DUBAI, Aug. 23 (Xinhua) — Many leading economists in Dubai believe that the growing ties between China and the oil-rich Gulf Arab states have the potential to expand further and to withstand global economic shocks.
When Chinese Prime Minister Wen Jiabao paid a landmark state visit to the United Arab Emirates (UAE) in January this year, the Gulf state’s President H. H. Sheikh Khalifa Bin Zayed Al Nahyan said “The UAE has the sincere desire to bolster its relations of cooperation with China in pursuit of more progress and development in both countries and further stability in world economy.”
Wen expressed the same hopes in exchange and urged his 200,000 compatriots who live in the UAE to respect local Arab culture and customs.
There are over 3,800 Chinese companies in the UAE, and the number is growing domestically and regionally at stop-watch speed.
Economic ties between Beijing and Abu Dhabi, but also between the Gulf Arab countries as a whole, grew indeed at an impressive level in the last decade, with the total trade between China and the six countries of the Gulf Cooperation Council (GCC), which are Saudi Arabia, the UAE, Kuwait, Bahrain, Qatar and Oman, rising ten- fold to hit 100 billion U.S. dollars last year.
These new ties mean a win-win situation for both sides. China imports its urgently-needed oil from the GCC; in exchange, Beijing gains access to a fast-growing consumer market with “Made in China ” products flooding into the GCC, whose total population stands at 47 million today and grows at 6 percent annually.
Due to the new East-Eastern axis, both sides gain a higher degree of independence from traditional trade routes with Europe and North America.
Even during the dull summer month of August, ample activities were seen.
The Dubai Mercantile Exchange, at which oil futures contracts are traded, said on Aug. 14 that it witnessed an annual growth rate of 31 percent for its flagship product DME Oman, “an indication of the growing importance of Asian demand for oil in the global marketplace,” said DME Chairman Ahmad Sharaf.
Data compiled by the DME showed that China’s primary energy demand rose to around 2,400 million tons of oil equivalent in 2012, up from around 1,000 tons in the year 2000.
“China’s role in global energy is very substantial, both because of China’s power requirements, but also because of its consumer market,” said Mark McFarland, Chief Investment Strategist of Emirates NBD Private Bank.
“If China’s pace of urbanization continues at anything like the rate it has done for the last twenty years, China’s demand for energy and related products will be immense,” said McFarland, who worked for many years in Hong Kong in the 1990s.
Meanwhile, on Aug. 9, China’s largest lender Industrial and Commercial Bank of China (ICBC) received a license to conduct commercial banking in Saudi Arabia.
Besides oil and capital, travel flows between the Arab world and the “Middle Kingdom” are increasing year by year. Nearly all Gulf Arab airlines in recent years have expanded their flights to China and vice versa.
“The decline in arrivals to the UAE from Europe was 80,000 in 2011, while the increase in arrivals from Asia was a 120,000 which clearly off-setting the loss from Europe,” said Liz Martins, senior economist at HSBC (Middle East) in Dubai.
ABILITY TO WEATHER DIFFICULTY
McFarland also expressed trust in China’s ability to weather the global recession as well its own slowdown, but added that external factors will play a significant role in how the world’s second largest economy will perform.
“Clearly, events in Europe will play a serious role in determining the extent of any further slowdown in activity. Europe is China’s largest trading partner and successful resolution of Europe’s problems is the key to the next twelve months,” McFarland added.
HSCB’s Martins said that “Our global economics team and Asia economics team are generally very bullish on China over the long- term. However, there is a bumpy road ahead, it will be cyclical. Nevertheless, we do think that the Chinese growth model has a structural, solid basis over the next few months and years.”
Dr. Farouk Soussa, Citigroup Middle East’s chief economist, pointed out that, within the GCC, the UAE benefitted in particular from Beijing’s sound fiscal and monetary policy.
“Chinese investment has helped the UAE weather the global economic downturn, and has been across a multitude of sectors, but particularly in infrastructure. The currency swap agreement between the countries will aid trade flows, and will potentially position the UAE as a primary gateway for the region’s trade with China as whole.”
CENTURIES TO COME
Promoting trade flows to new highs will be on top of China’s agenda. Whatever the impact from the euro zone debt crisis might be, Beijing with the GCC will continue to walk the path for expanding relations, analysts say.
During his visit to the UAE in January, Chinese Premier Wen triggered hopes for more trade by saying that signing the long- awaited FTA with the GCC was “near.”
Whether this agreement will be sealed this year, UAE Minister of Foreign Trade Sheikh Lubna Al-Qasimi is convinced that “China- Arab relations have centuries to come.”