By Hamad Buamim
Surging income growth within the world’s second largest economy presents a wealth of new opportunities for businesses in Dubai.
A new generation of Chinese spenders are entering the market who are educated, sophisticated and have a personal disposable income of at least $10,000.
By 2030, around 35 percent of China’s population will fall under the upper middle-income and high-income categories. That marks a sharp increase from the current 10 percent.
As a result of this income growth, private consumption is expected to rise by 5.5 percent annually over the next 15 years, boosting its share of the overall economy to nearly 50 percent, compared to just 38 percent in 2015.
Chinese companies will eventually find it difficult to keep up with surging consumer demand and may look abroad to source products, services and investments to fill market gaps. Investors in the country will also be actively looking to diversify their income sources, with the UAE and GCC markets standing out as an attractive options that can offer promising returns.
This is where the UAE can play an active role as China’s top trading partner in the GCC region. Dubai is a prime location for Chinese companies seeking access to markets in the Middle East, Europe and Africa and non-oil trade between China and the emirate has grown significantly over the last few years to reach $47.9bn in 2015.
The UAE stands to play a critical role as an investment and trade hub along the New Silk Road with strategic access to the Middle East, Africa and South Asian (MEASA) markets, which are estimated to have a combined GDP of $7.8 trillion. Yet, there remains plenty of room to explore new trade and investment opportunities that will be created by the growth of Chinese wealth.
With an expat community of 200,000 Chinese currently living in the UAE, there is huge potential for Chinese businesses to market products and services to this diverse group of consumers. In addition, consumers in China are increasingly demanding branded products which are not manufactured there. This should increase trade volumes flowing through Dubai’s ports to markets in China.
The number of Chinese
visitors to Dubai is predicted to increase significantly following the recent
decision to allow Chinese tourists to obtain visas on arrival in the UAE. Expo 2020 can also serve as a platform to connect the Chinese middle class with the rest of the world, while Chinese companies can also utilise the mega event to boost their profile globally.
This wave of new tourists could have a knock-on effect on Dubai’s retail sector, as the emirate remains an attractive destination for Chinese shoppers with a taste for luxury products. At the same time, new projects such as Dubai Wholesale City have the potential to attract new Chinese businesses wanting to access the GCC and Africa, with its strategic location, and world class logistics infrastructure.
China is also still expected to overtake the US as the world’s largest retail market over the next decade due to rising incomes in the country. Momentum within online retail is expected to pick up substantially, which can open up new opportunities for e-commerce players in the UAE.
The number of Chinese companies in the country has also grown to exceed 4,000, which has increased demand for properties. Chinese were the seventh biggest buyers of Dubai property last year, investing around $460m in the market during the first nine months of 2015.
As a leading financial hub for the MENA region, Dubai has the potential to become a gateway for Chinese companies looking to tap into regional liquidity. Dubai International Financial Centre (DIFC), in fact, offers an ideal platform to facilitate engagement with Chinese cities trying to develop financial services for a growing middle class.
Dubai Chamber of Commerce and Industry recently opened its first China representative office in Shanghai — which will help strengthen our trade relationship and explore opportunities for Chinese companies in Dubai. By establishing a presence in this fast-moving economy, we can also improve our members’ access to market intelligence, resources and new business prospects and promote Dubai as a lucrative investment destination.
Our China strategy falls in line with objectives outlined under the Dubai Plan 2021 that aim to boost foreign direct investment and further diversify the emirate’s economy. We believe that global economic growth in the future will largely be driven by emerging markets, with China at the forefront of this major shift as it’s expected to become the world’s largest economy by 2030.
With the cloud of uncertainty expected to hang over leading Western economies for some time, it’s now more important than ever for countries to look outwards and leverage strategic hubs like Dubai to unlock new trade and investment potential.
Hamad Buamim is president and CEO of Dubai Chamber of Commerce and Industry