The SCMP quoted Saudi Arabia's Minister of Industry and Mineral Resources , Bandar Al-Khorayef, as saying that the country is "open to new ideas" - including the use of the Chinese yuan in oil transactions.
“Oil trading in yuan is not a big deal for the Ministry of Industry and Mineral Resources, we believe that Saudi Arabia will do what is in its best interest, will always try new things and be open to new ideas, we try not to mix politics with trade,” Al-Khorayef said in an interview with SCMP.
The wider adoption of the yuan in cross-border oil transactions is seen as the next step in the internationalization of the yuan and a challenge to the ubiquitous US dollar in global commodities markets.
The use of the yuan has increased along with trade with Russia - China's biggest source of crude oil imports - after Moscow was cut off from the international dollar payments system over its military campaign in Ukraine.
Beijing is also expanding the yuan’s reach in international trade more generally, signing a three-year currency swap deal with Saudi Arabia worth 50 billion yuan ($7.1 billion) in November 2023 and increasingly favoring local currency settlements with trading partners.
The prevalence of the US dollar in oil trade – known as the petrodollar – is a key pillar of the greenback's status as a global reserve currency.
“Our monitoring policy is based on having a balanced exchange rate between the Saudi riyal and the US dollar. This gives us great opportunities to plan and compete, but most importantly, it gives our investors the ability to hedge against currency risks,” said Minister Al-Khorayef.
Saudi Arabia is the world's largest oil exporter and China's second-largest source of crude oil imports - purchases in 2023 fell 1.8% year-on-year to 86 million tonnes, significantly lower than Russia's 107 million tonnes.
A report from S&P Global Ratings in August said that strengthening economic ties between China and Saudi Arabia would boost the use of the yuan in oil transactions.
Riyadh is looking to diversify its economy and become an industrial hub in the Middle East under its Vision 2030 initiative, and Chinese companies are eager to explore alternative markets in Saudi Arabia, thus fostering closer ties between the two countries.
