Chinese President Xi Jinping's recent visit to the UAE is a precursor to closer ties between Abu Dhabi and Beijing
As the world continues to ponder the massive implications of China flexing its muscles around the globe for perhaps the first time in its long and often inward looking history, the UAE has already begun building a close relationship with the Asian country, forged by a large number of important – and very tangible – economic and cultural partnerships.
A warm relationship between the UAE and China is, in itself, nothing new, and in many ways was forged by a visit to China of the late Sheikh Zayed bin Sultan Al Nahyan more than 28 years ago. From an economic viewpoint, however, the relationship is at a historic level, as clearly highlighted by the visit of Chinese President Xi Jinping during the recent UAE-China Week. Currently, the UAE is home to approximately 200,000 Chinese citizens and 4,000 trading companies, and the annual trade volume between the two exceeds $50bn – a figure that represents 23 percent of all trade between China and the Arab world. There is, though, much room for improvement: as ties grow, trade between the two countries is expected to rise to $70bn by 2020.
Xi Jinping’s visit and UAE-China Week go far beyond the pageantry and often hollow niceties that often characterise global diplomacy. The week ended with a number of wide ranging government-to-government agreements on topics ranging from technology, innovation and technology transfer to the oil and gas sector, security and law enforcement and culture and tourism.
Just as importantly, many companies took the opportunity to announce China-related plans and projects that ultimately benefit both themselves and China and the UAE alike.
Dubai-based ports operator DP World, for example, penned an agreement with the Zheijiang China Commodities City Group to build a new “Trader’s Market” at Jebel Ali Port and Free Zone. The market will be composed of clusters of traders from all over the world – divided by sector – and will, in addition to its obvious benefits to the UAE, enable Chinese manufacturers to benefit from Dubai’s strategic location by enabling trade with other places in the GCC, Middle East and Indian Subcontinent. It is through projects such as this and others [a number of which were launched by the likes of Emaar, the Abu Dhabi Investment Office and more] that the business relationship between the two countries will be able to flourish.
China’s efforts in this process must be seen within the wider context of its ambitious $1tr Belt and Road Initiative [BRI] which focuses on connectivity and cooperation stretching from China across Eurasia. According to many experts, within this context the UAE – and many of the businesses that call it home – have much to gain. “The UAE is home to the world’s busiest port outside of Asia and a key connection point for China’s Belt and Road Initiative, which is vital as investment flows from China through the UAE to the rest of the world accelerate,” says HSBC UAE CEO, Abdulfattah Sharaf.
And while much of the BRI discussions focus on infrastructure, experts note that its potential benefits extend to a wide variety of sectors. “The BRI is a very ambitious plan that covers a huge part of the world, and the UAE’s position as a hub for the Middle East, with its financing capabilities and professional services, along with multi-national and local companies that are capable of running large infrastructure projects, makes this a huge opportunity for businesses in the region,” says Kyle Boag, regional head of international subsidiary banking at HSBC MENAT.
“The UAE is a gateway to Africa, the Middle East and Europe. If you are a Chinese company I don’t think you can think of a better place to set up an office to explore these new markets.”
For both the UAE and China, the improving ties have taken on additional importance due to the fact that they come at a time in which the United States, with President Donald Trump at its helm, is increasingly preoccupied by domestic concerns, “putting America first” and protectionism that has resulted in barriers on trade, giving China extra motivation to work towards its economic aims abroad.
The UAE is home to the world’s busiest port outside of Asia and a key connection point for China’s Belt and Road Initiative”
In a recent report, HSBC termed this new reality a New Global Trade Order from which both the UAE and China potentially stand to benefit. “There has been a definite shift away from the old world view of globalisation. This has slowed down and there is now more focus on intra-regional business,” Boag notes.
“The new global trade order is about the breaking down of the old order and we don’t know what that means exactly, though China is expanding and having a greater influence across the world while the US withdraws and focuses on its own industries.”