Oil-producing countries in the Middle East are increasingly finding that the US dollar can no longer be trusted.

The US dollar oil system, which has been in operation for 50 years, is now facing significant issues. Oil-producing countries are no longer willing to be held hostage by the US dollar. In the process of moving away from the US dollar, Middle Eastern nations are increasingly leaning towards the Chinese yuan.

The largest oil-producing country, Saudi Arabia, is leading the way, and its recent series of actions may provide the best example for other Middle Eastern countries.

01, Continuously increasing holdings in China

Following the emergence of the European and American banking crisis, Saudi Arabia, for safety reasons, has cooperated more closely with China.

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In March of this year, with China's assistance, Saudi Arabia and Iran achieved reconciliation in Beijing. Saudi Arabia's cooperation with the United States has decreased, and it has gradually turned towards China.

Subsequently, Saudi Aramco, the largest oil company in Saudi Arabia, announced a significant increase in investment in China.

A couple of days ago, Saudi Aramco established a joint venture in China. In the future cooperation with Chinese industrial groups, Saudi Aramco will invest more than 10 billion US dollars, equivalent to over 70 billion yuan in Chinese currency, holding a 30% stake.

This joint venture has a powerful refining capacity (a refinery with a daily processing capacity of 300,000 barrels and a chemical plant with an annual output of 1.65 million tons of ethylene and 2 million tons of propylene), which is inseparable from the strong support of Saudi Arabia. To this end, Saudi Arabia has not only provided the joint venture with a substantial amount of cash but also a continuous supply of crude oil.

The crude oil provided accounts for 70% of the company's original refining capacity, indicating that Saudi Arabia has provided the joint venture with a sustainable supply capability for crude oil channels.Immediately following, the group announced an agreement with Rongsheng Petrochemical, taking a premium stake with an investment amounting to 24.6 billion RMB, securing 10% of the shares.

02, The Middle East is on the move

In fact, prior to this, countries in the Middle East had already begun to continuously position themselves in China, purchasing RMB assets.

As the U.S. banking crisis has been repeatedly exposed, China's momentum for recovery has gradually become prominent. Consequently, many Middle Eastern investors have altered their strategies, placing increasing emphasis on the mainland Chinese market.

Information suggests that when U.S. securities recently met with Middle Eastern investors, the latter indicated a future preference for cooperation with the mainland Chinese market.

Numerous Wall Street investment banks have noted that clients from the Middle East are reducing investments in Western countries like Europe and America to mitigate investment risks, and are instead turning to invest in the mainland Chinese market.

Sovereign funds from the Middle East have even established dedicated teams to manage investments specifically in the mainland Chinese market.

At present, the main investment targets for Middle Eastern investors are large state-owned enterprise stocks, particularly in the financial sector, and they have also conducted in-depth research on internet companies and Chinese bonds.

The Middle East is also seeking investment opportunities in the fields of healthcare, green economy, energy industry, and financial technology innovation in mainland China. These actions undoubtedly indicate that Middle Eastern investors are gradually shifting their focus from the U.S. market to the mainland Chinese market, with RMB assets becoming increasingly popular.

03, Going public in Hong KongOn the other hand, there have been recent reports that Saudi Aramco is highly likely to go public in Hong Kong, which is another clear signal of investment in China. In 2018, Saudi Arabia began to advance the company's IPO, and in 2019, it was finally listed on the local stock exchange, with its market value surpassing Apple at that time. Since then, the plan for overseas listing has been ongoing, and several foreign exchanges have been promoting the advantages of their own platforms to the Saudi royal family, hoping to win the world's largest IPO deal. If Saudi Aramco were to list overseas, it would face challenges in increasing operational transparency, but the Saudi government is not willing to do so, which has led to the slow progress of the oil giant's overseas listing plans. As early as 2017, Hong Kong had indicated that Saudi Aramco would eventually be listed in Hong Kong. Given that both Saudi Arabia and China are major importers and exporters of resources, if Saudi Aramco were to list in Hong Kong, it would more fully connect the cooperative relationship between the two countries. Moreover, due to the fluctuations in commodity market prices, if Saudi Aramco chooses to list in Hong Kong now, it could also reduce risks. It seems that as cooperation between Saudi Arabia and China becomes increasingly close, the news in December last year that future oil settlements would be in renminbi may soon become a reality. Prior to this, some of the trade between Saudi Arabia and China has already begun to be settled in renminbi, and settling oil in renminbi in the future is just an inevitable step for mutual benefit between the two parties.