Saudi Arabia and UAE emerge as pivotal partners in China’s trade and investment

Ten years after the launch of China’s Belt and Road Initiative (BRI) in 2013, relations between China and the two main Gulf Cooperation Council (GCC) powers – Saudi Arabia and the United Arab Emirates – have developed far beyond the oil trade to embrace a wide range of new sectors.

Trade data over the past six years illustrates this shift. China and the Middle East traded USD507.2 billion of goods in 2022, which was double the level traded in 2017. China’s trade with the Middle East rose 27% in 2022, far surpassing the 15% growth of trade with Southeast Asian nations, and the 5.6% and 3.7% growth with the EU and the US respectively.

In the context of China’s BRI, Saudi Arabia and the UAE have partnered with Chinese companies on key port and industrial zone projects to reinforce their central position on global trade routes. These projects include a terminal at Khalifa Port in the UAE, as well as Yanbu, Jizan and Jeddah ports on Saudi Arabia’s Red Sea coast.

Saudi Arabia, the world’s largest oil exporter, is seeking foreign funding for its ambitious economic transformation and plans to become an industrial hub in the Middle East, while the region is gaining appeal for Chinese companies that want to explore overseas markets in the face of growing trade barriers with the US.

China is involved in some of the Gulf’s biggest renewable energy projects. Chinese firms are supporting the construction of two of the world’s largest solar-energy projects in the UAE – the Mohammed bin Rashid Al Maktoum Solar Park and the Noor Abu Dhabi solar plant. China’s Silk Road Fund also acquired a 49% stake in the Saudi renewable-energy company ACWA Power, which now serves as the Kingdom’s main investment arm in renewable energy projects across the region.

In particular, Saudi Arabia is seeking cooperation with Chinese companies in the automotive sector, a a key focus of its national industrial strategy, which emphasises developing the car industry and incorporating innovative technologies.

In June 2023, the Saudi government signed a USD5.6 billion deal with Chinese electric car maker Human Horizons to establish a research, development and manufacturing joint venture in Saudi Arabia. Chinese electric vehicle (EV) start-up Enovate also entered a joint venture with the Saudi Sumou Holding in 2022 to establish a USD500 million manufacturing plant in the kingdom.

In September, Saudi’s Minster for Industry and Mineral Resources Bandar Alkhorayef leads a delegation to visit Guangzhou, Hong Kong and Singapore, which is designed to improve relations and explore joint venture opportunities.

The programme in China includes meetings in Guangzhou, capital of the southern Chinese province of Guangdong, with EV maker GAC Group, lithium battery producer General Lithium and communication tech giant Huawei.

“The visit of the delegation to China aligns with our objective to become a key automotive hub in the region and a leader in innovative and eco-friendly vehicle solutions,” said Alkhorayef in a statement.

It added that the talks with Huawei were to discuss opportunities for collaboration in “innovative smart solutions” and leveraging ‘Fourth Industrial Revolution technologies’ (4IR technologies, such as advancements in artificial intelligence, robotics and the ‘Internet of Things’.

“Saudi Arabia aims to attract high-quality investments in 12 promising industrial sectors, including automotive, pharmaceuticals and food, supported by a stimulating investment environment,” the statement said.

“The visit is expected to result in partnerships that [focus] on mutual growth through high-quality investments, sustainable development, and economic diversification, particularly in strategic industrial sectors.”

According to figures from Saudi Arabia’s Ministry of Industry and Mineral Resources, China is Saudi’s biggest trading partner, with trade exceeding USD100 billion in 2023. The data also showed that Chinese investment in Saudi Arabia last year included US5.6 billion in original equipment manufacturing for the automotive industry and USD5.26 billion in the minerals sector, with semiconductor investment amounting to USD4.26 billion.

In Hong Kong, the delegation will meet with the city’s chief executive as well as with Hong Kong’s top industrial leaders and visit Hutchison Ports, Cyberport and Johnson Electric.

In Singapore, the Saudi delegation the delegation will meet with key government figures, including the Deputy Prime Minister and the Minister of Trade and Industry, and explore opportunities at Tuas Port, the world’s largest automated port. Meetings with A*STAR and the Singapore Manufacturing Federation will further highlight Saudi Arabia’s commitment to integrating advanced technology and automation in its industrial sectors.

“The visit to China by such a senior Saudi Minister further demonstrates the growing relationship between the two countries,” said Sovereign Trust (Hong Kong) Managing Director Alan Fong. “The BRI appears to be bearing fruit, resulting in closer trade links and the substantial investments in Saudi Arabia last year.

“The annual Belt and Road Summit will take place in Hong Kong later this month, and this will further reinforce the commitment from the Chinese Government to improve global trade amongst the participating countries,” he added.

The UAE has also emerged as a pivotal partner in China’s trade and commercial engagements within the Middle East. It is China’s second-largest economic partner in the Middle East, after Saudi.

In 2023, the UAE’s imports from China were valued at USD55.68 billion, while its exports to China amounted to USD39.31 billion. The UAE’s primary exports to China include mineral fuels, oils, distillation products, plastics, organic chemicals, copper and precious stones.

Investment between the UAE and China is also robust, spanning various sectors across logistics, transportation, industry, technology, artificial intelligence, renewable energy and food security. Between 2012 and 2022, Chinese foreign direct investment (FDI) in the UAE reached USD11.88 billion. China is the third largest investor in the UAE, with its FDI constituting 5% of the UAE’s total global FDI inflows by the end of 2020.

The UAE and China have also pursued several joint ventures and projects, particularly in free trade zones and industrial projects. The China-UAE Industrial Capacity Cooperation Demonstration Zone in Khalifa Industrial Zone Abu Dhabi (KIZAD), launched in 2019, has attracted investments from around 20 Chinese enterprises totalling over USD1.6 billion.

The Khalifa Port in Abu Dhabi, part of the KIZAD, serves as a significant hub for Chinese investments. The COSCO Shipping Ports Abu Dhabi Terminal, part of Khalifa Port, serves as the regional centre for China’s global network of ports.

The Dubai Traders Market, developed by Dubai port operator DP World in a joint venture with the Zhejiang China Commodity City Group (CCC Group), aims to give merchants and enterprises access to wholesale pricing with reduced supply chain expenses, aligning the UAE with BRI goals. It includes the Yiwu Market UAE, covering over 200,000 square meters with showrooms and bonded warehouses.