Wed, 08 Feb 2023

China's Xi visits Saudi Arabia, economic agreements expected

Robert Besser
09 Dec 2022, 13:29 GMT+10

RIYADH, Saudi Arabia: This week, Chinese President Xi Jinping is visiting Saudi Arabia, as the Middle East is increasingly looking East to drive economic transformation during a post-oil era.

Trade and investment ties between China, the world's largest energy consumer, and Gulf Arab states are expected to feature prominently during Xi's visit.

China is also a major trade partner of Gulf oil countries and gas producers, and their bilateral relations have expanded under regional infrastructure and technology drives.

Saudi Arabia accounts for some 18 percent of China's total crude oil purchases, making it Beijing's top oil supplier, and many Chinese refiners have annual supply deals with state-run Saudi Aramco.

Riyadh has said that strengthening trade ties and regional security would be priorities during Xi's visit, which will witness a China-Gulf summit and a China-Arab summit.

Under Beijing's Belt and Road Initiative, Gulf Cooperation Council (GCC) states are major markets for Chinese goods, construction contracts and investment opportunities in infrastructure, manufacturing and digital economies.

"The GCC wants FDI (foreign direct investment) which not only caters to local demand but also allows these economies to integrate into global supply chains. The Chinese companies will help do that, first on an Asia regional level, then beyond," said Fareed Mohamedi, managing director at SIA Energy International, as quoted by Reuters.

Saudi Arabia, the world's top crude exporter and largest Arab economy, aims to reduce reliance on oil by creating new industries that can generate jobs for Saudis, with the government, rather than foreign investment, driving projects.

Meanwhile, the UAE is competing with Saudi Arabia to become the region's commercial centre and transport and logistics hub.

The two countries are investing in future technologies to achieve economic diversification, in line with the global transition away from fossil fuels.

Despite US concerns, Chinese tech giant Huawei is finalizing a location for a new data centre in Saudi arabia that would be the region's second, after Abu Dhabi.

Online giant Alibaba has also partnered with STC Group to provide cloud services in Saudi Arabia.

As the kingdom is trying to develop local industries, including defense and automotive industries, Chinese firms are looking to participate in the construction of Saudi mega projects, such as the $500 billion NEOM city, as well as mining and manufacturing.

While Washington remains a key strategic partner, it is important for the region's national economic and security interests to enhance relations with other partners, including China and Russia, Gulf Arab officials have said.

"Our trade relations increasingly look to the East, while our primary security and investment relations are in the West," UAE official Anwar Gargash said last month, as reported by Reuters.

In a report, London-based think tank Asia House said that GCC-China trade has doubled between 2010 and 2021.

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