Pakistan, Sept. 10 -- Iran has started using a barter-style trade system with China to bypass US sanctions. The arrangement allows Tehran to continue selling oil while avoiding parts of the global banking system. Iranian sources said the system also helps secure billions of dollars in Chinese goods.

Two senior Iranian sources and people familiar with trade described the arrangement. Under the system, Iranian oil sales generate credit for Chinese imports. Iran has used that credit to obtain medicines, vehicles and communications equipment from China.

The manufacturers involved reportedly avoid direct financial transactions with Iran. Instead, the barter-style arrangement helps move goods through alternative trade channels. Sources said I...