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RIYADH: As of 2020, China has replaced the EU as the Gulf Cooperation Council’s largest trading partner. Saudi Arabia was China’s top crude oil supplier in 2021. Its neighbor, the United Arab Emirates, has become an important platform for Chinese goods to be re-exported to the region and Africa.

In addition, Qatar has become a major supplier of natural gas to China.

“There is a very strong China moment in the GCC that has been built over the past 15 years of (trade) relations,” Mohammed Al-Sudairi, head of the Asian Studies program at the King Faisal Center for Research and Islamic Studies, told an interview with Arab News.

He pointed out that the general sentiment across the GCC is that relations with China are much more important than before “as it has become a top bloc-level partner.”

According to Robert Mogielnicki, Senior Resident Scholar at the Arab Gulf States Institute in Washington, China also plays a key role in developing the region’s non-oil sectors.

The researcher believes that there are strong complementarities between China and the GCC in many sectors. These include tourism, telecommunications, artificial intelligence, smart cities, and renewable energy, among other technology-driven industries.

Reciprocity, mutual understanding and predictability are the most important aspects of the GCC-China relationship, Tang Tianbo, a research fellow at the China Institute of Contemporary International Relations, known as CICIR, said in an interview with Arab News.

“win-win relationship”

“GCC is vital to China’s energy security, while China provides GCC with a stable export market. It’s a win-win relationship,” he said, adding that the GCC and China never impose anything on each other.

“Both sides recognize and defend each other’s independence and their own decisions,” said the Chinese researcher, calling the relationship “pragmatic, stable and steadily growing.”

“It’s very valuable in a world of uncertainty,” Tianbo said.

GCC member states are also competing with each other to capture Chinese trade and investment flows into the region, Al-Sudairi explained.

While the United Arab Emirates has been at the forefront since 2004, other GCC member states have followed suit, linking their national development plans to China’s Belt and Road Initiative, also known as the BRI.

He added that they have developed Jazan in Saudi Arabia, Duqm in Oman and Silk City in Kuwait as key areas for Chinese companies to do business, and have spread Chinese trade and investment to the Middle East and East Africa.

“China’s Digital Silk Road seamlessly intersects with technology-led development plans across the Gulf, but especially in places like Saudi Arabia, the United Arab Emirates and Qatar,” Mogielnicki said in an interview with Arab News.

He pointed out that these governments and their state institutions have significant financial resources and have been tasked with the rapid growth of the digital economy. “Chinese firms are willing partners offering low-cost, high-quality services that can be completed in a short time,” Mogielnicki added.

Tianbo stressed that China can bring added value to the GCC in terms of e-commerce, Industry 4.0 and new energies, among others. “China and the GCC can work together in areas where China has a competitive advantage and the GCC has an interest.”

economic transformation

The CICIR researcher explained that China’s technology and manufacturing facilities can contribute to the economic transformation of the GCC and create more non-oil industry jobs.

Sovereign wealth funds are also strengthening China-Gulf ties.

For example, Mubadala of Abu Dhabi, China Development Bank Capital and China’s State Administration of Foreign Exchange set up a US$10 billion joint UAE-China investment fund in 2015.

Nevertheless, bilateral relations still face many challenges.

The GCC has failed to fully integrate into China’s Belt and Road Initiative.

However, Mogielnicki said, “It’s not so much that the BRI has failed to expand into the GCC, but that the GCC is not quite a central component or ultimate destination of the BRI’s primary economic corridors.”

There are certain projects and initiatives in the GCC that are flagged as part of the BRI. However, the research scholar said he is skeptical that the BRI will bring economic bounty to the region in the years to come.

“It is important to remember that the BRI emerged in the context of growing economic ties between China and the Gulf – it was not the starting point for strong economic ties,” he added.

The Gulf region continues to lack economic diversification, despite government efforts to do so.

In the GCC, the oil and gas sector still dominates the economy and represents a large part of the countries’ revenues. This creates an indirect dependency on China as it is considered a large energy consumer.

Most Gulf States depend on different trading partners for crude oil exports. However, Oman is highly dependent on China, which has bought 83 percent of Oman’s oil supplies in the first half of 2021, according to Mogielnicki.

He explained that strength in the bilateral relationship ultimately comes from diversification – primarily through diversification of trade flows or foreign investment.
“Gulf Arab economies would benefit from a more diversified mix of exports – beyond hydrocarbon commodities – to China. Gulf officials and businesspeople also want to see more Chinese investment in non-oil areas of their economies,” Mogielnicki added.

Chinese capital

Additionally, attempts to attract Chinese capital have not gained momentum as the Middle East has managed to attract only 2 to 3 percent of Chinese investment over the past decade.

For Tianbo, the GCC is perceived as a high-end market with significant purchasing power, a keen desire for new products, and intense competition.

“Companies must try to offer their best products and services in order to be successful. Compared to western countries, China is a laggard in the GCC and there is much to learn and adapt,” the researcher concluded.

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