Saudi National Bank Partners With China Exim Bank In RMB Yuan Loans
The Export-Import Bank of China (China EximBank), its major trade policy bank, announced on Tuesday (March 14) that it had made the first loan cooperation with the Saudi National Bank, the largest bank in Saudi Arabia, in RMB Yuan, facilitating financial cooperation under the framework of the China-proposed Belt and Road Initiative (BRI).
The funds will be preferentially used to meet the demand of China-Saudi Arabia trade projects, China EximBank stated. The move shows the rising role of the RMB Yuan on the international stage, expanding from trade settlement to loans.
The cooperation follows the implementation of the Comprehensive Strategic Partnership Agreement signed by the two countries in December last year.
This is the first instance of cooperation between China EximBank and financial institutions in Saudi Arabia, and will help facilitate financing and trade among countries and regions along the routes of the BRI, and achieve mutual benefit and win-win results, China EximBank added.
China and Saudi Arabia have made much progress in creating synergy between their strategies and conducting bilateral cooperation in various fields in recent years. Saudi Arabia remained the single biggest oil supplier to China in 2022. Bilateral trade reached US$116 billion last year, up 33.1%.
Chinese imports from Saudi Arabia stood at US$78 billion, up 37% over the previous year, according to China’s customs data.
China’s Ministry of Commerce stated in January this year that during 2022, the total RMB Yuan settlements in cross-border trade stood at 7.92 trillion RMB Yuan (US$1.15 trillion), an increase of 37.3% over 2021, while cross-border RMB Yuan settlements for direct investment stood at 6.76 trillion yuan, (US$979 billion) up 16.6%.
The RMB Yuan’s growing momentum in overseas markets can be expected to continue as Russia, in the top ten largest global economies in 2021, is faced with unilateral sanctions by the West and its traditional trading partners elsewhere need to continue to find currencies to continue buying and selling with Russia. If not, regional supply chains could collapse regardless of the West’s position.
Iraq’s central bank said in February that it plans to allow trade from China to be settled directly in RMB Yuan for the first time, in an attempt to improve access to foreign currency. “It is the first time imports would be financed from China in RMB Yuan, as Iraqi imports from China have been previously financed in US dollars only” according to Mudhir Salih, an Iraqi government’s economic adviser.
Iran’s Financial Tribune has stated that an Iranian official said Iran and China have recently talked about increasing the share of their national currencies in two-way trade, given that the RMB Yuan accounts for a considerable part of bilateral trade, and de-dollarization is on the government agenda.
Countries such as Russia and Vietnam have also opted to use the RMB Yuan in trade settlements, an indication that the currency’s internationalization not only suits China’s needs but also those of increasing numbers of countries as Washington’s use of the US dollar as a trade weapon has diminished its trustworthiness.
Other countries though, with more difficult relations with China are opting for other solutions, such as India choosing to settle some overseas trade in UAE Dirham, and has asked banks and traders to avoid using Chinese yuan to pay for Russian imports, government officials have said, because of long-running political differences with its neighbour and another sign that US dollar trust is eroding with major economies looking at alternatives.
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