That was further cemented by the visit of King Salman to Beijing in March this year, in which multi-billion dollar deals were signed between the biggest corporate players in both countries.
Today, in Jeddah, an investment forum between the two countries will add some significant detail to the newly co-operative relationship.
Energy minister, Khalid Al-Falih, will lead discus- sions that are likely to result in a joint investment fund between the two countries, as well as co-oper- ation agreements in the judicial area and in infor- mation and data collaboration.
The mutual attraction is not difficult to understand. China is the biggest customer in Asia for Saudi oil, while in 2016 China was the Kingdom’s most significant trading partner, with $42 billion worth of bilateral trade, according to official Chinese figures.
That will probably be overtaken in the current year by Saudi-US trade, after the big boost to com- mercial relations signalled by the visit of President Trump to Riyadh in May.
Hundreds of billions of dollars worth of deals were agreed in principle, with the “big ticket” items in defense and infrastructure, but China will remain a very significant trading partner for Saudi Arabia.
It sees the Kingdom as a vital link in its “One Belt One Road” strategy that aims to extend the Chinese trading network through Central and South Asia, through the Middle East, and ultimately into Africa.
Beijing official media calls it the “1+2+3 model” in which energy is the core area of mutual co- operation, supported by two separate sectors – infrastructure, and trade and investment — with three emerging sectors — nuclear, aerospace and renewable — rounding off the model.
The strategy is already beginning to bear fruit in energy and related petrochemicals. Saudi Aramco signed a $10bn deal to build a refining and chemicals in China with Norinco, while Saudi Basic Industries Corporation (Sabic) reached agreement to develop petrochemicals plants in both countries.
China needs a secure supply of crude to ensure it can fuel its economic growth. Saudi Arabia is increasingly inclined to look east for guaranteed markets for its main export, especially in light of the ongoing surge in shale products in the US. America still imports Saudi oil of course, but is increasingly aiming at self-reliance in energy.
All this makes perfect strategic economic sense. Since the global financial crisis a decade ago, one of the unstoppable global trends has been the “east- ward tilt” of the world economy, and the Middle East finds itself in the enviable position of being its fulcrum.
But several experts see that there are limits. The Trump visit, which prompted talk in Washington of a “reset” in strate- gic and commercial relations between the US and the Kingdom, may go some way to reversing the speed of that tilt.
China needs a secure supply of crude to ensure it can fuel its economic growth. Saudi Arabia is increasingly inclined to look east for guaranteed markets for its main export, especially in light of the ongoing surge in shale products in the US.
In particular, talk that China will somehow “buy Aramco” seems wildly misplaced. The speculation emerged in the Financial Times earlier this week, in an opinion column by a commentator with years of experience in the energy and public policy sector.
In a nutshell, he said that “one of the banks” working on the forthcoming initial public offering of shares in Aramco — forecast to be worth as much as $100bn — was looking at a scenario in which China bought the 5 percent lined up for IPO.
The arrangement would avoid all the unnecessary cost of an IPO, reduce the disclosure and transparency required, and obviate the need to reach a certain estimate of Aramco’s value, offi- cially set at $2 trillion.
This is to misread the plan behind the IPO. It is not just a cash-raising exercise, but a fundamental part of the Vision 2030 strategy to transform Saudi economy and society. To ditch the IPO in favor of a sale to China seems highly unlikely, as it would be a blow to that strategy, and to the $200bn privatization program lined up to accompany it.
If it were just a question of money, Saudi Arabia could easily raise as much from international debt markets in a co-ordinated multi-year plan. A sale to Aramco — even as part of some banker’s Plan B — looks a non-starter
That does not mean China will play no part in the IPO. Chinese financial institutions will no doubt want to be part of the biggest IPO in history, but as normal institutional investors, rather than “corner- stone” investors with special conditions and privi- leges attached to their investment.
There is still the possibility that Aramco will opt for an Asian market on which to list the shares, in addition to the Tadawul in Riyadh and one western market, London or New York (with the sentiment swinging toward the latter.) This could take place in Hong Kong with its access to big pools on cash via its links to Shanghai.
So Saudi Arabia is welcoming China as a trade partner, as we shall see over the next couple of days in Jeddah. But I personally doubt at this stage that it is going to hand over Aramco, or even a small part of it, to Chinese ownership.
• Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai