Saudi Arabia today possesses 70 percent of the world's
extra capacity in oil. Both countries are members of the G20. As China's demand
for oil increases so will Saudi Arabia's importance in providing sustainable
and secure amounts of the black gold. Security of supply for China is equal to
security of demand for Saudi Arabia. As China's role in the global economic
landscape increases, trade being an essential part of that role, assures a
sustainable foothold in Saudi Arabia. The relationship until now has been
marked by the roles the two countries attained respectively in the world.
However, the relationship is not merely based on global trade patterns. A
policy that embraces "China," looking "East" is part and
parcel of Custodian of the Two Holy Mosques King Abdullah's vision. In many
ways, the basis of the relationship is founded on the vision that China will
increasingly play a fundamental role in the global economy and in its own way
Saudi Arabia is an essential systemic partner.
In many ways, links between the two have grown so
dramatically because of each country's strengths. China is an exporter of goods
and Saudi Arabia is a significant importer, while China's growth and acute
demand for oil imports has been largely supplied by Saudi Arabia. China is
second largest source of imports to the Kingdom and is ranked fifth as a
destination for Saudi exports. Indeed, Saudi Arabia is China's biggest trading
partner in the West Asia and North Africa region.
The rise in Saudi Arabia's oil exports was spurred by the
growing energy demand in China that outstripped domestic supply. Between 2000
and 2005 China's oil consumption increased from 4.7 million barrels per day to
almost 7 million barrels, 43 percent of which was derived from imports.
China today is importing massive quantities of oil and,
following the modification and augmentation of its refining capacity, is able
to absorb increasing amounts of Saudi (heavy) oil. This has placed Saudi Arabia
into the position of China's leading foreign source of oil, while at the same
time making China the Kingdom's leading crude oil customer.
Important contributions to the development of the Saudi
economy have been made by Chinese companies over the past few years. Chinese
firms have begun to invest in infrastructure and industry in Saudi Arabia,
including in an aluminum smelter in the southern province of Jazan, at a cost
of $3 billion. Likewise, important investments over the recent past have been
made by Saudi companies. Saudi Aramco, owns a refinery in Fujian province as a
joint venture with Sinopec, a Chinese petroleum giant, and ExxonMobil.
Saudi Arabia is pursuing its own industrial drive based
on value added manufacturing, based on a knowledge based economy and know-how.
China would be an essential partner in enhancing Saudi Arabia's national
industrial strategy in the years to come. Doubling industrial contribution to
20 percent of GDP by 2020 is Saudi Arabia's goal.
Today, more than 800 Saudis are attending Chinese
universities, more than the total studying in France. Few would know that Saudi
Aramco has been sending students to study in China since 1986. Saudi Arabia's
future is based on diversification through education and innovation, something
China and its policy makers know all too well. Both countries have much to gain
as the relationship evolves and attains greater mutual depth.
- John Sfakianakis is group general manager and chief
economist at Banque Saudi Fransi. He is based in Riyadh.
