By P.K.Balachandran/Daily Mirror
Colombo, June 6: Against the backdrop of the 10th Ministerial Conference of the China-Arab States Cooperation Forum in Beijing on May 30, significant meetings took place between Chinese President Xi Jinping and a number of top Arab leaders. Egyptian President Abdel Fattah El-Sisi, Bahrain’s King Hamad bin Isa al-Khalifa, Tunisian President Kais Saied and United Arab Emirates (IAE) President Sheikh Mohamed bin Zayed Al Nahyan were in attendance along with the Foreign Ministers of Arab League nations.
To the delight of his Arab guests, Xi Jinping’s called for a Two-State solution to the Palestinian-Israeli crisis, an immediate ceasefire in Gaza, and Palestinian membership in the United Nations. Xi also announced that China will provide US$ 69 million in humanitarian aid for Gaza and a donation of US$ 3 million to the UN Relief and Works Agency (UNRWA).
But China’s real aim was to further strengthen its economic ties with the Arab world, which are already strong.
Sino-Arab trade is hefty, having surged from US$ 36.7 billion in 2004 to US$ 398 billion in 2023. China has been the Arab world’s top trading partner for long. China also gets most of its oil from this region. China has a tremendous economic and strategic stake in peace in the Arab world because of the Suez Canal and the Red Sea.
According to the US-based Wilson Centre, China’s foreign direct investment in the Arab States is now US$ 23 billion. The Kingdom of Saudi Arabia (KSA) tops the Arab states in trade with China. At the Arab-China Summit in Riyadh, KSA and China signed 34 investment agreements in multiple sectors including green energy, medical industries, transport, and information technology, among others. KSA and other Arab States are hungry for modern technologies and China is ready to provide these.
Wilson Centre notes that China has signed Belt and Road Initiative (BRI) agreements with all the Arab nations. Under BRI, over 200 large-scale projects have been executed. The Gulf Cooperation Council (GCC) States with their massive sovereign wealth funds, currently valued at US$ 4 trillion, are now becoming an increasingly vital source of finance capital for China.
China has strategic partnerships with 12 Arab countries. Seventeen Arab nations have endorsed China’s Global Development Initiative (GDI). Fifteen are members of the Asian Infrastructure Investment Bank (AIIB), and 14 have participated in the “China-Arab Cooperation Initiative for Data Security.”
Camille Lons, a European researcher, has written in detail on China’s growing relations with KSA and the Gulf States. KSA and the Gulf State have emerged as key drivers of economic development in the Middle East. She points out that the wars in Ukraine and Gaza have reinforced the narrative of a declining West-led order and have fed growing debates in the Gulf about the need to diversify economic and security partnerships.
March 2023 saw China’s successful mediation between sworn enemies KSA and Iran. Debates are increasing around the purchase of oil in renminbi rather than the US dollar.
KSA and the UAE have partnered with Chinese companies on key port and industrial zone projects to reinforce their central position in global trade routes. These projects include a terminal at Khalifa Port in the UAE, and Yanbu, Jizan, and Jeddah ports on KSA’s s Red Sea coast.
Chinese firms are supporting the construction of two of the world’s largest solar-energy projects in the UAE, namely, the Mohammed bin Rashid Al Maktoum Solar Park and the Noor Abu Dhabi solar plant. China’s Silk Road Fund has acquired a 49% stake in the KSA renewable-energy company ACWA Power, Camille Lons states.
In June 2023, KSA signed a US$ 5.6 billion deal with Chinese electric car maker Human Horizons, to establish a research, development, and manufacturing joint venture. In 2022 the Chinese EV start-up Enovate entered a joint venture with the Saudi Sumou Holding to establish a US$ 500 million manufacturing plant.
Two of the Gulf’s most important sovereign wealth funds, the UAE’s Mubadala and the Saudi Public Investment Fund (PIF), want to open offices in China.
The other advantage that the Chinese have in the Arab world is that they do not point to human rights violations in the Arab countries. And the Arab countries in turn remain silent about the persecution of Muslims in Xinjiang.
Security Inroads
China and the Gulf States are expanding security cooperation too. The Chinse navy has gradually increased the number of port calls and has held joint naval exercises in the region. Saudi Arabia conducts annual joint naval exercises with China’s PLA.
Chinese defence companies have started making inroads into the Gulf market largely dominated by Western companies. KSA and the UAE, for example, had purchased a large share of their combat drones from China in the 2010s – the CH4 and Wing Loong – a technology that Western partners are reluctant to sell due to concerns about undermining the Missile Technology Control Regime, (MTCR) Lons recalls.
Since 2017, the UAE and KSA have cooperated with Chinese companies on the joint development and manufacturing of military drones and ballistic missiles in the Gulf.
According to Lons, in 2021, US intelligence indicated that China may be building a secret military installation at the UAE’s Khalifa port in Abu Dhabi. In 2023, there were rumours about a possible establishment of a Chinese base in Oman too.
Security Issues for the West
There could be security issues for the US and the West in some of the Sino-Arab deals in sensitive emerging technologies, Camille Lons points out.
The KSA and the UAE have rapidly expanded their cooperation with Huawei and Alibaba for the development of part of their tech infrastructure, including their 5G networks, smart city applications, and the construction of large data centres.
In September 2023, Huawei launched a new “cloud region” in Riyadh aimed at supporting government services and AI applications. The UAE’s top AI company, G42, which is involved in some of the country’s most strategic high-tech projects, cooperated closely with Chinese companies.
These have raised concerns in the US. The US fears that Gulf countries could serve as weak entry points for China to access sensitive US technologies.
“For instance, the Saudi and Emirati research institutes involved in AI research have purchased a large quantity of US-produced Nvidia chips, whose export to China is restricted.””
“American policy circles also fear that widespread Chinese tech equipment in the Gulf’s digital infrastructures could be used for intelligence gathering purposes given the US’ close military partnership with the Gulf states,” Lons says.
Chinese companies are cheaper and do not make a fuss about technology transfers, which enable Gulf companies to bargain with Western providers.
West’s Advantages.
However, all is not lost for the West, Lons asserts. Gulf companies continue to prefer cooperation with Western companies, as they are seen as being more innovative and prestigious.
“Europe and North America continue to represent by far the main source of foreign investment in the region. They are also by far the main destinations for Gulf investments abroad. Europe’s foreign direct investment in Saudi Arabia is ten-times greater than that of China. In cutting-edge sectors, Gulf tech companies continue to favour partnerships with Western companies.”
“In May 2024, the head of the US$ 100 billion Saudi investment firm Alat, specialised in AI and semiconductors, said in an interview that if demanded by the US, the fund would divest from China. Gulf states’ sovereign wealth funds have invested heavily in American and European companies.”
Additionally, despite current debates on de-dollarization, the Gulf States have no interest in shifting dramatically to the renminbi and increasing their dependence on what is still an opaque financial system, Lon points out.
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