Saudi Arabia may seek funding in Chinese yuan

A handout picture by the Saudi Royal Palace on August 24, 2017 shows Saudi Crown Prince Mohammed bin Salman (R) meeting with the China's First Vice- Premier Zhang Gaoli in Jeddah. Saudi Arabia is considering funding itself partly in Chinese yuan, a senior Saudi official said on Thursday. (Saudi Royal Palace / Bandar Al-Jaloud via AFP)
Updated 25 August 2017
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Saudi Arabia may seek funding in Chinese yuan

JEDDAH: Saudi Arabia is willing to consider funding itself partly in Chinese yuan a senior Saudi official said on Thursday, raising the possibility of closer financial ties between the two countries.
The Saudi government has started borrowing tens of billions of dollars abroad in the past year to cover a big budget deficit caused by low oil prices, but its foreign bond issues and loans have been denominated entirely in US currency.
Obtaining some funds offers more financial flexibility and would mark a success for China, the biggest market for Saudi oil, in its drive to make the yuan a top international currency.
“One of our main objectives is to diversify the funding basis of Saudi Arabia,” Vice Minister of Economy and Planning Mohammed Al-Tuwaijri told a Saudi-Chinese conference in Jeddah.
“We will do that through access to investors or bodies of liquidity in the markets. China is by far one of the top markets. We will also access other technical markets in terms of unique funding opportunities, private placements, panda bonds and others.”
Tuwaijri added: “We will be very willing to consider funding in renminbi and other Chinese products, and Industrial and Commercial Bank of China and other divisions have shown interest for us to do that.”
Panda bonds are yuan-denominated bonds from non-Chinese issuers which are sold within China. An Liyan, chief executive of ICBC International, an arm of ICBC, the biggest Chinese bank, told the conference that her bank was willing to sponsor Saudi issues of panda bonds.
Tuwaijri said Riyadh was interested in raising money abroad not just to cover its budget deficit but also, more importantly, to finance major investment projects that would expand its economy and create jobs.
“Ideally, we would be funding through project finance and bond markets and other means,” he said.
Saudi Energy Minister Khalid Al-Falih told Reuters on the sidelines of the conference that Saudi Arabia and China planned to establish a $20 billion investment fund on a 50:50 basis.
“It is preliminary at this stage but the commitment from the top is there,” Falih said. He said the fund would invest in sectors such as infrastructure, energy, mining and materials, but did not give further details of its strategy.
China has announced plans to establish such joint investment funds around the world in recent years as a way to cement bilateral economic ties. In December 2015 Beijing said it would establish a $10 billion fund with the United Arab Emirates, and last October a plan for a fund with France was revealed.
The Jeddah conference followed a visit to China by King Salman in March during which as much as $65 billion of business deals were signed in sectors including oil refining, petrochemicals, light manufacturing and electronics.
Falih said on Thursday that he expected 11 business deals worth about $20 billion to be signed with China this week. He did not give details; some of the deals may be more detailed versions of agreements reached on the Asian tour, and some may be memorandums of understanding rather than concrete projects.
Saudi Arabia is keen to attract Chinese investment to new industries, such as manufacturing and tourism, that it hopes to develop as part of efforts to diversify its economy beyond oil exports.
But Riyadh is also eager to boost the profits of its main sovereign wealth fund, the Public Investment Fund, which is believed to have around $180 billion of assets. The PIF is looking at investment opportunities in China’s shipping and transport systems and other infrastructure, Tuwaijri said.


Dubai schools allowed to raise fees after last year’s freeze hit GEMS listing

Updated 4 min 18 sec ago
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Dubai schools allowed to raise fees after last year’s freeze hit GEMS listing

  • UAE authorities fixed the fees in hopes of stimulating the economy
  • The maximum increase for next year will be 2.07 percent for 90 percent of the schools

DUBAI: Dubai will allow a modest increase in school fees for the majority of students in the 2019-2020 academic year, the government said, after last year’s freeze triggered a delay in the London listing of a major school operator.
The move is likely to provide some reprieve for private investors such as private equity firms, who own most of the schools in the country, a Gulf Arab state that acts as a Middle East hub for international companies.
Last year’s move to freeze Dubai school had hit the initial public offering of Blackstone-backed, Middle East-focused education company GEMS, Reuters had reported, citing sources. The London listing was delayed after authorities in Dubai unexpectedly decided to freeze tuition fees, meaning the company’s financial forecasts had to be adjusted, they said.
Dubai’s move last year to freeze school fees came amid a number of other measures to cut costs in a bid to stimulate the economy that has been hurt by a downturn in property prices.
The Dubai government said it will allow an increase in school fees for 90 percent of students by a maximum 2.07 percent from the 2019-2020 academic year.
Sheikh Hamdan bin Mohammed bin Rashid Al-Maktoum, the crown prince and son of Dubai’s ruler, approved the new framework where the Dubai School Inspection Bureau will assess the quality of education in each school against its index and rank them accordingly.
Schools in which the quality of education is declining according to the government’s index will not be allowed to increase their fees.
Only 10 percent of the students in Dubai will have their fees increased by more than 2.07 percent, it said.