How China became Saudi Arabia’s top trading partner, revived ancient Silk Road
Modern China exports textiles, electronics and machinery to Saudi Arabia and imports crude oil and primary plastics
Both nations well placed to expand cooperation in the circular carbon economy, renewables and high-tech industries
Updated 09 December 2022
RIYADH: Decisions made over the past decade since Xi Jinping became president have placed China on a firm footing to become Asia’s — if not the world’s — pre-eminent economic power. The country’s many achievements are in the limelight as Xi pays a state visit to Saudi Arabia in response to an invitation from King Salman.
Thanks to sweeping reforms, diplomatic engagement, and massive infrastructure development, China has emerged today as the Arab region’s largest trade partner, reclaiming its historic mantle as an export powerhouse.
What makes China such a resilient exporter is the diversity of products it manufactures — having shifted away from agriculture, clothing and textiles into electronics, machinery and computers — making it less vulnerable to market volatility.
The rise of China did not happen overnight of course. In the early 1970s, the country’s share of global trade stood at less than 1 percent. Then, after a series of reforms designed to open up the economy, demand for exports boomed, growing from $2.31 billion in 1970 to $7.69 billion in 1975.
By 1985, Chinese exports had reached a value of $25.77 billion, growing throughout the decade until 1993 when exports almost doubled in value in just one year from $53.36 billion to $104.61 billion in 1994.
Further growth followed China’s induction into the World Trade Organization in December 2001, stimulating a surge in value worth $520.24 billion over a period of just five years.
In 1990, China was ranked 14th among the top world exporters, representing just 1.8 percent of global exports. By 2000, it had risen to seventh place, making up 3.9 percent, just behind the UK and Canada.
In 2004, China overtook Japan as the world’s third-largest exporter, accounting for 6.5 percent of global exports. Then, in 2007, the value of Chinese exports broke the $1 trillion threshold for the first time, reaching $1.26 trillion.
Although the 2008 global financial crisis briefly slowed Chinese export growth, it quickly rebounded. By 2009, China had overtaken Germany as the world’s largest exporting nation, making up 9.6 percent of global exports.
Unbowed by the COVID-19 pandemic, which originated in the Chinese city of Wuhan in late 2019, resulting in lockdowns, travel bans and a global economic slowdown, China’s exports have continued to grow, reaching an estimated $3.55 trillion in 2021.
China and the Arab world have a trade relationship stretching back 1,500 years to the time of the Silk Road, when Chinese fabrics came overland to the Arabian Peninsula and Arab incense, frankincense and pearls were carried to East Asia.
The name “Silk Road” was first coined by German geographer Ferdinand von Richthofen in 1877 to describe the ancient trade routes between East Asia and Europe. The concept of a great unifying belt continues to inspire trade relations to this day.
Today, China is Saudi Arabia’s largest trading partner. According to Reuters news agency, bilateral trade between the two countries reached $87.3 billion in 2021, with Chinese exports to the Kingdom reaching $30.3 billion and China’s imports from Saudi Arabia totaling $57 billion.
China’s main exports to Saudi Arabia are textiles, electronics and machinery, while China mainly imports crude oil and primary plastics from the Kingdom. In the first 10 months of 2022, China’s Saudi oil imports reached 1.77 million barrels per day, valued at $55.5 billion, according to Chinese customs data.
China’s global exports
• 1970: $2.31bn
• 1985: $25.77bn
• 2000: $253.1bn
• 2005: $773.34bn
• 2010: $1.65 trillion
• 2020: $2.72 trillion
• 2021: $3.55 trillion
Bilateral trade between Saudi Arabia and China grew steadily after the signing of a memorandum of understanding in November 1988, growing to $5.1 billion in 2002, of which China’s exports were worth $1.67 billion and imports $3.43 billion.
In October 1999, China’s then-President Jiang Zemin became the first Chinese leader to visit Saudi Arabia, where he signed a strategic oil deal with the Kingdom to help fuel China’s booming manufacturing sector.
