Saudi Arabia sold more than $3 billion in US government debt in June, dumping the securities for a third consecutive month and bringing its holdings to a six-year low of $108.1 billion, according to US Treasury Department data reviewed by Bloomberg on 16 August.
Neighboring UAE also sold nearly $4 billion in US Treasuries during the same month; China also followed suit, dumping $11.3 billion of their holdings in June, bringing them to the lowest level since 2009.
The US has the world’s highest national debt, with $30.1 trillion owed to creditors as of the first quarter of 2023. The largest holder of these treasuries is Japan, which owns $1.08 trillion of the US debt, followed by China with $870 billion, and the UK with holdings of $699 billion.
The sell-off by Riyadh and Abu Dhabi comes as Gulf states search for new avenues for investment that provide more significant returns. Furthermore, over the past year, Saudi and Emirati officials have been steadily moving away from the US dollar hegemony by opening up avenues to settle trade with Global South nations in local currencies.
The $700 billion Saudi Public Investment Fund (PIF) has been making sweeping acquisitions in sports, technology, and equity holdings in recent months.
The PIF has also boosted its investments at home, focusing on developing 13 sectors officials consider strategic, including aerospace and defense, healthcare, entertainment, leisure, and sports.
“The depth and breadth of PIF in creating new companies from scratch and pursuing giga-projects is truly unparalleled,” Diego Lopez, managing director of research firm Global SWF, told the Wall Street Journal (WSJ) last month.
As Riyadh continues to move away from the US dollar, the country is implementing plans to deepen economic ties with China, as the two nations have been holding talks to allow exchange-traded funds (ETFs) to list on each other's stock exchanges.
China is seeking to counter Washington's weaponization of the dollar-based financial system. As such, Beijing has sought to expand ties with countries in Europe, West Asia, and Africa and introduce the 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 US dollar.”
In March, China settled more international trade transactions in yuan than in dollars for the first time.