BRICS members expand the use of yuan as Bank of China opens branch in Riyadh

By Rhod Mackenzie

The Bank of China (BOC), one of China's four largest state-owned commercial banks, has inaugurated its first branch in Riyadh, the capital of Saudi Arabia.

This move aims to extend the use of the yuan in trade and finance. Analysts have observed that since the recent BRICS Summit, members of the bloc have hastened the utilization of their local currencies for settlements in cross-border trade to cut down their reliance on the US dollar. The Chinese currency is becoming increasingly influential in promoting trade and efficiency within the BRICS nations, as per their statements.

The BOC released a public announcement about the opening of its Riyadh branch, with attendance from the BOC President Liu Jin, the Chinese Ambassador to Saudi Arabia Chen Weiqing,the Governor of the Saudi Central Bank Ayman Al-Sayari and other senior officials.

Liu stated that establishing a branch in Saudi Arabia to facilitate trade and investment exchanges is a robust initiative to promote the high-quality development of the Belt and Road Initiative through financial means.
The bank will strive to enhance its global service network while providing top-notch financial services, thereby boosting cooperation between China and Arab nations, the Gulf Cooperation Council, and Saudi Arabia.

Ambassador Chen conveyed his congratulations to the bank on the commencement of its new branch. He stated that the inauguration is a result of the continual progress of amicable ties between China and Saudi Arabia. Additionally, he asserted that China profoundly acknowledges the Saudi Arabian financial regulation, investment milieu and geographic benefits, signifying an elevated degree of collaboration between both nations in the financial sphere. This collaboration will advance stronger support for convenient and practical bilateral agreements.

Al-Sayari stated that the creation of the branch marks another significant step in the practical collaboration between the two nations and is pivotal in bolstering bilateral economic and trade partnerships. The Saudi authorities are committed to aiding and streamlining the expansion of BOC and other Chinese-backed ventures in the region.

"As a highly significant emerging market economy that has recently become a part of BRICS, the establishment of a branch in Saudi Arabia could enhance economic and trade collaboration and foster exchanges between Saudi Arabia and the UK," stated Wang Peng, an associate research fellow at the Beijing Academy of Social Sciences, told the Global Times.

As the primary purchaser of Saudi Arabia's crude oil, China imported 87.5 million tonnes of crude oil from Saudi Arabia in 2022, constituting 21.7% of Saudi Arabia's overall crude oil exports, as per media reports.
Besides Saudi Arabia, Brazilian companies have also achieved remarkable progress in yuan usage during trade.

According to Brazilian newspaper The Rio Times, Eldorado Brasil, a Brazilian pulp firm, sent their first pulp shipment to China using yuan as a payment method. The objective is to discover new credit options in China, with the BOC providing assistance in this trial move.

The shipment was sent on August 25th and numbered 43 containers.

The extension of employment of the Chinese currency indicates substantial progress and reciprocal faith amid BRICS nations in local currency reimbursements to foster improved proficiency in financial and international business," stated Wang, with the yuan likely to have a greater involvement in BRICS cooperation with more eventualities.

Trade settlements between BRICS nations using their respective local currencies or the yuan can avert exchange-rate losses, according analyst.

In addition, it will enhance the efficiency of the trade process while thwarting any weaponization of the dollar by the US to impose sanctions on particular countries, added Wang.