China, Saudi Arabia in talks to deepen stock exchange cooperation
Beijing and Riyadh are continuing to challenge the US-dominated international financial system
China and Saudi Arabia are in talks to allow exchange-traded funds (ETFs) to list on each other's stock exchanges, Reuters reported on 5 August, as the countries look to deepen financial ties to match strong energy and diplomatic relations.
The Shenzhen Stock Exchange, one of two major exchanges in mainland China, is in negotiations with the Saudi Tadawul Group, operator of the Saudi Stock Exchange, to link the two countries through the program known as ETF Connect.
The cross-listing of ETFs will allow investors in China and Saudi Arabia to invest in and trade securities that track stock or bond indexes listed on each other's stock exchanges.
China has launched ETF Connect projects in recent years with stock exchanges in Hong Kong, Japan, South Korea, and Singapore.
Hong Kong Exchanges and Clearing Ltd is also in separate talks with its Saudi counterpart for a similar program, sources speaking to Reuters reported.
China is seeking to counter what it sees as Washington's weaponization of the international dollar-based financial system. The US has increasingly used economic sanctions to punish rival countries rejecting Washington’s foreign policy objectives, including Russia and Iran, with whom China has close ties.
Beijing has therefore sought to expand ties with countries in Europe, West Asia, and Africa and introduce the Chinese Yuan as an alternative currency for settling international transactions.
In April, Reuters reported the yuan “is slowly but surely being adopted for more international payments, which analysts say could lay the foundations for a trading system running parallel to the dominant U.S. dollar.”
In March, China settled more international trade transactions in yuan than in dollars for the first time.
China has recently developed close diplomatic ties with Saudi Arabia to add to close energy ties. China has become the largest purchaser of Saudi oil in recent years, while Beijing brokered a reconciliation deal between the kingdom and its regional Islamic rival Iran in March.
Saudi officials are also considering settling oil trade with China in yuan amid Riyadh’s plans to join BRICS+, an economic trade bloc, and the Shanghai Cooperation Organization (SCO) in the coming years.
Ashok Swain, a peace and conflict research professor at Uppsala University in Sweden, told Al-Monitor in April that this would be a “huge step” for China and a “significant setback to the dollar's standing. There is no doubt that Saudi Arabia becoming a member of China-dominated SCO and BRICS+ would accelerate the bilateral trading being conducted using the yuan as the trading currency.”