RIYADH, 7 May 2008 — Saudi Basic Industries Corporation (SABIC) vice chairman and CEO, Mohamed Al-Mady, said that Saudi Arabia’s large hydrocarbon resources made the Kingdom a “natural strategic trading partner” for China’s dynamic industrial and economic growth.
Speaking on the subject of “Saudi Arabia and China: Natural Partners in the Global Economy,” at the Financial Times China-Middle East Summit, held in Riyadh on Monday, Al-Mady said that China’s rapidly growing population provides important markets for Saudi Arabia’s growing petrochemical industry. “Saudi Arabia and China are indeed natural trading partners supported by cooperative political ties. The geographic location of the partners permits an economic pathway for two-way trade,” he said.
With China’s growing demand for oil, he said, it is quite natural for China and the Saudi Arabia to trade in crude oil and refined products. Saudi Arabia is the No. 1 supplier of crude oil to China, providing some 528,000 barrels per day in 2007 and targeting for larger volumes in the future.
Making a comparison between the economies of the West and the East, Al-Mady said “Economic growth statistics and trade balance data indicate that economic momentum is shifting eastward. China alone has been experiencing GDP growth of 10-12 percent for a number of years and experienced a positive trade balance of $265 billion in 2007.
Saudi Arabia, Al-Mady said, has benefited from the growing demand for energy products: crude oil, natural gas, LPG, and refined products while China has benefited from its large exports of manufactured products.
Howard Handy, GM and chief economist at Samba Financial Group, also spoke at the same forum and discussed the New Silk Road: a changing strategic tapestry for GCC-China trade and economic relations.
Handy said the Silk Road as a trade route can be traced back to about 2,000 years when Chinese silk was the main commodity sought by the Middle East and Europe. Later, trade flourished in spices from India and the East Indies and pottery and grain from Europe. Though the trade route fell into disuse during the Middle Ages, mainly because of political instability and upheavals in Asia and the Middle East, it revived in the colonial era. More recently, a number of factors have combined to give new meaning and significance to the Silk Road. These center on the extraordinary dynamism of China and the Gulf and the growing importance of each in international trade and capital flows.
Since 2000, the Chinese economy has doubled in size in real terms, recording real growth rates of 10 or 11 percent in most years. Adjusting for relative purchasing power, the Chinese economy is now about half the size of the US economy and more than 50 percent bigger than Japan’s, according to the International Monetary Fund.
Over the same period, the GCC countries have leveraged the surge in global oil prices through generally well-conceived fiscal spending strategies and broader measures to enhance the business environment and engage the private sector. Real growth of the GCC non-oil sectors has grown at 6.7 percent annually and has been trending upwards.
In nominal (dollar) terms, the GCC economy has tripled in size since the turn of the decade; it will surpass the $1 trillion milestone this year. To put this in perspective, the GCC economy is now on a par with India and will overtake South Korea this year.
