China and Saudi made a plan to shock the dollar, know what is that currency swap agreement

Many countries of the world are uniting to end the reign of the dollar. Some time ago there was discussion that preparations are underway to introduce a new currency jointly with China and Russia. Which was said to be an important step towards leaving the dollar behind. Now China has taken one step further and included Saudi Arabia in its plan. An important agreement has been reached between China and Saudi Arabia regarding currency. This is called currency swap agreement.

China’s latest agreement with Saudi Arabia is worth US $ 6.93 billion. After this agreement, both the countries will be able to save money and time. Business will also become easier. Know what is currency swap agreement and how it will shake the reign of dollar.

What is currency swap agreement?

This is a financial agreement between two countries. In which both the countries decide the exchange rate of their currency and other things for some time and then the transaction proceeds accordingly. It has been claimed in media reports that this agreement has been made for 6.93 billion US dollars.

This means that the central banks of each other country will be able to keep this much amount with themselves. Whenever China buys oil from Saudi Arabia, it will not have to pay in dollars. He will take his money from the Chinese currency Yuan available in the Central Bank of Saudi Arabia at pre-decided rates. Similarly, Saudi Arabia will not have to pay dollars for importing anything from China. The Saudi currency available with China will take payment at the fixed rate from Riyal. This makes business easier for both.

China has currency swap agreements with 40 countries

This is not the first time that China has made such an agreement. According to international media, till now China has made similar agreements with more than 40 countries of the world. No other country has created such a large economic network till now.

How much effect will be seen?

It is not possible to eliminate the influence of the US dollar within some time, but such small efforts being made by big countries like India and China will not only be helpful in giving independence to these countries economically, but also Dependence on dollar will also reduce. The more such agreements are made with more countries, the more the dependence on the dollar will reduce. As a result, the kingship of the dollar will gradually decline.

For a long time, countries of the world have been using dollars for import and export. Buying and selling could not be done in local currency. The Central Bank of the country does not have to put in any effort to get dollars, but additional money is definitely spent in exchanging them. Such agreements 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 coming to the fore. There is full hope that more such agreements will be seen in the coming days.

India has currency swap agreements with 23 countries

In recent years, India has also paid attention to reducing its dependence on the dollar. Till now India has probably created the second largest network with 23 countries. India first insisted on taking this agreement forward with those countries where trade deficit is high. Meaning, imports from those countries are high and exports are very low. In case of more imports, more dollars have to be arranged.

After this agreement, India is able to make payments in rupees. Most of the oil and gas supplying countries are included in the agreements signed by India. These include countries like Saudi Arabia, United Arab Emirates, Qatar and also countries like Japan, South Africa and Singapore. Such deals are being made between friendly countries for a fixed period and for a fixed currency.

Many countries have shown interest in doing trade with India with their own currencies. This effort is separate from currency swap agreements. Now banks of many countries of the world have opened more than 50 Vostro accounts. Through this also two countries can trade in their own currency. These include influential countries like Russia, Germany, Israel and many small countries are also included in this list.