A second Middle Eastern country within a week announces it will begin selling bonds in Chinese RMB
A few days ago, Saudi Arabia announced they were in the process of diversifying away from the dollar and are planning to sell sovereign bonds in RMB in order to shore up their dwindling coffers. ¬†Now on Aug. 31, a second Middle Eastern Gulf nation is reporting to be doing the same as the UAE government of Sharjah could actually beat the Saudi’s to the punch and be the first to receive Chinese Yuan from the sale of sovereign bonds.
The government of the emirate of Sharjah plans to issue a yuan-denominated bond in China, which could make it the first Middle East issuer in the Chinese interbank bond market, according to sources familiar with the matter.
Sharjah, one of the seven members of the United Arab Emirates, is in the process of applying to issue the instrument, known as a panda bond, said the sources, who declined to be named as the matter is not yet public.
Gulf governments and companies have boosted bond issuance over the past year because low oil prices have pushed state budgets into deficit and tightened liquidity in their banking systems.
To encourage greater global use of the yuan and diversify funding sources for its belt and road trade route connecting China by land and sea to Europe, Beijing is keen to attract more foreign issuers of bonds. Its interbank bond market is the third largest after the United States and Japan. –¬†South China Morning Post
The significance of these moves of course by Saudi Arabia and Sharjah are that they represent a continuing exit from the long-standing petrodollar agreement, and an acknowledgement of the financial strength of the Chinese economy and banking systems.
As more and more OPEC and oil producing countries diversify out of dollar denominated assets and debt, the more the U.S. loses market share as the singular global reserve currency. ¬†And with the dollar already beginning to experience its own hemorrhaging by falling over 10% since the beginning of the year, it will soon open the door for more countries to look Eastward towards China, and quicken the end of dollar hegemony over the global financial system.
Kenneth Schortgen Jr¬†is¬†a writer for¬†The Daily Economist,¬†Secretsofthefed.com,¬†Roguemoney.net, and¬†Viral Liberty, and hosts¬†the popular¬†youtube podcast¬†on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.