China and Saudi Arabia reached a currency swap agreement worth around $7 billion, marking another step in the dedollarization trend as countries around the world shift away from the greenback.
The three-year deal allows for a maximum of 50 billion yuan or 26 billion riyals.
While relatively small, the deal could loom larger symbolically as Saudi Arabia is the world’s top oil exporter, and most global oil trades are conducted in dollars.
And although Russia is China’s top oil supplier, China imported $65 billion worth of Saudi crude oil in 2022, according to Chinese customs data cited by Reuters. That adds up to roughly 83% of the country’s total exports to China.
More broadly though, China has been on a campaign to boost the internationalization of the yuan in an attempt to dethrone the dollar.
Last month, RBC reported that 25% of Russia’s trade with countries other than China was settled with the renminbi. And a JPMorgan report in September said more and more of the oil trade is taking place with currencies other than the dollar.
Meanwhile, the outstanding balance of China’s foreign-exchange swap lines notched a new high of 117.1 billion yuan in September, according to data analyzed by Bloomberg.
China has signed other currency swap agreements this year with countries like Argentina. In fact, the Chinese central bank currently has 29 active swap agreements, topping 4 trillion yuan, according to a report released last month.
Beijing has also encouraged foreign investors to access Chinese markets through the issuance of panda bonds. At the latest Belt and Road Initiative, the Chinese banks also signed a series of yuan-denominated loans for countries like Peru and Malaysia.