The twilight of the petrodollar is no longer in Arles. China and Saudi Arabia are dedollarizing their trade at a rapid pace. When will petro-bitcoin come?
Petroyuan
The currency swap concluded by the Saudi and Chinese central banks reflects a significant tightening of trade relations.
China is Saudi Arabia’s largest trading partner, dominating both exports and imports.
In September, the kingdom saw its exports to China increase by 34% compared to August. China’s share of Saudi exports increased from 14% in August to 18% in September.
The trade surplus with China soared to 6.7 billion rials ($1.8 billion). An increase of 257% compared to the month of August.
Very bad news for the petrodollar. This massive surplus strongly suggests that the Middle Kingdom is paying for an increasingly large portion of Saudi oil in yuan.
The currency swap worth 50 billion yuan clearly goes in this direction. It is a key initiative aimed at strengthening the use of national currencies and strengthening trade ties.
For example, national oil company Aramco revealed multibillion-dollar investments in Chinese oil refineries earlier this year. This is tangible proof that Saudi Arabia intends to consolidate its position as the country’s leading supplier of crude oil.
The fact that the Saudis are considering purchasing Chinese air defense systems and drones is another strong sign testifying to this geopolitical-monetary earthquake.
As expected, the internationalization of the yuan has accelerated since Xi Jinping’s visit to Saudi Arabia in December 2022. The Chinese president then pleaded in favor of trading oil in yuan, and no longer in dollars.
It is no coincidence that the Saudi central bank has drastically reduced its investment in US public debt.
However, China is not in the habit of selling its debt to the rest of the world. The question is therefore: what to do with these yuan in the event of a significant surplus?
Exchange them for gold perhaps? Indeed, remember that China launched its own crude oil benchmark index in 2018. The latter is denominated in yuan and convertible into gold. You read correctly, China has been bringing the gold standard back into fashion for several years now.
Knowing that everything that is good for gold is also good for bitcoin. Much rarer and more practical than the barbarian relic, digital gold will eventually eclipse it as a store of universal value.
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