China never really took the GCC region very seriously in the economic sense previously. It simply never considered the Middle East to be one of its strategic and important business and economic partners. The international firm Ernst & Young states that Western Europe and North America still account for most of investments in the Middle East region. However that is quickly changing.
Trade between China and Arab countries reached a whopping figure last year to $222.4 billion, a considerable 14 percent jump from the previous year. Chinese imports were worth approximately $131.1 billion, mainly consisting of hydrocarbons, while Chinese exports to the area were valued at 91.3 billion.
There are serious reasons to think that this is the beginning of something really big. Global consultants McKinsey and Company predicts that bilateral trade between China and the Middle East will climb sharply to reach somewhere between $350 billion to $500 billion by the year 2020. Massive investments are being made by large Chinese companies focusing on large infrastructure projects rather than only small trade opportunities. The GCC being the economic heart of the Middle East region shows even more significant numbers.
China imports 25-30 percent of its entire oil requirements from the Middle East, more than its imports from all other parts of the world combined. Saudi Arabia alone exported an average of 1.4 million b/d to China during the first half of this year. Although Beijing is investing heavily in wind, solar and nuclear power, Chinese oil consumption is set to double between 2010 and 2030 and the Gulf States will provide much of that additional oil.
Many western analysts like to see an ulterior motive in Chinese investment around the world but Beijing’s strategy is quite simple: it is interested in commercial and economically strategic considerations alone. The big change will come when Gulf investment funds begin to invest in China. The country’s maturing economy has created a large number of huge companies with a global reach that could be prime targets for sovereign wealth funds.
China is in the process of becoming dependent on Middle Eastern oil as the United States used to be before its shale oil gas and gas boom. So Beijing has every reason to engage with the region’s businesses and governments. The Chinese government forecasts that China-Middle East trade will increase by 50 percent in value in 2014, while sustained rapid growth in trade between the two blocs has convinced many analysts that China will become the Gulf Cooperation Council’s (GCC) biggest trading partner by 2020.
Whatever its approach, there is little doubt that the world’s most populous country will figure ever more prominently in the region and must be taken into consideration when Middle Eastern governments set their economic policies.
Economic relations are beginning to move beyond oil for manufactured goods formula often portrayed in the media, as Chinese firms source more and more aluminum, petrochemicals and plastics from the region. Beijing has even ventured into Israeli-Palestinian negotiations, so it will be interesting to see whether it continues to carve out a political role for itself, when it has opted not to do so elsewhere in the world.
By Hussein Shobokshi
