* Reserve diversification into yuan would be good for Saudi
Arabia
* Banks’ loan exposure to big corporates not a concern
* Replacing expatriate jobs to be gradual, not to disrupt
economy
By Martin Dokoupil
RIYADH, May 22 (Reuters) – Saudi Arabia would benefit from
diversifying of its large foreign currency reserves into the
Chinese yuan, the OPEC state’s economy and planning minister
said, adding the exposure of the kingdom’s banks to large
corporates was not a concern.
“We need more diversity in international reserve currencies.
And with the (Chinese) economy, which is now the (world’s)
second largest, it is unnatural that their currency is not a
major participant in the foreign exchange market,” Muhammad
al-Jasser told Reuters on Tuesday from the sidelines of a
financial conference in the Saudi capital.
Asked whether it was a good idea for Saudi Arabia to
diversify its vast foreign asset reserves of $561 billion into
the yuan, Jasser, a former central bank governor, said: “What’s
good for the world is good for Saudi Arabia.”
The world’s No.1 oil exporter is, like most of its Gulf Arab
neighbours, a major holder of dollar assets as its riyal
currency is pegged to the dollar, and crude accounts for around
85 percent of its budget revenue.
Saudi Arabia, which is the only Middle Eastern member of the
G20 group of developed and emerging economies, and its central
bank (SAMA) rarely comment on the reserve strategy.
China has signed a series of currency swap agreements in
recent years with key trading partners to boost the use of the
yuan for the direct settlement of international trade.
Saudi Arabia’s neighbour United Arab Emirates signed in
January a currency swap agreement with China worth $5.5 billion
to boost trade and investment. Its central bank said in March
including yuan into official reserves was long-term issue.
In April, China imported 1.07 million barrels per day of
crude oil from Saudi Arabia, its biggest source of oil imports,
14 percent higher than a year earlier and 15 percent higher than
in March, Chinese customs data showed.
Saudi exports to China, including oil, have soared over the
past two decades to 112.2 billion riyals ($29.9 billion) in 2010
from as little as 346 million in 1991, while imports jumped to
46.9 billion riyals from mere 2.3 billion over the same period.
Chinese Premier Wen Jiabao pressed Saudi Arabia on his
January visit to Riyadh to open its huge oil and gas resources
to expanded Chinese investment.
LARGE CORPORATES
The International Monetary Fund recommended to Saudi Arabia
in April to tighten regulation and supervision of banks’ large
loan exposures to big corporate groups despite decent overall
capitalisation.
But Jasser said such exposures were not a source of concern
in the kingdom — at $577 billion the largest Arab economy:
“When I was at SAMA, I was not worried about the exposure.”
“When they say big corporates … they are more or less like
government entities that have a very low debt and are doing
great,” said Jasser, who left the central bank to head the
economy and planning ministry in December.
“I do not think it should raise any sort of concerns for
supervisors or international rating agencies,” he said.
The main impact of the 2008 global credit crunch on the
Saudi financial system came through banks’ exposure to defaults
by two large family conglomerates in 2009, which caused
widespread bank losses. Large corporate groups are prominent in
the Saudi economy.
Jasser also said that creating jobs, which match the skills
of the local population, was a “serious” challenge, speaking
after the country’s deputy labour minister told the conference
the kingdom was seeking to replace part of its foreign workforce
with Saudi citizens.
“We have created eight million jobs, but we gave them to
somebody else. So it will be a gradual, methodical substitution,
nothing to disrupt the economy and the lives of those
expatriates because they are our guests, we invited them and we
care about them,” Jasser said.
“But in the final analysis, our citizens have to get the
jobs,” he said.
Foreign workers account for nine out of 10 private sector
jobs in the desert kingdom and the government is introducing a
range of initiatives to regulate the labour market with a goal
of getting more of some 19 million Saudis into work.
(Reporting by Martin Dokoupil; editing by Ron Askew)
