Strengthening ties between Saudi Arabia and China could enable oil trading between the two nations in the renminbi, according to S&P Global Ratings.
Yuan-based oil trade between Riyadh and Beijing faces “significant challenges” and may take decades to grow to a “meaningful scale”, but the deepening bilateral ties and aligning long-term interests may boost this process, the ratings agency said in a report on Wednesday.
“Aside from the booming oil trade that continues to anchor their core relationship, long-term plans such as Saudi Arabia's Vision 2030 are driving new institutional, financial and cultural linkages between the two countries,” said Charles Chang, Greater China country lead for corporates at S&P.
“These new linkages will provide the Saudis more outlets for the renminbi's use, such as paying for Chinese engineering and construction services in the kingdom or investing in Chinese firms across a widening range of sectors."
10th Ministerial Meeting of China-Arab States Co-operation Forum – in pictures
The potential for more renminbi-based oil trade hinges on exporters' willingness to accept the Chinese currency for payment and that depends on their ability to use the resulting proceeds, the report said.
However, since the yuan is not widely used in international trade and finance, there are relatively fewer spending opportunities, the agency added.
Saudi Arabia is China's largest trading partner in the Gulf. The kingdom's trade surplus with China has widened from the lows of $5 billion to $10 billion in 2015-2016 to $20 billion to $40 billion in the past three years, the report said.
Crude oil accounted for about 84 per cent of China’s imports from Saudi Arabia in 2023, up from about 67 per cent a decade ago, S&P said.
The yuan is now the fourth most-transacted currency, having overtaken the Japanese yen last year, according to data from Swift.
Its rise represents a shift in the global financial landscape towards a more multipolar system, challenging the historical dominance of western currencies and financial markets.
The Chinese currency’s share as a global trade settlement currency has continued to grow despite China’s weakening exports to western countries.
Attempts to increase the yuan's global use were undone by a sharp depreciation in late 2015. However, by early 2022, escalating geopolitical risks caused a resurgence in its role in global trade.
“These episodes underscore the pull forces of trade and the push forces of geopolitical risks that continue to characterise the renminbi’s use,” S&P said.
“Both these forces are at play in the use of the currency in Saudi-China trade.”
Riyadh has been focused on maintaining a balance between its relationship with its primary security ally, the US, and its relationships with China and Russia, its key energy partner within Opec.
Last year, China and Saudi Arabia signed a local currency swap agreement worth $7 billion as part of efforts to boost trade using their currencies and reduce reliance on the dollar.
More recently, Saudi Arabia became a participant in the mBridge project, a collaborative effort to develop a new system for cross-border payments using central bank digital currencies.
It was launched in 2021 between the central banks of China, Hong Kong, Thailand and the UAE.
“Escalating geopolitical events, shifting national interests and growing non-US trade, particularly with Asia, in recent years led some emerging economies to look to diversify their external relations,” S&P said.
Dollar dominance
Gulf exporters’ currencies are pegged to the US dollar, including those of Saudi Arabia, the UAE, Iraq and Oman.
If the dollar appreciates against the yuan, as it has been doing for the past year, selling oil in the Chinese currency will cut their incomes in domestic-currency terms, the agency said.
“Moreover, Beijing has yet to lay out a road map for resolving these issues and for liberalising the country’s currency and capital account,” S&P said.
“This leaves a high degree of uncertainty on the ability to manage future petroyuan-related risks.”
About 88 per cent of all foreign currency transactions have the dollar on one side, while half of all international trade is conducted in dollars.
Although the dollar remains the most dominant currency in the foreign exchange reserves of the world's central banks, its share in these reserves has decreased from more than 70 per cent in 2000 to about 55 per cent in the last quarter of 2023, after accounting for exchange-rate and interest-rate adjustments, International Monetary Fund data shows.
Growing partnership
Saudi Arabia’s Vision 2030 programme, which aims to reduce the country’s dependence on oil exports and diversify its economy, along with its plans to host major events, may lead to increased collaboration with Chinese entities, the report said.
The kingdom will host the Asian Winter Games 2029, Expo 2030 and the Fifa World Cup 2034.
“For China, yuan-based oil trade and the resulting Saudi need to spend future yuan proceeds would provide self-sustaining logic for Saudi Arabia’s participation in China’s Belt and Road Initiative,” S&P said.
The Belt and Road Initiative, a mega project launched in 2013, aims to connect several countries in Asia, Europe and Africa through a network of infrastructure and trade-related projects.
Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
Globalization and its Discontents Revisited
Joseph E. Stiglitz
W. W. Norton & Company
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The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
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Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
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Church of South Indian Parish
St Andrew's Church Mussaffah branch
St Andrew's Church Al Ain branch
St John's Baptist Church, Ruwais
Church of the Virgin Mary and St Paul the Apostle, Ruwais
UAE currency: the story behind the money in your pockets
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Gran Gala del Calcio 2019 winners
Best Player: Cristiano Ronaldo (Juventus)
Best Coach: Gian Piero Gasperini (Atalanta)
Best Referee: Gianluca Rocchi
Best Goal: Fabio Quagliarella (Sampdoria vs Napoli)
Best Team: Atalanta
Best XI: Samir Handanovic (Inter); Aleksandar Kolarov (Roma), Giorgio Chiellini (Juventus), Kalidou Koulibaly (Napoli), Joao Cancelo (Juventus*); Miralem Pjanic (Juventus), Josip Ilicic (Atalanta), Nicolo Barella (Cagliari*); Fabio Quagliarella (Sampdoria), Cristiano Ronaldo (Juventus), Duvan Zapata (Atalanta)
Serie B Best Young Player: Sandro Tonali (Brescia)
Best Women’s Goal: Thaisa (Milan vs Juventus)
Best Women’s Player: Manuela Giugliano (Milan)
Best Women’s XI: Laura Giuliani (Milan); Alia Guagni (Fiorentina), Sara Gama (Juventus), Cecilia Salvai (Juventus), Elisa Bartoli (Roma); Aurora Galli (Juventus), Manuela Giugliano (Roma), Valentina Cernoia (Juventus); Valentina Giacinti (Milan), Ilaria Mauro (Fiorentina), Barbara Bonansea (Juventus)
Killing of Qassem Suleimani
Kibsons%20Cares
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Company%20profile
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THE BIO: Martin Van Almsick
Hometown: Cologne, Germany
Family: Wife Hanan Ahmed and their three children, Marrah (23), Tibijan (19), Amon (13)
Favourite dessert: Umm Ali with dark camel milk chocolate flakes
Favourite hobby: Football
Breakfast routine: a tall glass of camel milk
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
New schools in Dubai
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
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THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
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8 UAE companies helping families reduce their carbon footprint
Greenheart Organic Farms
This Dubai company was one of the country’s first organic farms, set up in 2012, and it now delivers a wide array of fruits and vegetables grown regionally or in the UAE, as well as other grocery items, to both Dubai and Abu Dhabi doorsteps.
www.greenheartuae.com
Modibodi
Founded in Australia, Modibodi is now in the UAE with waste-free, reusable underwear that eliminates the litter created by a woman’s monthly cycle, which adds up to approximately 136kgs of sanitary waste over a lifetime.
www.modibodi.ae
The Good Karma Co
From brushes made of plant fibres to eco-friendly storage solutions, this company has planet-friendly alternatives to almost everything we need, including tin foil and toothbrushes.
www.instagram.com/thegoodkarmaco
Re:told
One Dubai boutique, Re:told, is taking second-hand garments and selling them on at a fraction of the price, helping to cut back on the hundreds of thousands of tonnes of clothes thrown into landfills each year.
www.shopretold.com
Lush
Lush provides products such as shampoo and conditioner as package-free bars with reusable tins to store.
www.mena.lush.com
Bubble Bro
Offering filtered, still and sparkling water on tap, Bubble Bro is attempting to ensure we don’t produce plastic or glass waste. Founded in 2017 by Adel Abu-Aysha, the company is on track to exceeding its target of saving one million bottles by the end of the year.
www.bubble-bro.com
Coethical
This company offers refillable, eco-friendly home cleaning and hygiene products that are all biodegradable, free of chemicals and certifiably not tested on animals.
www.instagram.com/coethical
Eggs & Soldiers
This bricks-and-mortar shop and e-store, founded by a Dubai mum-of-four, is the place to go for all manner of family products – from reusable cloth diapers to organic skincare and sustainable toys.
www.eggsnsoldiers.com
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
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MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
ADCC AFC Women’s Champions League Group A fixtures
October 3: v Wuhan Jiangda Women’s FC
October 6: v Hyundai Steel Red Angels Women’s FC
October 9: v Sabah FA
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BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
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UAE currency: the story behind the money in your pockets
Bareilly Ki Barfi
Directed by: Ashwiny Iyer Tiwari
Starring: Kriti Sanon, Ayushmann Khurrana, Rajkummar Rao
Three and a half stars
