Growing China-Middle East Economic Ties Cannot be Ignored

Commentary The fireworks were flying during the recent China and Gulf Cooperation Council (GCC) summit in Riyadh. Several high profile business deals were announced between the Chinese Communist Party (CCP) in Beijing and the GCC—traditionally and until recently a strong ally of the United States—that could help shape the landscape of international investments in the future. On one side we have the Arab states, a collection of oil-rich nations with a large young population and cash to invest; on the other side we have China, a manufacturing powerhouse with an aging population and a desperation for economic diversification and growth. The biggest deal announced was a $5.6 billion investment in Chinese EV maker Human Horizons—which makes cars under the HiPhi brand in China—by the Saudi Arabia Ministry of Investment. Saudi’s plan is to use Human Horizons’ technology to boost its domestic electric vehicle manufacturing capabilities. That deal alone accounted for more than half of the $10 billion in value announced in deals across real estate, healthcare, agriculture, and technology. As of 2021, China had contributed more than $23 billion in foreign direct investment in Saudi Arabia. EV is a big area of cooperation between the Gulf states and China. Last week the government of Abu Dhabi announced a $1 billion investment in Chinese EV maker NIO through CYVN Holdings, a mobility-focused investment platform backed by the Abu Dhabi government. Specifically, CYVN’s investment would help NIO’s “international business growth,” CYVN Chairman Jassem Al Zaabi said in a statement. These are just the latest developments of economic cooperation between the Middle East and China. Abu Dhabi’s sovereign wealth fund, Mubadala, for example has an office in Beijing and as early as 2015 committed $10 billion to a fund to invest in projects in China. Qatar and Kuwait also have significant investments in Chinese companies. To a lesser extent, Chinese firms also announced investments in Gulf states during the June summit. Saudi ASK Group and the China National Geological & Mining Corp. agreed on a $500 million deal to mine copper in Saudi Arabia. And in another $533 million deal, Zhonghuan International Group (Hong Kong) agreed to jointly invest in an iron production facility in Saudi Arabia with AMR ALuwlaa Company. The cash-rich Middle East nations are pivoting to China during a time that China critically needs foreign investment dollars. We previously covered the precarious situation facing the Chinese economy. To execute CCP boss Xi Jinping’s vision for Chinese self-sustainability and technological innovation, Beijing desperately needs foreign cash. And partnering with resource-rich Gulf nations grants China a secure supply of oil and gas should the country’s growing demand for resources resume. Official statistics count $73.5 billion in foreign investment in China during the January to April 2023 period, according to China’s Ministry of Commerce. That’s a 3 percent decline from 2022. Investments from the United States have become more politically fraught after recent CCP raids on Chinese offices of U.S. firms such as consultancy Bain & Co., eliciting complaints from the American Chamber of Commerce in Shanghai. U.S. venture capital firm Sequoia Capital recently announced plans to split off its Chinese investment subsidiary into an independent firm. However, Middle East funding lends a valuable lifeline for Chinese companies both domestically and in their ambitions of growing abroad. The NIO investment would specifically propel its international operations, potentially accelerating its plans to sell EVs in the U.S. market. It also comes during a time when the Biden administration has increasingly antagonized the Middle East, specifically Saudi Arabia, while undoing some of the progress President Donald Trump made with Saudi Crown Prince Mohammed bin Salman. For example, Saudi Arabia Public Investment Fund’s announced merger with the U.S. PGA Tour and the DP World Tour to gain control of the biggest U.S. golf league has generated criticism from U.S. mainstream media. Senate Finance Committee chairman Ron Wyden (D-Ore.) unveiled a Senate investigation into the matter. The U.S. government has also criticized OPEC countries’ decision to cut oil production in 2022 and early 2023. This effectively encourages some of the strongest BRICs (Brazil, Russia, India, China, and South Africa) economies (and past U.S. allies) to seek closer relationships with China and Russia, and playing right into the hands of the CCP, which is aiming for global superpower hegemony.

