'Threat to Dollar Hegemony' China Signs 9 Trillion Won Currency Swap Agreement with Saudi Arabia

China has signed a bilateral currency swap agreement worth approximately 9 trillion won with Saudi Arabia.

Crown Prince Mohammed bin Salman of Saudi Arabia (left) is shaking hands with President Xi Jinping at the Great Hall of the People in Beijing, China, in 2019. [Image source=AP Yonhap News]

According to Xinhua News Agency on the 11th, the People's Bank of China recently obtained approval from the State Council and signed a currency swap agreement worth 50 billion yuan (about 9 trillion won) with the Saudi Central Bank.

A currency swap refers to a transaction in which the domestic currency and the counterpart country's currency are exchanged at a pre-agreed exchange rate. Under this agreement, China set 50 billion yuan and Saudi Arabia set the same amount of 26 billion riyals as the swap limit, allowing mutual exchange. The agreement is valid for three years and can be extended with the consent of both countries.

The People's Bank of China stated, "The bilateral currency swap agreement between China and Saudi Arabia will strengthen financial cooperation between the two countries, expand the use of local currencies mutually, and promote the facilitation of trade and investment."

According to Chinese economic media Caixin, as of last year, the trade volume between the two countries exceeded 100 billion dollars (about 129 trillion won), making China Saudi Arabia's largest trading partner. China is recently expanding the use of the yuan mainly among countries participating in the Belt and Road Initiative (一帶一路, land and maritime Silk Road), threatening the dollar's hegemony as the key global currency.

As of the end of September this year, China has signed currency swap agreements with 30 Belt and Road Initiative participating countries and established yuan settlement systems with 17 countries.

This content was produced with the assistance of AI translation services.