Growing GCC-China ties provide boost to regional economies (page 1 of 2)

Chinese economic growth slumped to a three-year low in the first three months of 2012 as gross domestic product increased by an annual rate of 8.1% in the first quarter, down from 8.9% in the previous three months. Nevertheless the country has seen double-digit GDP growth for much of the last decade, and while trade with the struggling economies of Europe and the US may have faltered, economic ties between China and the Gulf have grown significantly even in the aftermath of the global financial crisis.

Trade between China and the UAE has risen by more than a third every year for the past decade, to reach around $35bn last year. Tourist visits from China have soared, too, after the UAE was granted 'preferred destination status' by the Chinese authorities in 2009, cutting red tape for travellers and travel agents with the Emirates in their sights.

"China has changed the world, and we're already seeing it in terms of the trade flows in and out of the Middle East," says Adil Marghub, Manager, Infrastructure Cluster, Mena, at the International Finance corporation (IFC), a member of the World Bank Group which finances and provides advice for private sector ventures and projects in developing countries.

"It is already the largest trade partner for the UAE, and although China is slowing down, that will have less of an impact upon a region such as the Middle East, than it will on other regions that are exporting commodities to China."

A visit to China in March by Sheikh Mohammed Bin Zayed, Crown Prince of Abu Dhabi, included meetings with PM Wen Jiabao, the National People's Congress chairman Wu Bangguo and the vice president, Xi Jinping, who is expected to take over as president next year. And Sheikh Mohammed's high-level encounters echoed Jiabao's recent visit to the Middle East, during which the Chinese PM signed more than a dozen agreements across a broad range of sectors including trade, infrastructure and finance, with the Saudi Arabian, UAE and Qatari governments during a week-long tour.

Shift to focus on emerging markets

"Even in the wake of the global financial crisis, trade continues to grow," insists Mohammed Al Muallem, Senior VP and MD for the UAE Region, at ports operator DP World. "Global consumer trade rose 6.5% in 2011, and yet the Middle East saw double-digit growth in the same year. This was due to the Asian economies, in particular China and India.

"We took a decision in the early days, long before the financial crisis, to position ourselves in the emerging economies where we knew that the shift would come, where we could really contribute to the growth of those economies," he continues. "Two thirds of our portfolio is in those emerging economies [of Asia], because we need to connect our region to that region."

China is hungry for Gulf products, too, in particular the energy it needs to satisfy the soaring electricity demands of its fast-developing economy. World Bank figures indicate that somebody who lives in an urban setting uses approximately four times the energy of somebody who lives in a rural setting. In January this year China announced people living in its towns and cities for the first time outnumbered those in the countryside: urban dwellers accounted for 51.27% of China's entire population of nearly 1.35 billion, up from just 10.6% of the population in 1949, when the Communist Party took power, and just under 19% in 1979, according to official Chinese statistics.