Xi hosts Arab leaders as China-Mideast ties widen beyond trade
PRESIDENT Xi Jinping will meet Arab leaders this week seeking deeper ties in a region where China does plenty of business – and increasingly diplomacy, too.
Xi will address the China-Arab States Cooperation Forum in Beijing on Thursday (May 30) with heads of state from Egypt, the United Arab Emirates, Bahrain and Tunisia among the attendees. Talks will likely focus on fast-growing trade and investment, and regional security concerns amid the Israel-Hamas war.
As the Biden administration backs Israel in the conflict, China sees eye-to-eye with Arab nations, supporting an immediate cease-fire and recognition of a Palestinian state. That alignment is helping Beijing to extend its political sway in countries that until recently saw China chiefly as an economic partner – and win new allies in its global contest for influence with the US.
Xi’s visit to Saudi Arabia in late 2022 was hailed as a landmark by both countries. Last year, China followed up by brokering a surprise accord between the kingdom and Iran, the Islamic world’s biggest rivals. The detente has held up even amid the strains caused by the Gaza war, and there are signs it’s been followed by an acceleration of investment between China and the Middle East.
State oil firm Saudi Aramco is in talks to buy a US$1.5 billion stake worth in a Chinese petrochemical firm, while carmaker China FAW Group is part of a push to make electric vehicles (EVs) in Egypt. UBS analysts estimate that growing Chinese ties to the Middle East could add more than US$400 billion to global energy-related trade by 2030.
“China is developing soft power in the region,” said Shirley Yu, director of the China-Africa Initiative at the London School of Economics.
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On top of commercial ties that fit the needs of both sides, she said, “the relationship extends to mutual political support at the existing US-led global institutions” – as well as new ones such as Brics, which China co-founded. Egypt and the UAE joined the group this year, and the Saudis are weighing a similar move.
Outlining the meeting’s agenda at a briefing on Monday, Chinese Vice Foreign Minister Deng Li cited a tenfold increase in trade with the Middle East over the past two decades.
For Beijing, the crucial import is oil. China gets more than one-third of its crude from members of the six-nation Gulf Cooperation Council, with the lion’s share coming from Saudi Arabia.
In overall trade, the UAE – even though its economy is only half the size of Saudi Arabia’s – has become a bigger partner for China.
The UAE plays a “key role in the Belt and Road Initiative” – Beijing’s global infrastructure drive – and has more than 6,600 Chinese brands registered in the country, Bloomberg Intelligence wrote last week. Through the end of 2022, which is as far as Beijing’s official data goes, the UAE had gotten about US$12 billion in Chinese direct investment – four times as much as the Saudis.
The picture may have changed last year. Saudi Arabia attracted US$16.8 billion in greenfield investment from China in 2023, including in the auto and semiconductors industries, Arab News reported in April citing a study by the Dubai-based bank Emirates NBD.
While China’s economic and diplomatic weight in the region are rising, the US remains the key security partner for Gulf Arab states. It has major military bases in countries such as Bahrain and Qatar, and supplies defence technology.
Washington is also pursuing a new defence accord with Saudi Arabia that’s supposed to be part of a wider regional realignment in which the Saudis would grant diplomatic recognition to Israel.
That project could slow China’s commercial advance in the Middle East by raising hurdles in high-tech sectors with a security element. There are signs that the US is pressing Gulf firms to cut ties with Beijing in such fields.
The UAE’s top artificial intelligence (AI) firm, G42, recently agreed to divest from China and pivot to American technology, signing a US$1.5 billion accord with Microsoft. Saudi Arabia’s US$100 billion AI fund signalled it’s willing to do the same.
“The Gulf is moving from strategic hedging in the tech sphere to strategic alignment with the US,” said Ahmed Aboudouh, an associate fellow at UK thinktank Chatham House who also heads China research at the UAE’s Emirates Policy Center.
Still, there will be plenty of other industries where Gulf countries will welcome a wider partnership with Beijing, Aboudouh said, including renewable energy, EVs and infrastructure investments.
That fits a wider global pattern. The main Gulf economies exemplify a reluctance among many emerging-market nations – from East Asia to Latin America – to get caught up in a Cold War between the US and China. They’d prefer to keep the doors open, and the money flowing, with both sides.
Saudi Arabia “will not put all its eggs in one basket”, said Hongda Fan, a professor of Middle East studies at Shanghai International Studies University. “Saudi Arabia’s defence cooperation with the US will not come at the expense of its relationship with China.” BLOOMBERG
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