China has chosen Saudi Arabia for its first US dollar sovereign bond issuance in three years, signaling a deepening financial relationship between the two nations. The Chinese State Council has approved the issuance of up to $2 billion in dollar-denominated debt, which will be sold in Riyadh next week. This move marks a significant departure from China’s traditional practice of issuing dollar bonds in Hong Kong, highlighting Saudi Arabia’s growing role as a financial hub.
The decision to sell bonds in Saudi Arabia aligns with Crown Prince Mohammed bin Salman’s Vision 2030 initiative, which aims to diversify the kingdom’s economy beyond oil and position it as a global investment center. Saudi Arabia has been ramping up its own international bond sales to fund large-scale projects, further cementing its financial importance on the world stage.
China’s collaboration with Saudi Arabia is multifaceted. Beyond the bond issuance, China has been securing major construction contracts in Saudi Arabia, especially after the downturn in its own property market. Additionally, the kingdom’s solar energy boom has attracted Chinese companies involved in the production of solar panels and batteries.
This bond issuance is part of a broader strategy to strengthen state-level ties with Saudi Arabia. Although Russia became China’s largest oil supplier in 2023, Saudi Arabia continues to be a major supplier, sending large amounts of crude oil to China. As a result, the dollars earned from these oil exports can be invested in dollar-denominated Chinese sovereign debt, further integrating the two economies.
China’s foreign currency bond issuance, while not a primary source of government funding, plays an important role in global financial markets. By selling bonds in Riyadh, China not only strengthens its ties with Saudi Arabia but also sets a price benchmark for other Chinese issuers in the international debt markets.
In recent months, Saudi Arabia has increased its efforts to attract Chinese investment, with the Public Investment Fund (PIF), the kingdom’s sovereign wealth fund, signing deals worth $50 billion with Chinese banks. These agreements are part of a broader push to facilitate “two-way capital flows” between the two countries through both debt and equity investments.
This bond sale represents a continuation of a strategic relationship that is shifting towards deeper economic collaboration, with Saudi Arabia positioning itself as a key player in both the global financial system and in its partnership with China. As China’s economic influence continues to grow, this bond issuance in Saudi Arabia marks another step in solidifying their financial and political ties.
