Saudi Arabia and China sign major currency swap deal
The Saudi Arabian Central Bank, known as the Saudi Arabian Monetary Authority (SAMA), signed a currency swap agreement with the People's Bank of China worth more than 6.9 billion dollars for a period of three years.
This agreement was initialled "in the context of financial cooperation between the Central Bank of Saudi Arabia and the People's Bank of China", an official SAMA statement said.
The agreement has a duration of three years, but the People's Bank of China acknowledged that the deal could be extended for longer as part of a dynamic of financial cooperation between the two nations that seeks to promote the use of the two countries' local currencies with the aim of encouraging trade and investment between the two countries.
Swaps are financial agreements between countries to exchange a certain amount of one currency for an equivalent value in another currency, which is precisely what the Saudi kingdom and the Chinese giant have just signed. A swap line is an agreement between two central banks to exchange their respective currencies, allowing a central bank to obtain liquidity in foreign currency from the central bank that issues it, generally to satisfy the need for that currency of domestic commercial banks.
Swap lines, initially used by central banks to finance certain market interventions, have in recent years become an important instrument for maintaining financial stability and preventing market tensions from affecting the real economy. These foreign exchange arrangements seek to provide foreign currency liquidity to the central banks that enter into them.
In this vein, economic relations between Saudi Arabia and China continue to grow closer. A recent report published by the Saudi Arabian General Authority for Statistics in August noted that the Kingdom's exports to China reached 51.3 billion dollars, making the Asian giant its largest trading partner. The Kingdom's imports from China were also close to 50 billion dollars. This shows the importance of trade flows between the two nations in both directions.
In addition, in September, Saudi Arabia and China signed a memorandum of understanding to exchange expertise in modern transport systems, including high-tech methods to improve roads, build autonomous vehicles and improve shipping and port operations, as reported by Arab News.
In the same month, to strengthen the tourism link between the two countries, China officially granted Saudi Arabia approved destination status, allowing Chinese citizens to travel to the Saudi kingdom on group tours.
Recently, the 10th China-Arab Business Conference, a Sino-Saudi forum aimed at strengthening the bilateral relationship between the two nations, also took place. Just a few months ago, China and Saudi Arabia sealed up to 30 investment deals worth $10 billion in sectors such as technology, renewable energy, agriculture, healthcare and tourism. "Crown Prince Mohammed bin Salman has continuously expanded efforts to enhance the strong and long-standing partnership between the Arab world and China in all fields," said Saudi Foreign Minister Prince Faisal bin Farhan at the opening of the summit.
During the meeting, organised by ministries from both countries in collaboration with the Arab League, the Saudi government agreed with several Chinese companies on projects related to research, development, automobile production and sales, tourism development, as well as the manufacture of railway equipment. Partnerships between Chinese and Saudi companies were also promoted.
All these economic moves demonstrate the great moment of cooperation between Saudi Arabia and China. At the political level, this is also manifested in various ways, such as, for example, through the latest contacts between foreign ministers in the framework of the latest summit hosted by the Chinese giant on Monday to discuss the war between Israel and Hamas in Gaza.