In 2000, crude oil exports to China alone were valued at $1.5 billion. By 2010, they were worth well over $25 billion. In 2022, Saudi Aramco invested in a $10 billion refining and petrochemicals complex in China — the largest Saudi investment in China.
In September 2013, Xi announced the launch of the Belt and Road Initiative — formerly known as One Belt One Road, and often referred to as the new Silk Road — during an official visit to Kazakhstan.
The initiative sets out to connect the markets and manufactories of East Asia to those of Europe via a vast logistical and digital network running through Central Asia, the Middle East and North Africa in a modern-day reimagining of the ancient Silk Road.
Considered the centerpiece of Xi’s foreign policy agenda, the Belt and Road Initiative is a global infrastructure development strategy, investing in 149 countries and international organizations, and which has been likened to the US Marshall Plan of the late 1940s.
The initiative, which was incorporated into the Chinese constitution in 2018, has a target completion date of 2049, intended to coincide with the 100th anniversary of the founding of the People’s Republic of China.
China’s Belt and Road Initiative shares the same goal of boosting interconnectivity through cooperation in energy, trade, investment and technology as Saudi Arabia’s Vision 2030 social reform and economic diversification agenda, launched in 2016 by Crown Prince Mohammed bin Salman.
Beyond energy, technology and sustainable development, another emerging area of cooperation between the two nations is logistics. The Kingdom’s courier, express and parcel services market is forecast to grow over the next five years, offering the Belt and Road Initiative a valuable source of haulage infrastructure.
Saudi-based companies like AJEX and its international e-commerce express service are looking at ways to improve trade between China, Saudi Arabia, the UAE, Bahrain and the wider Middle East to keep up with the demand for cross-border commerce.
By working together, diplomats and business leaders say Saudi Arabia and China are well-placed to expand their cooperation in the circular carbon economy, hydrogen power, renewable energy, and a host of other sustainable and high-tech industries.
In 2019, Chen Weiqing, China’s ambassador to Saudi Arabia, said his country’s Belt and Road Initiative is wholly consistent with the Kingdom’s Vision 2030 agenda, highlighting both governments’ common interests and readiness to collaborate.
“China and the Kingdom are among the leading forces of dialogue among civilizations,” Chen said at the time in an opinion article for Arab News. “Cooperation between China and the Kingdom enjoys the characteristics of strategy, harmony, and mutual benefit.”
During the Chinese-Arab Friendship Association meeting in 2021, Mohammed Al-Ajlan, chairman of the Saudi-Chinese Business Council, said more than a dozen Chinese investors had expressed an interest in various Saudi infrastructure projects.
“The economic and financial cooperation between the Arab countries and China witnessed a clear development in the process of consolidating trade and investment relations,” Al-Ajlan said in a statement at the time.
“(We are) looking forward to more efforts to support trade exchange and joint investments by taking advantage of the opportunities available in all countries.”
Strength in numbers: Saudi Arabia and China seal 35 deals worth $30bn during Xi Jinping’s visit
Agreements range from green energy, technology, and logistics, to construction and manufacturing
Major ones include an alignment plan between the Kingdom’s Vision 2030 and China’s Belt and Road Initiative
Updated 09 December 2022
RIYADH: China’s business links with Saudi Arabia have been significantly boosted thanks to the signing of 35 investment agreements involving organizations from the two countries.
The raft of deals came during the visit of Chinese President Xi Jinping to the Kingdom. They cover a range of sectors, including green energy, technology and cloud services.
Transportation, logistics, medical industries, construction and manufacturing are also covered by the deals, as is a petrochemicals project, housing developments and the teaching of the Chinese language.
The agreements are worth about $30 billion, and come as China seeks to shore up its COVID-19-hit economy and the Kingdom continues to diversify its economic and political alliances in line with Vision 2030.
The signing of the agreements was overseen by Saudi Crown Prince Mohammed bin Salman and President Xi, with the first an alignment plan between the Kingdom’s Vision 2030 and China’s Belt and Road Initiative.
Another deal saw a memorandum of understanding in the field of hydrogen energy signed by Prince Abdulaziz bin Salman, Saudi Arabia’s energy minister, and He Lifeng, chairman of the Chinese National Development and Reform Commission.
Walid bin Mohammed Al-Samaani, the Kingdom’s justice minister, and Wang Yi, China’s state councilor and minister of foreign affairs, inked an agreement for cooperation and judicial assistance in civil, commercial and personal status cases.
A memorandum of cooperation to teach the Chinese language was signed by Yousef bin Abdullah Al-Benyan, Saudi Arabia’s education minister, and China’s Wang Yi.
Direct investment is to be encouraged through an MoU penned by Khalid bin Abdulaziz Al-Falih, the Kingdom’s investment minister, and Wang Wentao, China’s minister of commerce.
An action plan to activate the provisions of the housing memorandum of cooperation was also agreed, and signed by Majid Al-Hogail, Saudi Arabia’s minister of municipal, rural affairs and housing, and China’s Wang Wentao.
The signing of these MoUs and agreements was followed by a ceremony during which the Chinese president received an honorary doctorate degree in administration from King Saud University.
The Saudi crown prince also held an official lunch in honor of the Chinese president.
Saudi investment minister Khalid Al-Falih said that this week’s visit “will contribute to raising the pace of economic and investment cooperation between the two countries,” offering Chinese companies and investors “rewarding returns.”
One of the deals involved a memorandum of understanding with China’s Huawei Technologies on cloud computing and building high-tech complexes in Saudi cities, the government communication office said in a statement.
Saudi firm AJEX Logistics Services is one of the companies looking to benefit from the growing ties between the Kingdom and China.
The firm marked the visit of the Chinese leader by announcing the launch of two new services as part of its expansion strategy into China and the Middle East.
Customers will soon be able to send single-piece and multi-piece shipments from China to Saudi Arabia, the UAE and Bahrain in four to seven days.
Another deal, signed between the Saudi Investment Ministry and Shandong Innovation Group, involves the construction of an aluminum plant.
Chinese chemical company Kingfa, Shanghai-based wind turbines and energy management software firm Envision, and Beijing-headquartered CITIC Construction also penned MoUs.
The range of deals prompted the CEO of the Saudi Export Development Authority, Abdulrahman Al-Thukair, to hail the strong economic relations between Saudi Arabia and China.
Al-Thukair praised the growth and development of the volume of trade exchange between the two countries, noting that China is one of the Kingdom’s main trade partners, as total non-oil exports from the Kingdom to China reached SR36 billion ($9.57 billion) in 2021, mainly petrochemicals, which amounted to SR31.7 billion, and minerals, which amounted to SR2 billion.
Thursday’s developments prompted Hussain Al-Shammari, the Ministry of Media’s director of international media, to claim that Saudi Arabia is now a “hub” for Chinese industry.
Speaking to Arab News, he said: “Today they will open a regional center for all factories of China in Saudi Arabia that makes Saudi Arabia a hub for the industry for China. The Silk Road of China will be served with the Saudi Vision. Both countries are interested in strengthening these relations and we will benefit, both China and Saudi Arabia, from these visits.”
He added: “This second visit of the Chinese president is very important. We are signing a SR110 billion contract. We are signing more than 20 agreements — it is the deal of the decade for both countries.”
Al-Shammari highlighted the importance of the Chinese president’s visit to the Kingdom and the aligned goals of Saudi Vision 2030 and China’s Belt and Road Initiative.
“These important agreements will serve both purposes of Saudi Vision 2030 and will also serve the purposes of China,” Al-Shammari said, adding: “China needs the continuity of energy and oil going to their economy. We are important to China and China is also important to us.
“The Saudi-Chinese bilateral relations are very strong, China is the largest commercial partner of Saudi Arabia with a $67 billion interaction annually between the two countries, and both leaderships are looking forward to developing these relations even further.”
As China is the second largest economy in the world and Saudi Arabia is going through its Vision 2030 goals, a transfer of new technologies is required, said Al-Shammari.
“These summits come at an important time for both countries to further strengthen these bilateral relations,” he added.
As confirmed recently by Saudi Minister of Energy Prince Abdulaziz bin Salman, the Kingdom will host a regional center for Chinese factories owing to Saudi Arabia’s strategic location among the three continents of Asia, Africa and Europe.
The minister also reaffirmed collaboration with China’s Belt and Road Initiative, as well as investment in integrated refining and petrochemical complexes in both countries.
Cooperation between the two countries has witnessed remarkable growth during the past five years, Bandar bin Ibrahim Al-Khorayef, the minister of industry and mineral resources, told Arab News.
During the crown prince’s visit to China in February 2019, both countries concluded agreements to establish joint projects covering several sectors including manufacturing, petrochemicals, pharmaceuticals and others.
The countries already share a good history of cooperation, Al-Khorayef said, citing the example of seven Chinese factories operating in different fields in the Saudi Authority for Industrial Cities and Technology Zones.
In addition to this, there are 10 other factories at different stages of planning, construction and implementation.
Furthermore, there are about 12 projects for the Royal Commission for Jubail and Yanbu with Chinese companies at different stages, some of them in operation and others under procedure or design.
It is not just business groups that are benefiting from Saudi Arabia’s closer ties with China.
Saudi Arabian think tank King Abdullah Petroleum Studies and Research Center signed an MoU with China’s Economics and Technology Research Institute to exchange information around energy, economics and climate change.
Under the terms of the MoU, both entities will work hand in hand to allow for the exchange of research and the generation of actionable insights.
Some of the fields of common interest which will be prioritized as topics of research include energy, economics, climate change, sustainability, transition, productivity, hydrogen and carbon capture, among others.
The MoU falls in line with KAPSARC’s mission to utilize applied research and innovation to drive and propel the global energy sector, while the Chinese organization is affiliated with oil and gas firm China National Petroleum Corporation.
SABIC to sell Functional Forms polycarbonate business to Germany’s RÖHM
SABIC’s Functional Forms business develops and manufactures high-quality, polycarbonate resin-based engineered thermoplastic sheet and film products
Final agreements between the two companies will be signed in the coming months after consultation with applicable works councils and unions in Europe
Updated 08 December 2022
RIYADH: SABIC has agreed to sell its Functional Forms polycarbonate business to German manufacturer RÖHM.
The sale will allow SABIC to focus on its portfolio of petrochemicals, agri-nutrients, and specialties.
SABIC’s Functional Forms business develops and manufactures high-quality, polycarbonate resin-based engineered thermoplastic sheet and film products which it sells across a wide variety of industries, ranging from building and construction, consumer electronics, aircraft and rail interiors to displays. Its operations are in 19 countries and has about 700 employees.
Final agreements between the two companies will be signed in the coming months after consultation with applicable works councils and unions in Europe. Subject to regulatory approvals and completion of the carve-out of the business from the rest of SABIC’s operations, the transaction is expected to close during the first half of 2024.
How Saudi firms can build on the momentum created by Chinese President Xi’s visit
Chairman of the Council of Saudi Chambers praises China’s role in the Kingdom’s mega projects
Saudi Arabia-China bilateral trade stood at $95.46 billion between January and October 2022
Updated 09 December 2022
RIYADH: Ajlan bin Abdulaziz Al-Ajlan, chairman of the Council of Saudi Chambers of Commerce, conveyed the greetings of the country’s business community to Chinese President Xi Jinping, who arrived in the Kingdom on Wednesday for a three-day visit.
