The Prince’s Smile to China
The expansion of Gulf investments in China in recent years is a result of precise planning and strategic foresight.
Gulf investments in China have significantly increased in recent years due to strategic partnerships and mutual economic interests.
This expansion is not a mere accident but the result of precise planning and strategic foresight.
For Saudi Arabia and other GCC countries, continuing economic diversification programs is an absolute priority in their policy planning. China and many Asian countries are considered vital components of these visionary programs that are being realized.
The six GCC member countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—collectively and separately, with a total trade volume of $315.8 billion in 2022, are among China’s largest trading partners in the Middle East. The GDP of the GCC countries is $24 trillion, while China’s has reached $17.7 trillion.
The GCC countries are the ninth-largest economy in the world, while China is the second-largest, guiding cooperation between the two regions for the global economy.
Comprehensive strategic partnerships, multilateral action programs, joint initiatives, and perhaps soon a China-GCC free trade agreement strengthen this upward trajectory.
During the China-GCC Industry and Investment Forum held on May 23, 2024, in Xiamen, President Xi Jinping stated that deepening industrial and investment cooperation between GCC countries and China will help align the Belt and Road Initiative with the development strategies, visions, and programs of the GCC countries.
Chen Wei Qing, the Chinese ambassador to Saudi Arabia, stated that about 90% of the conditions for free trade negotiations between the GCC countries and China have been agreed upon.
Both sides have made progress on this agreement, and the first session of the China-GCC Economic and Trade Ministers’ Meeting was held after ten rounds of meetings and technical negotiations in Guangzhou in October 2023.
Additionally, the value of Gulf companies’ acquisitions and investments in China increased by more than 1000% year-on-year, reaching $53 billion in 2023, with most of this growth at the corporate level and in joint petrochemical projects.
At the tenth Arab-China Business Conference held in June 2023 in Riyadh, it was noted that China is set to receive between $1 to $2 trillion in investments from the Gulf Sovereign Wealth Funds by 2030, as their focus is on Asia, particularly China. In this context, Saudi Arabia’s Minister of Investment, Khalid Al-Falih, emphasized that economic relations between China and the Arab world, especially with Saudi Arabia, are growing, and there is room for further growth, particularly in capital market relations between Beijing and Riyadh.
Acquisitions by GCC countries in China increased to over $23 billion in 2023, compared to $100 million the previous year. Sheikh Mohammed bin Zayed Al Nahyan, President of the United Arab Emirates, visited China on May 30, 2024, to attend the China-Arab Cooperation Forum.
This visit was made on the occasion of the 40th anniversary of the establishment of diplomatic relations between the two countries within the framework of a comprehensive strategic partnership between the UAE and China.
The number of Gulf institutions applying for and receiving Qualified Foreign Institutional Investor (QFII) certificates increased from three to nine in the years 2021-2022, surpassing the gradual and upward trend of previous GCC Public Investment Fund investments in China.
Although the Saudi Public Investment Fund entered the Chinese stock market in 2016 through its partnership with SoftBank due to its ambitions and global reach, it has now begun to deploy capital directly in China.
In February 2022, the Saudi Public Investment Fund (PIF) opened an office in Hong Kong, indicating its intention to deepen its ties with Beijing. The Saudi Tadawul Group, which oversees the Saudi stock exchange, is reportedly in initial talks about cross-listing with the Hong Kong, Shanghai, and Shenzhen stock exchanges next year.
Such agreements may facilitate access for Gulf public investment funds and other GCC-based public and private funds to the Chinese stock market.
These efforts indicate a broader trend where Gulf countries are diversifying their investment portfolios and reducing reliance on fossil fuels. By targeting sectors with high growth potential, these investments not only seek financial returns but also aim to foster innovation and economic diversification in both regions.
The GCC’s ambitions to develop clean energy opportunities further link the region to China, considering Beijing’s dominant global role in the clean energy supply chain, with a significant share in lithium batteries and wind energy production.
According to UN statistical data, China’s lithium battery exports to the GCC increased by 99% between 2021 and 2022, with a 26% growth in the first three quarters of 2023.
The market opportunity in renewable energy stems from national visions and the GCC’s efforts for economic diversification.
Chinese companies, attracted to the Gulf countries like Saudi Arabia by shifting traditional state project models to public-private partnerships, claim that the participation of Chinese businesses creates significant social benefits.
The determination of GCC countries to expand trade and economic relations with China will undoubtedly be influenced by US-GCC relations. However, despite current US suggestions that expanding GCC-China relations could have consequences, GCC countries will continue to develop their ties with China.
Indeed, the growing economic relations between the Gulf and China indicate an upward trajectory in global investment patterns, where traditional Western-centric investment strategies are complemented by Asian and Middle Eastern partnerships. These collaborations are expected to play a significant role in shaping the economic landscape of both regions in the coming years.
However, Gulf investments in China should not be seen as a strategic pivot away from other regions but as an effort to enhance the GCC’s focus on Asia.
This trend is characterized by mutual interest in economic diversification and high-growth sectors. The rationale behind these investments is not merely capitalizing on the strong growth potential of Asian markets, especially China, but also strengthening a mutually beneficial bilateral relationship.
This approach allows Gulf investors to capitalize on new opportunities in rapidly developing industries and foster innovation and economic growth on both sides.
While there has always been a gradual upward trajectory in the scale and diversity of Gulf fund investments and increasing engagement with the Chinese stock market, particularly in technology and other emerging sectors aligned with Gulf interests, it is important to note that this does not indicate a transformation in China-Gulf relations.
Instead, the increasing complexity of their economic relations reflects a broader global shift towards Asia as a vital economic hub.
Gulf investments in China, rather than indicating a strategic realignment, represent a natural progression towards deepening economic ties with a region that is increasingly influential in the global economy.
Overall, Gulf investments in China demonstrate a pragmatic approach to leveraging growth opportunities in Asia while maintaining a balanced global investment strategy, paving the way for a promising future for global economic relations.
