China has started making its vicious moves in the war between Israel and Hamas. Amidst the war raging in Gaza, leaders of Muslim countries gathered in China. Leaders of 20 Arab countries have met with Chinese Foreign Minister Wang Yi. In an effort to become a friend of Muslim countries, the Chinese Foreign Minister is saying that his country is a good friend of Arab and Muslim countries and has always been like a brother. Now in a significant step to strengthen financial ties, the People’s Bank of China and the Saudi Central Bank have set up a 50 billion yuan ($7.05 billion) currency swap agreement. This strategic agreement announced is set for a period of three years with the possibility of renewal based on mutual consent. The initiative is designed to promote the use of domestic currencies in bilateral trade between China and Saudi Arabia, further strengthening their economic partnership.
50 billion yuan currency swap agreement signed
The agreement follows a series of collaborative efforts between the two countries aimed at enhancing their economic ties. Saudi exports to China saw an increase in August, reaching SR13.7 billion, indicating the diversification of trade beyond the traditional oil sector. The growing partnership was further emphasized through a memorandum of understanding in September that promised progress in road construction and autonomous vehicle development, which is expected to deepen transportation technology ties between the countries. Additionally, China granted approved destination status to Saudi Arabia, a move expected to increase group tourism and cultural exchanges. In October cooperation extended to the literary sphere, with Saudi Arabia’s Literature Commission forming an alliance with China’s National Press. This cooperation aims to improve shipping routes and port operations while promoting cultural ties through joint translation projects. The currency swap agreement outlines a mutual commitment to promote financial cooperation and increase trade investment using local currencies. The move is part of a broader strategy by both countries to diversify their economies and reduce dependence on US dollar transactions in international trade.
Strategy to weaken the US dollar
After attacking Ukraine in 2022, Russia started giving more preference to China’s foreign currency Yuan. This year, Russia has done more international trade in yuan than in dollars. Due to economic sanctions imposed on Russia by Western countries, Russian companies had increased their dependence on other currencies for foreign trade. Yuan won it. Not only this, China also went ahead and opened its markets for Russian goods so that there is no problem in exchanging foreign currency. However, the US dollar still leads world trade. But many countries have started trying other options for their foreign trade or loans.