Al-Ajlan praised the ever-improving ties between Saudi Arabia and China, in light of the strong political will and strategic partnership between the two friendly countries — particularly on the economic front.
Speaking to Arab News, Al-Ajlan said the two countries have strong historical and economic relations, as China is the Kingdom’s largest trade partner.
He urged the business community to take advantage of the momentum created by Xi’s visit to push forward trade deals and investments in both Saudi Arabia and China.
Xi is scheduled to meet Saudi and Arab leaders during his visit to the Kingdom. Three summits will take place during his stay: The Saudi-Chinese Summit, the Riyadh Gulf-China Summit for Cooperation and Development, and the Riyadh Arab-China Summit for Cooperation and Development.
The visit reflects the desire of the leaderships of Saudi Arabia and China to strengthen ties, enhance strategic partnerships and realize the political and economic potential in areas of common interest.
Around 35 initial agreements between the two countries, worth more than SR110 billion ($29.3 billion), have been signed during the presidential visit, along with a strategic partnership deal and a plan to harmonize implementation of Saudi Arabia’s Vision 2030 with China’s Belt and Road Initiative.
The volume of bilateral trade grew during 2021 by 37 percent to reach $81.14 billion, with Saudi Arabia accounting for about 26 percent of China’s total foreign trade with Arab countries.
The CSC Chairman said the Kingdom is China’s largest trade partner in West Asia and North Africa, with the import and export of goods between the two countries from January to October 2022 amounting to $95.46 billion, reflecting the strength and diversity of trade between the two countries.
Al-Ajlan praised the role played by Chinese companies in the Kingdom and their involvement in several Saudi mega projects that ads value to the Kingdom’s economy.
He added that harmonizing China’s Belt and Road Initiative with Saudi Arabia’s Vision 2030 will help exploit the Kingdom’s strategic location to make it a global logistics hub.
The CSC chairman said there were huge investment opportunities in the Kingdom for China, particularly in infrastructure projects, as well as in enhancing economic cooperation through regional and international blocs such as the Gulf Cooperation Council, the G20 and others.
He said optimizing this relationship would turn both nations into a powerful combined economic force, based on solid institutional frameworks.
Al-Ajlan said investment cooperation agreements under the Saudi-Chinese Joint Committee and the Saudi-Chinese Business Council, which works under the umbrella of CSC, play an important role in developing investment and trade between the business sectors of the two nations.
Minister of Industry and Mineral Resources stresses importance of strategic partnership with China's industrial and mining sector
Updated 08 December 2022
RIYADH: Strategic partnership between Saudi Arabia and China in the industrial and mining sector is important and crucial, the Minister of Industry and Mineral Resources Bandar bin Ibrahim Al-Khorayef said.
Cooperation between the two countries has witnessed remarkable growth during the past five years, Al-Khorayef is cited by Saudi Press Agency as saying.
Non-oil exports during 2021 amounted to more than SR36 billion ($9.5 billion), while the Kingdom's imports from China during the same period reached SR112 billion riyals, Al-Khorayef said.
Topping the list of Saudi's exports to China were Petrochemicals and minerals as well as heavy machinery, electronics, vehicles and spare parts he explained.
Moreover, joint projects account for an important part of the volume of cooperation between the two countries. The Saudi Industrial Fund, alone, contributes to financing six joint projects.
During the visit of Crown Prince Mohammed bin Salman to China in February 2019, both countries concluded agreements to establish joint projects covering several sectors including manufacturing, petrochemicals, pharmaceutical, and others.
The countries already share a good history of cooperation, Al-Khorayef said, citing the example of the seven Chinese factories operating in different fields in the Saudi Authority for Industrial Cities and Technology Zones
In addition to this, there are an estimated 10 other factories in different stages of planning, construction, and implementation.
Furthermore, there are approximately 12 projects for the Royal Commission for Jubail and Yanbu with Chinese companies in different stages, some of them are in operation, and others are under procedure or design.