Dubai – Decypha: As UAE diverts heavily towards expanding its Foreign Direct Investments (FDI), one crucial ally for UAE in post-non-oil driven era is China, withstanding major investments since 1984. UAE and China have a strategic joint fund worth of $10 billion that has been signed in 2015. Financed equally by both countries, the agreement is aimed at boosting trade between both countries including China’s ‘One Belt, One Road’ and ‘Maritime Silk Road’ initiatives.
Economic Relations between China & UAE
As diplomatic relations were established in 1984, bilateral trade between both countries has grown from $ 63 million that year to approximately $ 60 billion in 2016, according to a report by Trends MENA, making China the largest investor in the Arab region in 2016 with investments. Named as UAE’s second largest trading partner and its biggest exporter, China has 60% of its export pass through UAE’s gateway onto regional markets attaining an annual volume of exchange worth $ 70 billion, according to Reuters.
China also holds essential energy demands where the country showed interest in new avenues for cooperation where UAE is playing a role in globalizing green energy and infrastructure development. A delegation from UAE to China has highlighted three important categories including currency cooperation, partnership investment, and solar-oriented green energy, according to a statement by James Town.
Industries of Interest and Contribution to UAE economy
As trade recorded between both countries in 2015 amounted a total of $ 54.8 billion, the entire Middle East has managed to incur over $ 92 billion worth of foreign investment according to the Investment Climate Report for 2017, cited by Arabian Business. China achieved approximately third of foreign investment, amounting $ 15.1 billion. Emirati trade experts expect growing trade figures due to good relations between both countries, whereas the foreign direct investment from China to UAE recorded a total of $ 390 million from January to September 2016 which is a 358% growth compared to the same period last year, according to the Chinese ambassador, Jian who was cited by Gulf News.
The recorded investments that contributed to UAE’s economic growth bolstered in various industries such as the road initiative, infrastructure and energy, making UAE China’s second largest trading partner in the Middle East and preferred than other GCC countries due to UAE being the region’s biggest market for Chinese goods. UAE operates 60%of Chinese exports embarking $70 billion annually.
Showing interest in export labor and technologies to Arab countries, China has operation companies in the UAE such as Huawei and ZTE and also plans to focus on communities through scientific development according to Trend MENA. Another vibrant sector that China is pumping investments in the UAE is banking, where China Construction Bank has recently listed a $ 600 million bond on Nasdaq Dubai which is the only international exchange in the region that is related to regulatory standards. The four largest Chinese banks are headquartered in UAE’s financial free zone in Dubai International Financial Center (DIFC).
Ongoing Investments
Several Chinese investments are currently spanning across UAE including the recently signed agreement of five Chinese companies that are set to begin operations in Abu Dhabi’s industrial at an investment cost worth $ 300 million. The investments will be allocated in sectors such as power, metals, natural resources, and banking, according to Reuters. The 50-years agreement was signed with the Jiangsu Provincial Overseas Cooperation & Investment Company (JOCIC) and also includes making advantage of a lease worth 2.2 kilometers at Khalifa Industrial Zone Abu Dhabi (Kizad).
The five Chinese companies include Hanergy Thin Film Power Group, Jiangsu Fantai Mining Development (Group) Co Ltd, Xuzhou Jianghe Wood Co, Jiangsu Jinzi Environmental Technology Co, and Guangzheng Group. This is not the first Chinese investment in Kizad as it has witnessed an investment by Chinese Cosco Shipping Ports Limited that won a 35-year concession contract to build and operate a new container terminal on site in UAE as part of its investments over $ 700 million.
UAE’s banking sector has also experience ambitious Chinese investments including a contract established late 2015 by Mubadala, asserting the China Development Bank Capital and China’s State Administration of Foreign Exchange are to position capital through investments in UAE and China, according to a statement by Mubadala. The fund overlooks investment strategies, asset classes, and offers opportunities in Greenfield projects. The contact aims to persist on sustainable returns and offers principal capital protection.
China and UAE also signed the first bilateral currency swap in 2012 worth $ 5.5 billion. China has signed several currency swap deals with other countries previously however UAE was the first country in GCC countries that signed this contract.
Another ambitious ongoing project is The ‘One Belt, One Road’ (OBOR) initiative is an initiative categorized in renewable energy sector that aims to merge the East and Central Asia with the Middle East, Africa, and Europe through UAE’s government support. The initiative is divided into the Silk Road Economic Belt which begins in China’s capital Xi’an and passes to Central Asia onto Western Europe and the Maritime Silk Road, the other part of the infrastructure initiative, which links Mainland China with South Asia, the Middle East, and Africa through several water spectrums. China is building six new routes that will connect it with countries and regions globally through 77 ports and sea stations worldwide as part of the initiative.
The Maritime Silk Road investments are expected to benefit China by enabling it invest more funds and resources through a larger part of the world and it will turn the country to a rich political and economic material of Eurasia. OBOR will focus on increasing safety and security of economic interests of GCC countries since Abu Dhabi is a founding member of the initiative
UAE is also one of the countries of the international Asia Infrastructure Investment Bank (AIIB) in Beijing in China. The bank has approved a set of loans in 2016 that were allocated the Silk Road projects. OBOR aims to finance a set of infrastructure projects that will work as transition towards clean energy and will provide investment opportunities for large, medium, and small firms.
Particularly unique from other GCC countries, UAE was chosen by China as a currency partner because of its stability, wealth and former cooperation, based on research. There are several rising opportunities that continue to foster across both countries’ visions where China remarks the Expo 2020 as awaited investment opportunities. Both countries are opting on diversifying energy contracts, currency cooperation, and joint investment following the OBOR and Maritime Silk Road initiatives. UAE is deemed a strategic hub for Chinese investments in the Arab region.
By Fatma Khaled
