China has issued $2 billion in bonds in Saudi Arabia, choosing Riyadh and denominating the bonds in U.S. dollars, which speaks volumes about Beijing’s intentions.
In early November, China’s Ministry of Finance launched a $2 billion bond issue in Riyadh, Saudi Arabia, rather than in a more established financial market. This decision reflects Beijing’s efforts to strengthen ties with Saudi Arabia and potentially replace the United States as the kingdom’s strategic partner.
Despite its aspirations for the yuan as a global currency, Beijing opted to denominate the bonds in U.S. dollars, acknowledging the dollar’s continued dominance in the global financial system.
While it would have been more cost-effective to conduct the transaction in Shanghai or Hong Kong, Beijing’s choice to do so in Riyadh holds significant economic and diplomatic implications for China. The move was made as a gesture of support to Saudi Arabia as it seeks to develop its capital markets and attract international finance.
The decision to issue dollar-denominated bonds also underscores the importance of oil in China’s economy, as the country relies on imported oil. Saudi Arabia offers a reliable and abundant source of oil, making it an attractive partner for China.
Additionally, Beijing aims to capitalize on the strained relationship between the United States and Saudi Arabia under the Biden administration, seeking to draw the kingdom closer to China’s diplomatic sphere. This aligns with the CCP’s broader goal of eventually supplanting Washington as Riyadh’s primary strategic partner.
By issuing bonds in U.S. dollars, China is deviating from its previous insistence on conducting trade deals in yuan, signaling a recognition of the dollar’s role as a global reserve currency. This move showcases China’s need for dollars to access global liquidity, despite its efforts to promote the yuan internationally.
While this event may not be a turning point in global finance, it sheds light on Beijing’s acknowledgment of the challenges it faces in achieving global economic dominance. The CCP’s ambitions have been tempered by economic and financial obstacles, highlighting the complexities of China’s path to international prominence.
Please note that the views expressed in this article are the author’s opinions and do not necessarily reflect those of The Epoch Times. Please rewrite the following sentence:
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