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Source: www.asiaecon.org |

CHINA AIMS TO BOLSTER TIES WITH SAUDI ARABIA AND THE GULF


With very complementary economies, China and Saudi Arabia have enjoyed strong bilateral ties in recent years. China's rapidly growing economy has fueled its need for energy resources, substantially raising the importance of cooperation with the oil rich country of Saudi Arabia as well as its oil producing neighboring countries.




With very complementary economies, China and Saudi Arabia have enjoyed strong bilateral ties in recent years. China’s rapidly growing economy has fueled its need for energy resources, substantially raising the importance of cooperation with the oil rich country of Saudi Arabia as well as its oil producing neighboring countries.

China and Saudi Arabia have expressed plans to sign several trade and energy cooperation agreements between Sinopec, China’s major oil company, and the Saudi state oil company Aramco. Chinese President Hu Jintao has also showed interest in increasing trade liberalization agreements and creating measures to alleviate the current pressures of the global economic slowdown.

President Hu also hopes to secure his country’s involvement in several infrastructure development projects in Saudi Arabia in an effort to increase Chinese presence in the country and alleviate the pressures of China’s domestic unemployment problem.

China’s unemployment rate has reached 4.5%, a figure that does not even include the hundreds of thousands jobless citizens in rural areas. Moreover, Chinese migrant workers have been returning to the country in alarming rates. Out of an expected 9.7 million Chinese migrant workers, 3 million have returned, out of which, 2 million are unemployed with no job prospects.

Currently, there are around 16,000 Chinese workers in the Saudi Arabia. China hopes that by increasing the number of workers in the Saudi labor market, the country will ameliorate the domestic unemployment burden, while also expanding Chinese influence in the Middle East.

China has recently realized the importance of strengthening economic relations with Saudi Arabia, as the country is home to one-fourth of the world’s oil supply. Sinopec is committed to the exploration of natural gas in the Saudi region, while Saudi Arabia has made significant investments on the development of oil refinery infrastructure in China. 

Bilateral trade has experienced rapid growth, reaching a volume of $25 billion in 2007, more than 80 times the initial amount since both countries forged diplomatic ties 18 years ago. In 2008, trade volume between the two countries exceeded $41.8 billion.  Both sides expect to increase ties by expanding current trade to include cooperation in fields such as environmental protection, vocational education and high technology.

China’s efforts to strengthen ties with Saudi Arabia is a crucial step towards increasing Beijing’s influence in the Gulf. Saudi Arabia is a major oil producer in the Middle East, a key player in the Cooperation Council for the Arab States of the Gulf (GCC) and a traditional ally of the United States.

China and the GCC have recently experienced rapid developments in economic relations with present collaboration in all areas of trade, investment, project contracting, labor, and energy.  GCC members rank as China’s 9th largest exporting market, with bilateral trade totaling $58 billion in 2007,  accounting for 3.1 % of China’s total foreign trade volume that year. 

GCC investment in China is likely to increase with the implementation of stronger Sino-Saudi ties. With stronger relations, the GCC member countries could benefit greatly from the opportunities presented in China’s rapidly growing economy.

Investments will be facilitated by the GCC’s soaring foreign reserves, a result from the recent boom in its oil and gas revenues. Moreover, total nominal GDP in GCC countries is rapidly increasing with an expected average of $1.2 billion by the end of 2009. 

China on the other hand, has began to increase its investments in the GCC region, with Chinese firms having contracts to build everything from railways and cement plants in SaudiArabia, to a port in Kuwait, and a sewage system in UAE.

Further, China is predicted to considerably strengthen GCC relations as experts predict the country to import 20% more oil from the region in the following years,  going from the current 50% to 70% in 2015. China also seeks to increase phosphate and aluminum imports, which are abundant in GCC countries.  Increased dependency on GCC oil, phosphate, and aluminum exports could result in further Chinese investment in the region in order to avoid any local political or economic instability.

Overall ,  the future of Sino-Arab relations seems to be promising, considering China’s overwhelming growing need for energy security. GCC oil exports to China are expected to grow an average of 3.7% annually until 2030.  Moreover, China’s needs to establish influence in the area and to secure new trading markets as the global economy slows, will result in an expected China-Middle East trade volume increase to between $350 billion and $500 billion by 2020.


Source: www.AsiaEcon.org

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Source: www.asiaecon.org |


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