By Hussein Sayed
Some key take-homes from President Xi's UAE trip, which ended with a raft of trade, oil and economic deals
China President Xi ended his three-day visit to the UAE by signing a raft of trade, oil and economic deals.
The UAE on Saturday said it agreed to set up a "comprehensive strategic partnership" with China, and have agreed to "enhance cooperation in all fields to higher levels and forge overall strategic partnerships”.
An on official statement also said the UAE is "keen to deepen cooperation" with China's "One Belt, One Road" ambitious trillion-dollar infrastructure plan that aims to revive the ancient Silk Road trading routes with a global networks of ports, roads and railways.
Below are six key points to note from the visit, as observed by Hussein Sayed, chief market strategist for FXTM.
President Xi showed his support for the UAE economy in general and especially of the crude oil industry. Chinese investors were given permission to bankroll onshore and offshore crude oil concessions in Abu Dhabi.
The visit also coincides with OPEC’s decision to increase crude oil supplies amid strengthening demand triggered by US sanctions on Iran and Venezuela’s oil industry woes. After four long years of depressed crude oil prices, the UAE is ready for the brighter economic prospects China appears to represent.
A raft of bilateral trade and other agreements are being put into place, adding to the annual $50bn in bilateral trade that is expected to reach $80bn in the next two years.
It’s part of China’s bigger plan - the “Belt and Road Initiative” (BRI) – to develop land and maritime infrastructure linking 68 countries across the Middle East, Africa and Europe. The BRI promises massive Chinese investments in the form of loans and stake-holdings in the industrial, financial, construction and energy sectors in the UAE.
The UAE plays an important role as “the hub of the BRI”, acting as a springboard for Chinese goods to be distributed into the region and other parts of the world. Around 60 percent of all Chinese exports to the Middle East come through the UAE, at an estimated value of $70bn annually.
Closer relations between the UAE and China come at a time when US protectionism under President Donald Trump resulted in tariff barriers on trade, meaning that the Asian giant is even more motivated to develop alternative global markets.
Chinese investors are snapping up properties and bankrolling construction projects, and now account for around three percent of new property sales in Dubai alone.
In 2010, China overtook the US as the Arab world’s largest trading partner and has pledged $23bn in loans for infrastructural projects in the region. By 2016 Beijing had become the largest strategic investor in the Arab world, with $30bn in direct foreign investment.
Almost one quarter of the trade between the Arab world and China is carried out by the UAE. Due to its relative stability and developed business infrastructure compared to other Middle Eastern countries, the UAE is likely to keep a competitive edge over other Arab nations vying to gain market share in China.
Nonetheless, there are more regional countries which are also part of China’s BRI. Saudi Arabia and Egypt are doing a brisk trade with China, with Saudi in the number one spot for supplying crude oil to the Asian giant. Iran is another nation with close ties and infrastructural projects in common with China, with bilateral trade estimated at $37bn per year.
Even though China is becoming incredibly influential in the Gulf, India is still the UAE’s number one trading partner, with bilateral exports and imports valued at $57bn.
The UAE would be wise not to keep all its eggs in one basket and stay diversified in its trading partners to reduce potential geo-political risks that could have an impact on its economy.