Behind China’s breakthrough in the Middle-East

Quite unspectacularly - with the exception of its brokering the reconciliation between Iran and Saudi Arabia in March 2023 - China has become the Middle East’s biggest trade partner and one of the biggest investors in the region (in first or second place, depending on the year), surpassing the US. According to the Arab Investment and Export Credit Guarantee Corporation (Dhaman), China currently holds one third of the direct foreign investments (DFI) in the region. Seventeen years ago, its presence there was estimated...at 1 %.

This meteoric progress is due to an unprecedented convergence of strategies between all the actors involved. On the Chinese side, in addition to the usual commercial incentives - ensuring its energy sources and opening new markets - is its determination to become a world power, capable of gathering the countries of the global South around its norms and values. This involves the development of the Belt and Road Initiative (BRI), whose prestigious history of interaction with the Arab and Islamic worlds (as the Silk Road) has been cleverly updated. For John Fulton, one of the top experts on Sino-Arab relations, “China remains primarily an economic actor there, with growing political and diplomatic engagement and still little in the way of a security role¹”. But it is quietly working on this third area as well.

Synergy between Riyadh, Abu Dhabi and Beijing

For the Gulf states, but also for Egypt, the desire to shed their exclusive engagement with the United States, lower the cost of development and no longer be confined to their role of energy-purveyors, provides a powerful incentive to strengthen their ties with Beijing. Thus “Vision 2030”, the grandiose project for the transformation of Saudi Arabia, dreamt up by Crown Prince Mohamed Ben Salman (often known as MBS), fits nicely with the tentacular BRI, the brainchild of President Xi Jinping. The same observation applies to the less spectacular project “Vision 2031”, the progeny of the United Arab Emirates (UAE) President, Mohammed Ben Zayed (known as MBZ). As Camille Lons, a guest scholar with the European Council on Foreign Relations (ECFR), has written:

“Saudi Arabia and the UAE have emerged as key middle powers driven by their ambition to play a role in a changing global order and the growing geopolitical competition between China and the United States².”

For the US, the days when its relations with the Gulf states were entirely determined by black gold are gone forever. Oil “drilled in America”, as Donald Trump puts it, has taken the lead now that the US has become the biggest producer on the planet with 19.4 million barrels per day against Saudi Arabia’s 11.4 million. In fact, towards the end of his second term in office, Barack Obama could speak of “turning towards Asia” - not without in the process unsettling the region’s rulers, who no longer felt really protected. However, Washington has not given up the Middle East card and retains its military bases and/or troops stationed in the UAE, Qatar, Bahrain, Saudi Arabia, Kuwait and Jordan...

Joe Biden’s miserly welcome

As for China, its position is exactly the opposite. Its need for oil informs all its foreign relations while at the same time it cannot possibly field a security apparatus to rival with that of the US, despite its base in Djibouti. So it is going to consolidate its presence by using its economic ties to advance its strategic pawns.

While commercial ties go back some time, the Chinese “turn to the Gulf” was really consolidated during the last decade. In 2016, Beijing published its first white paper on “China’s Arab Policy”, stressing five areas of cooperation: energy, technology, aerospace, finance and culture. Six years later, in December 2022, Xi Jinping is welcomed in Riyadh with a grandiose ceremony. His plane is “escorted in Saudi air-space by four jet-fighters and once it has landed, six more jets fly over, leaving a red and yellow smoke-trail, the colours of the Chinese flag” (Le Monde, 9 December 2022)!

Three summit meetings were held on that occasion: one bilateral with MBS and his advisors: one at a regional level with the Golf Cooperation Council (GCC), composed of all six Gulf monarchies, and finally a broader Sino-Arab summit including Egypt, Tunisia and Palestine. Contracts amounting to $50bn are said to have been signed, though it is difficult to separate the firm commitments from the vague promises. But the fact remains that just a few months earlier, on 7 July 2022, US President Joe Biden was accorded a miserly welcome from MBS. A striking contrast.

Between 2016 and 2022, the volume of Chinese trade with GCC members more than doubled. First in line was Saudi Arabia ($125bn) followed by the UAE ($95.2bn), Oman ($40.4bn), Kuwait ($31.5bn), Qatar ($24.5bn); figures provided by the Chinese Customs Administration and Ministry of Trade as well as the French Observatory of the New Silk Roads (OFNRS). Unsurprisingly, energy and petrochemical products are, as ever, at the top of the list, constituting between 40 % and 75 % of the exports to China by members of the GCC. Joint Chinese ventures with Saudi and the UAE are mushrooming and reciprocal investments are developing quickly: the Saudi company Aramco has joined up with Sinopec in Fujian (China) and become co-owner of Rongcheng, one of the petrochemical giants, and Abu Dhabi National Oil Company (ADNOC) has partnered with the China National Petroleum Company (CNPC).

Sights set ont the ports and artificial intelligence

Chinese companies are also taking part in the construction of ports, often associated with huge industrial or housing developments. As for instance in Saudi Arabia, the economic zone of Jazan (on the Red Sea) with its considerable financial and fiscal incentives, as well as the ports of Yanbu and Jeddah (also on the Red Sea) destined to serve as trade hubs. Also notable are the terminal in the port of Khalifa in the UAE, or the huge economic zone on the Suez canal, where Chinese companies (public and private) are committed to investing over $8bn in the coming years.

