China and Saudi made a plan to shock the dollar, what is the currency exchange agreement?
Many countries of the world have united to end the rule of the dollar. Some time ago, there was a discussion that preparations were being made to introduce a new currency together with China and Russia. Which was said to be an important step towards leaving the dollar behind.
Now China has taken a step forward and included Saudi Arabia in its plan. An important agreement has been reached between China and Saudi Arabia on currency issues. This is called a currency exchange agreement.
China’s latest contract with Saudi Arabia is worth 6.93 billion US dollars. After this agreement, both countries will be able to save money and time. Business will also be easy. Learn what a currency swap agreement is and how it shakes up the dollar’s reign.
What is a currency exchange agreement?
This is an economic agreement between the two countries. In which both the countries fix the exchange rate of their respective currencies and other things for some time and then the transaction proceeds accordingly. It has been claimed in media reports that this deal is worth 6.93 billion US dollars.
This means that the central banks of each country can keep so much money with themselves. China does not have to pay in dollars when it buys oil from Saudi Arabia.
They will take their money from the Chinese currency yuan available at the central bank of Saudi Arabia at a predetermined rate. Similarly, Saudi Arabia does not have to pay dollars when importing any goods from China. The Saudi currency available with China will take payment from the riyal at a fixed rate. This makes business easier for both.
Currency swap agreements with 40 countries by China
This is not the first time that China has made such an agreement. According to international media, so far China has signed similar agreements with more than 40 countries in the world. So far, no country has built such a large economic network.
What will be its effect?
It is not possible to remove the influence of the US dollar anytime soon, but such small efforts by big countries like India and China will not only give these countries economic freedom but also reduce their dependence on the dollar.
The more countries have such agreements, the less dependence on the dollar. As a result, the dominance of the dollar will gradually decline.
For a long time, the countries of the world have been using dollars for import and export. It is not possible to buy and sell in local currency.
A country’s central bank does not have to make any effort to acquire dollars, but it does cost extra money to exchange them. Such deals will save both time and money in obtaining dollars.
This trend is increasing rapidly in recent years. In this context, agreements like Saudi Arabia-China, India-Sri Lanka are progressing. It is hoped that there will be more such agreements in the coming days.