Complex Made Simple

Middle East to receive $20bn from China: Why the interest in the region?

The Trump China trade war is a ‘plus’ to the region.

It’s a plus, because it turned China’s attention and interest to the Middle East the GCC, aiming to shift economic presence to the 5-star red flag from the US Stars and Stripes and become a main trading partner.

But what’s behind China’s sudden show of affection in the form of loans and philanthropy to the region, in what it calls the “oil and gas plus” model?

A surprising, yet welcome gift

Source: Reuters

Middle East nations will have at their disposal $20 billion in loans, and about $106 million in financial aid, to revive their economies.

This was announced At the China Arab forum being held in Beijing this week, where 21 Arab countries are participating, Reuters reports.

China produces half of its oil and gas supply and imports the other half from the Middle East. Yet, the East Asian nation has always maintained a relative distance in its business dealings, avoiding the complications of politics and other sensitive issues their business partners are going through and instead opting to remain strictly professional.

With this new pledge, China is proving that it will be taking an active role in several aspects and sectors in the region.

“Development was key to resolving many security problems in the Middle East,” Xi told a gathering with representatives of 21 Arab nations in the Chinese capital, Reuters reports.

“We should treat each other frankly, not fear differences, not avoid problems, and have ample discussion on each aspect of foreign policy and development strategy,” he said.

China would offer aid worth $15 million to Palestine to support economic development, besides providing a further $91 million to Jordan, Lebanon, Syria, and Yemen, he added.

He also announced that a consortium of banks from China and Arab nations, with a dedicated fund of $3 billion, will also be set up.

“Oh hey,” Middle East!

Dr. Altay Atli, a lecturer at Koç University in Turkey, pointed out that China was solely focused on the economic aspects of the Middle East policy, however, things changed after 2011’s Arab Spring as China found itself isolated from the region in terms of economy, Turkish state-run Anadolu Agency reports.

“China continues its aids and investments to the region during the financial shifts. While doing this, it wants to join the roundtable by having a say in politics and economy of the Middle East, which will be reshaped again,” he added.

Another, more obvious reason for this sudden change of heart is the advent of the Chinese Belt and Road project.

The Belt and Road initiative was announced in 2013 by Chinese president Xi Jinping, a sort of new-age restoration of the ancient silk road commerce route. The Route is a development project that will help connect China to the regions to its west, in Central Asia, the Middle East, and Europe.

According to the Belt and Road Action Plan released in 2015, the initiative will encompass land routes (the “Belt”) and maritime routes (the “Road”) with the goal of improving trade relationships in the region primarily through infrastructure investments.

With the Middle East factoring greatly in this project, the Chinese government cannot afford faltering infrastructure or political or economic unrest hindering their efforts. So, while their laissez-faire attitude has served their economic pursuits in the past, China will have to adopt a more cooperative and nurturing role in the region if it seeks to fulfill its ultimate goal.

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What’s already been cooking?

Last month, China Daily reported that Alibaba’s logistics arm, Cainiao, had signed a Memorandum of Understanding (MoU) with UAE-based Emirates Airlines’ freight branch, SkyCargo. This will allow both companies to streamline and improve the delivery of cross-border shipments, giving a boost to the e-commerce market in the region through its Aliexpress service.

Conversely, UAE-based noon, an e-commerce platform, announced the launch of two entities in China, one on the mainland and the other in Hong Kong, kick-starting noon’s Asia operations.

In China, noon aims to establish a trusted network of high-quality Chinese brand owners with unique offerings, to bring the best range of products to customers in the Middle East.

The Investor reports that the UAE, particularly the trading center of Dubai, is expected to be a key beneficiary of Chinese investment interest in the next few years. Large state-owned construction companies such as China State Construction Engineering Corporation (CSCEC) and China National Aero-Technology International Engineering Corporation already have a number of projects underway.

For example, CSCEC has committed to 16 projects in Dubai, mostly in the residential sector, but also in retail and hospitality. The firm is also active in other Emirates; in January CSCEC signed an agreement with Ajman Holdings to build a US$136 million shopping center in Ajman, one of the UAE’s emirates.

China-Middle East relations will kick off in full force in the coming years, in a fruitful relationship that will have wide-scope effects on the region’s place on the international stage, as well as its place as a region of commerce and trade.

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