Saudi Arabia Trades in Yuan: US Dollar Faces Loss in BRICS Nations

• De-Dollarization Efforts Intensify as China and Saudi Arabia Sign Trade Agreement
• The Impact of the Trade Agreement on Local Currencies
• A Potential Blow to the US Dollar
• A Paradigm Shift for Cross-Border Transactions
• Implications of De-dollarization on US Economy
• The Influence of China on Developing Countries

De-Dollarization Efforts Intensify as China and Saudi Arabia Sign Trade Agreement

The US dollar faces a potential challenge as BRICS members China and Saudi Arabia make strides toward de-dollarization. A trade agreement, valued at $7 billion, was signed between China and Saudi Arabia, instigating a significant move in the de-dollarization process.

The Impact of the Trade Agreement on Local Currencies

The deal between China and Saudi Arabia is essentially a currency swap, benefiting their local currencies - the Chinese Yuan and the Riyal. Spanning three years, the trade agreement allows both countries to conduct trade in their local currencies, up to a limit of 50 billion Chinese Yuan or 26 billion Saudi Riyals.

A Potential Blow to the US Dollar

With this trade agreement in place, the US dollar finds itself sidelined, playing no part in cross-border transactions for payment settlements up to $7 billion between the BRICS nations. In lieu of the USD, China's Central Bank will maintain a reserve of the Saudi riyal, while the Saudi Central Bank will keep the Chinese Yuan.

A Paradigm Shift for Cross-Border Transactions

When initiating cross-border transactions, the Central Banks will employ their native currencies, excluding the US dollar. This move promotes the Chinese Yuan and the Saudi Riyal by removing the US dollar from settlement scenarios. The gradual removal of reliance on the US dollar by BRICS nations presents a mutually beneficial situation for China and Saudi Arabia.

Implications of De-dollarization on US Economy

Abandoning the use of the dollar for global trade by BRICS nations will undoubtedly have significant impacts on various sectors in the US. This shift could incite lasting consequences for the US economy and potentially induce inflation domestically.

The Influence of China on Developing Countries

China's successful campaign to persuade developing countries to sever ties with the US dollar continues to gain traction. If this trend persists into 2024, numerous developing nations might opt to use local currencies for trade.

Edited by Jonathan Stoker