In November 2024, a quiet but deeply symbolic financial event took place in Riyadh. The Chinese Ministry of Finance issued $2 billion in U.S. dollar-denominated bonds, its first such international debt sale in three years, not from the traditional financial centers of New York or London, but from the heart of Saudi Arabia.
At first glance, there was nothing revolutionary. The bonds were denominated in dollars, structured by global banks, and carried coupon rates close to U.S. Treasuries. But the implications are profound. More than just a debt sale, it was a clear geopolitical signal. It marked the embryonic phase of a new financial geography, one where China and the Gulf states begin to rewire the dollar-based system to serve their own strategic ends.
The popular narrative is “de-dollarization,” but this is not about abandoning the dollar – at least not directly. It’s about reclaiming the dollar from the empire that built it. And in doing so, it may reshape not just global power, but domestic economics in the United States.
The Petrodollar System: Empire’s Engine
Since the 1970s, the petrodollar system has underpinned U.S. global power. The arrangement was simple: OPEC, led by Saudi Arabia, would price oil in dollars. In return, the United States would offer military protection and political cover. The dollars earned from oil exports would then be recycled into U.S. capital markets, primarily in the form of Treasury bonds and other financial assets. This kept U.S. interest rates low, asset prices high, and deficits perpetually funded.
It also meant that the U.S. could export inflation, borrow limitlessly, and finance both military hegemony and a bloated financial sector with little cost to its elites. The “exorbitant privilege” was not just a monetary quirk, it was a global class system backed by warships and liquidity.
China’s Financial Foray into Riyadh
So what does it mean when China, the world’s second-largest economy and the de facto leader of the Global South, starts issuing dollar bonds in Saudi Arabia?
It’s a subtle, potent challenge to U.S. financial dominance—not by replacing the dollar, but by displacing the U.S. as the center of its gravity. Rather than borrowing in New York, China is borrowing in Riyadh. Rather than clearing through Western channels, it is building a parallel capital infrastructure between Asia and the Gulf. This weakens U.S. jurisdiction, reduces the reach of its sanctions apparatus, and lays the groundwork for a more multipolar financial order.
Saudi Arabia, for its part, gains a strategic foothold in this emerging system. The kingdom is rapidly diversifying its financial relationships as part of Vision 2030. Hosting dollar issuance by China makes Riyadh more than an oil hub; it becomes a capital allocator in its own right. And by creating a regional debt market anchored by both Chinese borrowers and Gulf investors, Saudi Arabia can shift from being a passive petrodollar recycler to an active financial player in a Sino-centric world.
When the Borrower Outpaces the Banker
One of the most remarkable features of China’s Riyadh bond issuance was the cost. The bonds were so well received (oversubscribed nearly 20 times) that their yields landed just 1–3 basis points above U.S. Treasuries. In effect, China was able to borrow dollars more cheaply than the U.S. government.
This inversion of financial logic, where a supposed geopolitical rival borrows at a lower cost than the world’s reserve currency issuer, shocked many in the financial world. It points to growing confidence in China’s creditworthiness, its macroeconomic stability, and its strategic maturity as a borrower. But more importantly, it underscores the emergence of a dollar ecosystem no longer controlled by the United States.
This shift is more than symbolic. It erodes the traditional hierarchy of the dollar system, one where the U.S. sits at the top, both as issuer and gatekeeper. If other countries, especially non-Western powers like China, can source dollar liquidity outside of Washington’s reach, it dramatically reduces the leverage of U.S. sanctions, export controls, and financial warfare.
And if investors prefer Chinese debt over U.S. Treasuries in certain contexts, it reflects something deeper: a loss of faith in U.S. fiscal discipline, geopolitical coherence, or perhaps even the long-term sustainability of American financial dominance.
The Paradox: Who Really Loses When the Dollars Stay Away?
From the perspective of U.S. geopolitical strategy, this fragmentation is a loss. The U.S. state loses its ability to compel allies through dollar liquidity. Sanctions become less effective. Treasury demand becomes more localized. And the world’s largest borrower, the U.S. federal government, may soon face higher costs of capital if foreign buyers dry up.
But for the average American? The picture is more complicated, and arguably more optimistic.
The traditional petrodollar recycling process didn’t just finance deficits, it also inflated financial assets. Trillions of surplus dollars from Asia and the Gulf flowed into Wall Street, fueling a relentless rise in equities, bonds, real estate, and speculative assets. This capital surge disproportionately benefited the investor class, while pricing ordinary Americans out of homeownership, local land, and urban housing.
In short, Wall Street got rich; Main Street got priced out.
If foreign capital stops flowing back into U.S. markets, if those dollars instead circulate in Riyadh, Singapore, or Shanghai, it could depress asset bubbles in the U.S. It might mean lower real estate prices, more modest equity valuations, and a return to fundamentals in American capital markets. For wage earners and renters, this could be a net benefit. For hedge funds and leveraged landlords, it’s a threat.
Will the Fed Just Print More?
There is, of course, a counter-risk. If foreign investors no longer soak up U.S. debt, the Federal Reserve may face pressure to step in as buyer of last resort. This could mean more money printing, more balance sheet expansion, and a return to inflationary pressures. But even here, the dynamics are not straightforward.
If that liquidity flows into wages and industrial investment, it could strengthen the real economy. If it flows back into financial speculation, we return to the same cycle of elite enrichment.
Either way, the U.S. will be forced to internalize the costs of its own deficits, something it has avoided for half a century thanks to petrodollar recycling. That reckoning may be painful for policymakers and asset holders. But it could also mark the beginning of a more grounded, less extractive economic model.
Conclusion: Empire vs. Nation
China’s bond issuance in Riyadh is not a revolution. But it is a reorientation, a pivot away from U.S.-centric finance and toward a multipolar, negotiated dollar system. This challenges U.S. imperial privilege, yes. But it may also erode the financial distortions that have gutted the American middle class.
In decoupling from the global petrodollar feedback loop, the U.S. might lose its empire, but recover its nation.
The question now is: which one do Americans want?
Frank Levine is a writer and analyst specializing in Israeli politics and Middle Eastern geopolitics. He holds a master’s degree in International Relations and Public Policy from Tsinghua University, where his research focused on great power competition and regional security dynamics. Drawing on extensive fieldwork and deep regional insight, Levin writes with a sharp eye for power, sovereignty, and the strategic fault lines shaping the modern Middle East
