China has agreed to establish a direct trading pair between its yuan currency and the Saudi Arabian riyal, and the United Arab Emirates’ dirham, the China foreign exchange trading platform operator said on Friday, according to Business Recorder.
Media reports outlined that this move which will be effective from September 26, brings the number of foreign currencies that are allowed direct trading with the yuan to 16 countries.
Yuan is used in direct business between China and Canada, Paris, Australia, London, Hong Kong, Luxembourg, Malaysia, Moscow, Singapore, South Korea, Switzerland, Taiwan, and Tokyo.
The China Foreign Exchange Trade System (CFETS), said the direct trading will help lower exchange costs and facilitate bilateral trade and investment.
China has stepped up the signing of direct trading agreements with several currencies, to promote the global use of the yuan and open up financial markets.
The State Council of China reported on its official website that on Dec.2010 the yuan started trading in Russia, the first overseas market for the Chinese currency, adding that the Chinese currency is now the world’s seventh most used currency for payment.
Impact of a Gulf rapprochement
Earlier in August, the Saudi Deputy Crown Prince Mohammed Bin Salman visited China, met with the Chinese Vice Premier Zhang Gaoli, and signed 17 cooperative agreements.
Some 17 memorandums of understanding (MoU) were signed between the two nations in fields including oil storage, water resources, cooperation on science and technology, and cultural cooperation, Saudi News Agency SPA said.
Also, among the MoUs was a plan for the two countries to cooperate in building 100,000 homes in the Asfar suburb of the eastern Saudi city of al-Ahsa.
These upraising cooperation plans came just few days before Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and the Ruler of Dubai has approved a decision to grant visas on arrival at the country’s airports to visitors from the People’s Republic of China.
According to Khaleej Times, the establishment of a direct trading pair between China’s yuan currency and the dirham in anticipation of a remarkable surge in bilateral trade and tourism ties following the decision by the UAE to grant visa on arrival for Chinese visitors.
The Emirati economic newspaper also said that the currency trading move comes at a time when China is embarking on an ambitious drive to diversify its global assets to fully exploit its huge investment capabilities.
It is noteworthy that 500,000 Chinese tourists visited the UAE in 2015 while the first half of this year witnessed 267,000 Chinese tourist arrivals in Dubai.