Growing China-Middle East Economic Ties Cannot be Ignored

Commentary

The fireworks were flying during the recent China and Gulf Cooperation Council (GCC) summit in Riyadh.

Several high profile business deals were announced between the Chinese Communist Party (CCP) in Beijing and the GCC—traditionally and until recently a strong ally of the United States—that could help shape the landscape of international investments in the future.

On one side we have the Arab states, a collection of oil-rich nations with a large young population and cash to invest; on the other side we have China, a manufacturing powerhouse with an aging population and a desperation for economic diversification and growth.

The biggest deal announced was a $5.6 billion investment in Chinese EV maker Human Horizons—which makes cars under the HiPhi brand in China—by the Saudi Arabia Ministry of Investment. Saudi’s plan is to use Human Horizons’ technology to boost its domestic electric vehicle manufacturing capabilities.

That deal alone accounted for more than half of the $10 billion in value announced in deals across real estate, healthcare, agriculture, and technology. As of 2021, China had contributed more than $23 billion in foreign direct investment in Saudi Arabia.

EV is a big area of cooperation between the Gulf states and China. Last week the government of Abu Dhabi announced a $1 billion investment in Chinese EV maker NIO through CYVN Holdings, a mobility-focused investment platform backed by the Abu Dhabi government.

Specifically, CYVN’s investment would help NIO’s “international business growth,” CYVN Chairman Jassem Al Zaabi said in a statement.

These are just the latest developments of economic cooperation between the Middle East and China. Abu Dhabi’s sovereign wealth fund, Mubadala, for example has an office in Beijing and as early as 2015 committed $10 billion to a fund to invest in projects in China. Qatar and Kuwait also have significant investments in Chinese companies.

To a lesser extent, Chinese firms also announced investments in Gulf states during the June summit. Saudi ASK Group and the China National Geological & Mining Corp. agreed on a $500 million deal to mine copper in Saudi Arabia. And in another $533 million deal, Zhonghuan International Group (Hong Kong) agreed to jointly invest in an iron production facility in Saudi Arabia with AMR ALuwlaa Company.

The cash-rich Middle East nations are pivoting to China during a time that China critically needs foreign investment dollars.

We previously covered the precarious situation facing the Chinese economy. To execute CCP boss Xi Jinping’s vision for Chinese self-sustainability and technological innovation, Beijing desperately needs foreign cash.

And partnering with resource-rich Gulf nations grants China a secure supply of oil and gas should the country’s growing demand for resources resume.

Official statistics count $73.5 billion in foreign investment in China during the January to April 2023 period, according to China’s Ministry of Commerce. That’s a 3 percent decline from 2022.

Investments from the United States have become more politically fraught after recent CCP raids on Chinese offices of U.S. firms such as consultancy Bain & Co., eliciting complaints from the American Chamber of Commerce in Shanghai. U.S. venture capital firm Sequoia Capital recently announced plans to split off its Chinese investment subsidiary into an independent firm.

However, Middle East funding lends a valuable lifeline for Chinese companies both domestically and in their ambitions of growing abroad. The NIO investment would specifically propel its international operations, potentially accelerating its plans to sell EVs in the U.S. market.

It also comes during a time when the Biden administration has increasingly antagonized the Middle East, specifically Saudi Arabia, while undoing some of the progress President Donald Trump made with Saudi Crown Prince Mohammed bin Salman.

For example, Saudi Arabia Public Investment Fund’s announced merger with the U.S. PGA Tour and the DP World Tour to gain control of the biggest U.S. golf league has generated criticism from U.S. mainstream media. Senate Finance Committee chairman Ron Wyden (D-Ore.) unveiled a Senate investigation into the matter.

The U.S. government has also criticized OPEC countries’ decision to cut oil production in 2022 and early 2023.

This effectively encourages some of the strongest BRICs (Brazil, Russia, India, China, and South Africa) economies (and past U.S. allies) to seek closer relationships with China and Russia, and playing right into the hands of the CCP, which is aiming for global superpower hegemony.