China strengthens economic ties with Middle East

Updated 31 January 2016

China strengthens economic ties with Middle East

Chinese President Xi Jinping recently completed his visit to the Middle East at a crucial time.
Tensions rose between Saudi Arabia and Iran in January, leading to strained diplomatic ties between the region’s heavyweights, and sanctions on Iran were lifted some days earlier.
In his Middle East tour, President Xi Jinping visited Egypt, Saudi Arabia and Iran.
A central element of the five-day visit was to gather support for China’s “One Belt, One Road” plan, an initiative that intends to increase the integration between Asia, the Middle East, Europe and Africa through extensive infrastructure building, free trade and cultural exchange.
All three countries, Egypt, Saudi Arabia and Iran agreed to collaborate in the Chinese initiative, and all three signed different forms of agreements and announced Chinese investments.
The details of the agreements are not known, but it seems that, in Egypt, the total amounts to more than $15 billion worth of projects, mostly in the construction field, to develop the new administrative capital, and increase Egypt’s industrial capacity in power generation and transport.
The funding will be mostly channeled via state-owned companies.
For instance, China Development Bank will lend $700 million targeting the implementation of infrastructure projects.
The Central Bank of Egypt will receive a $1 billion to enhance Egypt’s international reserves.
China also upgraded relations with Saudi Arabia and Iran to “comprehensive strategic partnership”, a title granted by Chinese diplomacy to signal the intention to strengthen economic and diplomatic ties.
According to the Chinese Embassy in Riyadh, President Xi Jinping signed 14 agreements in Saudi Arabia in energy, communications, environment, culture, aerospace, science and technology.
A key deal was the $2.43 billion investment in the building of a nuclear power plant scheduled for completion in 2022, and an additional 15 plants by 2032. Saudi Aramco and China’s Sinopec also agreed to undergo a $1-1.5 billion expansion in their joint venture Yasref oil refinery, China’s largest project in the region.
In Tehran, 17 agreements were signed for cooperation in areas such as energy — upstream and downstream, with a specific mention to the nuclear sector — trade, science, transportation, banking, human resources, culture, customs and tariffs, and media communications.
Like in the case of Saudi Arabia, the details of the deals were not made public, with the exception of a plan to boost trade to $600 billion over the next 10 years, a tenfold increase from 2015 levels.
All in all, China announced initiatives amounting to $35 billion in the Middle East, mostly in industrial and energy projects.
In addition, China also announced the establishment of an investment fund with the UAE and Qatar worth $20 billion focused on developing energy, infrastructure and high-end manufacturing.
With half of China’s crude imports coming from the Gulf, turmoil in the region has greater implications on China today.
Overall, President Xi Jinping made clear that the interest of China in the region is rising, but its involvement will remain limited to the economic arena.
He carefully avoided taking positions in regional disputes.
In fact, the initial plan included a visit to the UAE that was later replaced by the trip to Iran.
To bring balance, China declared its support for the Yemenite government’s fight against Iranian-backed Houthis.
The traditional neutrality of China is not bringing comfort to GCC countries, which could benefit from a strong ally to compensate the loss of interest in the region by the US and the Russian alignment with Syria’s President Bashar Assad.
The lack of a powerful country patrolling the zone is increasing uncertainty in the region.

— Camille Accad is an economist at Asiya Investments Company

Wealthy Gulf individuals feel more confident about regional prospects

Updated 25 April 2018

Wealthy Gulf individuals feel more confident about regional prospects

  • “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”
  • Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving.

DUBAI: Survey finds growing optimism on region’s economies, but Saudi investors remain wary.

Wealthy individuals in the Gulf are more optimistic over the future of the region and the global economy compared with last year, and are increasing likely to invest in their own countries and other emerging markets in Asia than in western economies. These are among the main findings of an annual survey by Dubai-based Emirates Investment Bank (EIB), released on Tuesday, of the sentiment among high net worth individuals (HNWIs) in the region. 

After two years of falling confidence, some 60 percent of regional HNWIs now believe things will improve or stay the same. Fewer are pessimistic about both regional and global economic prospects than last year, while nearly 80 percent of respondents said they would prefer to invest in Gulf assets, rather than looking abroad.

The recovering oil price was a big reason for the increasing feel-good factor in the Gulf, according to Khalid Sifri, EIB’s chief executive officer, who added: “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”

After falling below $30 per barrel in early 2016, oil has subsequently recovered to a three-and-a-half-year high, breaching the $75 a barrel mark yesterday for the first time since November 2014.

However, the overall optimism of the survey masks some concerns among regional HNWIs; in Saudi Arabia, 48 percent of respondents said that they saw the regional economic situation improving or staying the same, against 52 percent who felt it was likely to worsen in 2018.The survey was conducted last November and December, when investor sentiment in the Kingdom was affected by the high-profile anti-corruption campaign undertaken against some prominent business people accused of financial wrong-doing. “It may have been affected by that. We shall see what the situation is at the end of this year,” Sifri said. 

Respondents from Kuwait were even more pessimistic. None of the respondents from the country felt that things were going to improve on the investment front this year, while 54 percent said they would worsen. Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving. On the long-term global outlook, a total of 78 percent of those surveyed across the region were optimistic about prospects over the next five years, with most citing positive economic and political stability as the reason, along with a smaller number who said oil price stabilization would benefit the world economy. The oil price recovery was the biggest reason for regional optimism. 

The geopolitics of the region was claimed as a big factor in deciding investment decisions, but Saudis were less concerned than others. Only 29 percent in the Kingdom said they were influenced by geo-political events, compared with 83 percent in Qatar and 85 percent in the UAE. 

Oil prices, economic reforms and the introduction of VAT were also factors influencing investment, as was the election of Donald Trump as president of the USA. There has been a big shift in global investor orientation outside the GCC. Nearly half of regional wealthy investors (47 percent) are now looking to Asia, 38 percent to the wider Middle East and North Africa, some 34 percent to Europe and only 17 percent to North America. The survey was conducted among 100 HNWIs with $2 million or more in investable assets.