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June 13
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China wants to buy more oil from Saudi Arabia, Chinese President Xi Jinping said, a move that some economists warn could weaken the global dominance of the U.S. dollar.

During his visit to Riyadh, Xi Jinping noted that China would expand crude oil trade with the Middle Eastern country. He also agreed to step up coordination with Saudi Arabia on energy policy in a meeting with Crown Prince Mohammed bin Salman.

The meeting, indicative of warming relations between Beijing and Riyadh, came after the U.S. and its allies imposed a ban and price cap on Russian oil exports.

Not mentioned during the meeting was the idea that Saudi Arabia might start accepting payments in Chinese yuan for its crude oil exports, something the two countries reportedly actively discussed earlier this year in connection with a possible shift away from the dollar.

This would raise the possibility of de-dollarization - replacing the dollar as the world's reserve currency.

China already pays for Russian energy in renminbi, which now accounts for nearly half of Moscow's currency market.

The dollar rose in 2022, helped by the Federal Reserve's interest rate hike, which attracted foreign investors seeking higher returns. The U.S. dollar index, which measures the value of the dollar against a basket of six other currencies, has jumped 9.16% since the beginning of the year.

Oil contracts are based on benchmark crude prices, such as Brent crude futures and West Texas Intermediate futures, which are priced in dollars. This means that countries have to buy dollars to buy oil, supporting the value of the dollar.

Western sanctions against Russia have led to a cooling of relations between the U.S., China and Saudi Arabia.

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