China and Saudi Arabia have challenged the dominance of the dollar

Relations between China and Saudi Arabia continue to improve – this became even more obvious after the Chinese leader's warm welcome in Riyadh, where he was greeted with a purple carpet.

For a long time, Saudi Arabia was seen as the closest ally of the United States in the Middle East. However, for some time now, Beijing has been actively working to attract the kingdom to the east, and the Saudis are quite open to cooperation.

One of the key goals of deepening relations was an attempt to challenge the global dominance of the dollar, in particular, by trading oil and gas in yuan. For a long time, starting in 1974, Saudi Arabia traded oil exclusively in dollars.

However, in November last year, China and Saudi Arabia signed an agreement to create a 50 billion yuan currency swap line. This allowed Saudi Arabia to have access to the yuan at a fixed exchange rate, and also provided Beijing with the opportunity to receive Saudi rials at the same exchange rate.

This deal has gained great importance because, even despite the relatively small amount of 50 billion yuan, it has become an important turning point. If oil and gas trade between Saudi Arabia and China is conducted in yuan, it means that such transactions go beyond the Western financial system and can circumvent sanctions. 

In addition, this deal serves as a signal to the world community about Saudi Arabia's readiness to use the yuan in international financial transactions, as Russia has already done, which is China's largest partner in the field of oil trade.

However, it is worth noting that at the moment, most of the public and private debt around the world is held in dollars. The dollar is still the main currency for almost half of all global payments, while the yuan's share is less than 4%. The dollar is easily convertible, while the yuan has restrictions on free conversion and China has restrictions on the movement of capital.