As it embarks on a period of economic growth and diversification, the UAE has a long list of targets. Building unrivalled malls and theme park attractions, increasing the number of visitors, and becoming the next Gulf financial and business hub, are but a few. Behind the scenes, the country is also embarking on a programme to boost trade and investment, eyeing strategic ties with key markets. As it looks towards future growth, such a programme will not only be key in helping it move away from oil, but will also be significant in boosting overall GDP.
Looking across the new strategic markets, probably the most important is China. As the world’s fastest growing major global economy and number-one exporter to the globe, the Asian country offers a wealth of opportunities to the emerging Gulf state, both as a standalone market for UAE firms and a hub for furthering their global trade.
Speaking at the HSBC Global Connections — China MENA Forum last week, which focused on MENA links with China, the UAE’s minister for higher education and scientific research HE Sheikh Nahyan Mubarak Al Nahyan said ties between China and the Middle East were becoming ever more important.
“China has got what we need, and we have what China needs,” he said, addressing delegates. “China needs oil to support its economic growth, and the Middle East needs Chinese markets for its products and investment. As China develops industries such as aerospace, power generation and automobiles, MENA countries will also need these products.”
Figures quoted by industry experts show that China now accounts for 35 percent of oil exports from the GCC, and that trade with the UAE is up 40 percent since 2010, reaching $32bn last year. By 2015, it is estimated that bilateral trade with China could exceed $100bn (AED367.31bn). At the same time, over 3,000 Chinese companies are now registered in the UAE, a number which is only set to grow as China’s business market develops and expands its reach.
Changes in China
Taking a closer look at China, industry experts say there are some changes and risks to bear in mind. The country, whilst going through a period of political change which could have a significant impact on its business environment, also seems to have experienced a slowdown in recent years, with economic growth falling from eight to 7.5 percent in 2011. Some experts argue that this shows a change in tactic rather than a slowdown, whilst others believe it is a sign of what’s to come. In the interim era of uncertainty, businesses are urged to move with caution.
“Growth projections have come down,” says Bruce Alter, head of trade at HSBC China and a panellist at the Global Connections event. “Exports have also decreased. Growth is still there but has come down from 40 percent to fifteen percent, which could be a concern. At the same time, political change is also about to take place, and there is the issue of RMB appreciation and depreciation. These things are very key right now, and they’re on everybody’s minds.”
On the plus side, Alter adds that there are several positive changes happening in China, including a move towards a more mature business market, the internationalisation of the Chinese currency and a growth in volumes of settlement of traditional trade flows in RMB. As ties between the Middle East and China increase, Dubai could well become an offshore trade centre for the Chinese currency as the government adopts a more liberal policy when it comes to the yuan, he says.
“While most flow has been via Hong Kong up until now, Singapore-China flow is now growing and London will also follow. Dubai could possibly one day be a RMB exchange centre like Hong Kong given its perfect geographical link between London and China.”
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