BRI’s trade promises bode well for Chinese-Gulf relations

As GCC members look to diversify their economies, synergies between the BRI and the Arab Gulf’s economic futures are becoming more apparent.
Saturday 06/07/2019
A key partner. UAE Prime Minister Sheikh Mohammed bin Rashid al-Maktoum (L) and Chinese President Xi Jinping during a meeting at the Diaoyutai State Guesthouse in Beijing, April 25. (AFP)
A key partner. UAE Prime Minister Sheikh Mohammed bin Rashid al-Maktoum (L) and Chinese President Xi Jinping during a meeting at the Diaoyutai State Guesthouse in Beijing, April 25. (AFP)

DUBAI - China’s Belt and Road Initiative aims to redraw trans-regional trade in the decades ahead by creating a network of integrated infrastructure and create unprecedented connectivity between countries and revive trade routes of the ancient “silk roads.”

China’s financial and political investment into the Belt and Road Initiative (BRI) can be seen as a reflection of both the scale of China’s economic rise and its ambitions. The BRI is said to include 70 countries and make up two-thirds of the world’s population and 40% of global GDP.

With China already the Gulf Cooperation Council’s largest trading partner, all six members of the bloc — Saudi Arabia, the United Arab Emirates, Bahrain, Kuwait, Oman and Qatar — have been enthusiastic in signing up for the BRI. China’s economic rise has been lucrative for the region. Since 2000, China-Gulf Cooperation Council (GCC) trade has grown more than five-fold and Chinese investment in the GCC is estimated at more than $90 billion.

Traditionally, GCC ties with China had been built through oil and petrochemical exports to Beijing’s energy-intensive industries. While energy cooperation has evolved much more strategically, there is a more diverse range of goods and services that China is relying on from the Arab Gulf.

As GCC members look to diversify their economies by cultivating non-oil sectors and as their cash-strapped sovereign wealth funds seek new investment opportunities, synergies between the BRI and the Arab Gulf’s economic futures are becoming more apparent.

With energy demand from the BRI region expected to increase 50% by 2040, ties between China and its key energy partners in the Arab Gulf are poised for sustained growth.

Saudi Arabia is investing billions in refineries and petrochemical facilities in China as well as taking a larger role in the China-Pakistan Economic Corridor, which is one of BRI’s most important components.

Saudi Arabia is implementing its ambitious Vision 2030 just as China is consolidating the first phase of its BRI master plan. With almost $100 billion in deals between Saudi Arabia and China the past two years and trade increasing by one-third in the past year, trend lines point to a new strategic embrace on both sides.

When Saudi Crown Prince Mohammed bin Salman bin Abdulaziz visited China this year, Chinese President Xi Jinping spoke of the need for the two partners to “speed up the signing of an implementation plan on connecting the Belt and Road Initiative with Saudi Vision 2030.”

Beyond energy cooperation, the GCC has established itself as a key logistics and export gateway for Chinese businesses and is seeing an influx in Chinese tourists.

The United Arab Emirates is China’s most important regional trading partner; Dubai acts as a key gateway for Chinese goods heading across the Middle East, North Africa and continental Africa. Officials predict China-UAE bilateral trade will reach $70 billion by next year.

To support bilateral trade growth, the Emirates and China introduced reciprocal on-arrival visas and 875,000 Chinese tourists visited Dubai last year.

At the Belt and Road Forum in China in April, the United Arab Emirates signed agreements valued at $3.4 billion that reinforce Dubai’s position as a global logistics and trans-shipment hub for China.

Chinese wholesale company Yiwu plans to build a 5.6 million sq.metre traders market and a logistics hub at Jebel Ali Port. Another $1 billion has been earmarked for a food manufacturing and processing plant that processes, packs and exports animal, marine and agricultural products.

The agreements demonstrate how Dubai’s strategic location, modern infrastructure and international expertise retain long-term appeal in China’s plans.

China’s BRI is, however, as equally focused on new infrastructure as it is on exploiting the full potential of existing infrastructure. Saudi Arabia’s Jizan Port, Abu Dhabi’s Khalifa Port and Oman’s Duqm Port, together with Egypt’s Said Port, are expected to be part of the Industrial Park-Port Interconnection project announced by China, which would link supply chains in industrial parks being developed in those cities.

Looking ahead, Beijing has indicated its keenness in joining forces with regional partners to create a rail network to boost connectivity in the Arabian Peninsula and North Africa.

The GCC has had a regionally integrated rail network in the pipeline for years, which China aims to revive. China Railway Construction Corporation recently completed the Haramain High Speed Railway in Saudi Arabia and is working on constructing the four-line Mecca Metro.

With BRI’s overarching, potentially all-encompassing scope it is difficult to quantify the range of feeder projects it involves or to dissect between its various layers in the Arab Gulf or indeed the wider region.

Yet the synergies between China’s BRI and the GCC region’s own development agendas appear to be deepening, driven by a broadening set of emerging trade and investment interests.