It also said China opposes unilateral sanctions that lack a basis in international law or authorization from the U.N. Security Council.
Iran's missions to the United Nations in New York and Geneva did not respond to requests for comment. A U.S. official said the Trump administration works with partners, including the European Union, to limit Iran's ability to advance its nuclear ambitions but did not comment specifically on the trade mechanism.
China is Iran's largest buyer of shipped oil. More than 80% of Iran's exported oil went to China in 2025, averaging about 1.4 million barrels a day, according to commodities data cited in the source material.
People familiar with the financial system said it is one of several arrangements that allow Iran to obtain Chinese goods and services without making direct international bank transfers to Chinese suppliers.
A Western official and two other people familiar with the matter said a buyer acting for Chinese state-owned oil trader Zhuhai Zhenrong was, at least until this year, depositing hundreds of millions of dollars each month with an obscure China-based financial entity known as ChuXin.
The deposits were linked to purchases arranged with a Hong Kong-registered company associated with Iran's national oil company, according to information gathered by intelligence agencies and described by the people. ChuXin would then transfer money to Chinese exporters and companies involved in infrastructure projects in Iran, apparently through other Chinese financial institutions.
About 70% of the Iranian oil proceeds handled through ChuXin were allocated to infrastructure projects, according to three sources. The remaining funds were directed to a special purpose vehicle, or SPV, used to pay companies supplying goods to Iran.
The Iranian sources confirmed the existence of the SPV, which had not previously been publicly reported. They said the funds are managed by two entities, one representing China's Ministry of Commerce and another linked to Iran's central bank.
Under the arrangement, the Iran-linked entity informs its Chinese counterpart when Iran's central bank approves an importer to use money in the SPV. The Chinese entity can then arrange payment to the relevant supplier, according to three sources.
There are significant uncertainties surrounding some of the entities involved. A search of Chinese company registries found no financial institution called ChuXin, while Reuters could not find public records confirming the identities or operations of the firms described as representing the Chinese commerce ministry and Iranian central bank.
One source suggested that ChuXin may exist only as a name on a spreadsheet. Companies using names similar to those associated with Iran's national oil company and Zhuhai Zhenrong appear in Hong Kong's company registry, but their ownership and business activities could not be established from public records.
The companies did not respond to questions sent to their registered addresses, which are offices operated by corporate secretarial service providers.
Zhuhai Zhenrong has previously been targeted by U.S. sanctions over alleged dealings involving Iran. One person familiar with the arrangement provided what appeared to be a July 22, 2025, letter from Iran's national oil company asking the Chinese trader to confirm an outstanding balance.
The document could not be independently authenticated. Iran's national oil company and Zhuhai Zhenrong did not respond to questions about the document or their alleged involvement.
Iran's central bank and China's Ministry of Commerce also did not respond to requests for comment.
The trade mechanism has reportedly operated since at least 2021. Three sources said it was initially used to help Iran obtain medicines and COVID-19 vaccines and later became more important as Washington increased pressure on businesses dealing with Iran.
The sources estimated that $2 billion to $2.5 billion passed through the SPV during the past year. They said the system has allowed Iran to continue accessing Chinese products while giving Chinese companies a way to limit their direct exposure to sanctioned Iranian transactions.
Analyst Andrea Ghiselli of the University of Exeter said such arrangements can also serve China's broader effort to resist U.S. economic pressure. At the same time, he said Chinese authorities have an interest in protecting their banks and companies from being shut out of the international financial system.
That balance creates an incentive for arrangements that allow trade to continue while keeping direct responsibility difficult to establish.
