* 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
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