These port and industrial projects are economically interesting for all concerned because they facilitate connections between Asian, African and European countries. But they also provide China with an essential security advantage, because whoever controls the Bab el-Mandeb straits and the Suez Canal can block them completely. This is Beijing’s nightmare in the event of a confrontation with its US rival, because two-thirds of its goods travel by sea.

Economic cooperation extends beyond these traditional sectors. It jibes with the strategic choice of the Gulf rulers to use their oil earnings to escape from their dependency on oil and modernise their countries. “Green energies” and hydrogen projects have made their appearance, with China’s backing and know-how, for it leads the world in this field. Its companies are involved in the world’s two largest solar energy projects: the solar parks Mohamed Ben Rashed Al Maktoum in Dubai and Noor in Abu Dhabi, among many other examples.

The most spectacular Chinese breakthrough is to be found in the areas of telecommunications, e-commerce and artificial intelligence (AI). Huawei rolled out its 5G network in all the Gulf states as early as 2019, in partnership with local companies. Although rejected by western countries, especially the US which banned it, Huawei “has played a pivotal role...in the region’s digital transformation”³, be it in the realms of “smart cities”⁴, data centres, biogenetics, facial recognition or...public surveillance. Last September, the Emirates set up the Arab world’s first AI network. At the end of January 2025, Saudi Arabia inaugurated a digital cloud data storage centre built by the Chinese group Tencent.

Teaching standard Mandarin on schools

In addition, Camille Lons tells us:

“professors of Chinese or Chinese-American origin head some of the top AI research institutions and enterprises in the UAE and Saudi Arabia, such as King Abdullah University of Science and Technology in Saudi Arabia and the Mohammed bin Zayed Artificial Intelligence University (MBZUAI) in the UAE.”

The objective is to adapt digital models to the Arabic language and to build innovative economies in a field previously monopolised by closed US companies such as Microsoft, OpenAI, and Google. Chinese companies are trying to catch up. No wonder that the Emirates (in 2019) and Saudi Arabia (in 2023) have introduced the teaching of standard Mandarin in their schools and colleges.

For China, the conquest of a new market is always a powerful incentive, but it would be a mistake to see only the economic aspect of all this. Beijing is mostly seeking to share, or even to impose, its technological norms, which are both technical and ideological keystones in its competition with the United States. Indeed, everyone knows that there is nothing neutral about AI and it many applications.

The competition between China and the US no longer springs from opposition between two antagonistic systems as in the days of the cold war. Both countries are propelled by capitalist principles (the one being just a bit more state-controlled than the other). But the match is being played between two different conceptions of a multipolar world in which China means to increase its strategic influence, especially in the global South.

Towards a Petro-Yuan ?

Another powerful symbol is that local currencies are starting to be used for trade between countries. The sums involved are modest, but appear to mark an early sign of possible disconnection from the hitherto sole currency for such transactions, the US dollar. The embargo against Russia, cut off from the international finance system (SWIFT), was a source of worry for rulers and wheeler-dealers, reared on petrodollars. It would only take a decision by the US for their investments to be frozen. Those well-endowed sovereign funds⁵ began diversifying their investments, turning towards hi-tech start-ups and real estate in China. In the wake of which, and for the very first time, the Chinese government issued government bonds (sovereign debt) on Riyadh’s financial market. While it was hoping to collect $2bn with this operation, orders quickly amounted to...$40bn, proof of the confidence which the Saudi tycoon and rich families have in even a slowed-down Chinese economy. Above all, Beijing was demonstrating that it could become a decisive actor in the recycling of those much-touted petrodollars, until now entirely in the hands of Washington. If this logic were carried all the way, it would be capable of upsetting the international financial system. For the moment, this is just a warning sign.

While China cleverly weaves its web, the US remains a major actor, not to say a decisive one in matters military, strategic, diplomatic and economic. Thus did Trump (in his first term of office) and then Biden pressure MBZ into reducing the extent of Chinese investments in the UAE port of Khalifa, a stone’s throw from the US Air Force base at al-Dhafra. To show they meant business, Abu Dhabi was denied the F-35 strike fighters and MQ-9 drones it wanted to purchase. Similarly, the Emirati artificial intelligence company G42, which had reached an agreement with BytDance, the Chinese parent company of TikTok, had to break with it in order to be allowed to work with Microsoft⁶.

“If we have to choose sides...”

It is however unlikely that such actions will be enough to stop the ongoing trend. On the one hand, the Arab rulers are manoeuvring to suit their best interests in the midst of this bitter competition: “We have nothing to gain from siding with one or the other great power”, Mohammed Bin Zayed’s diplomatic advisor recently assured the press. The Gulf countries can even use a gentle form of blackmail to get the most from the two rivals.

On the other hand, while steadily working the region (diplomatically speaking), China refrains from demanding that anyone choose sides. As three Chinese scholars, Sun Degang, Yang Yinqi and Liu Si demonstrate,

“It proactively cultivates ties with Sunni and Shi’a, republics and monarchies, Iran and the Arab countries. Meanwhile it avoids entanglement in regional states’ internal affairs, accommodating the ruling elites’ expectations and preferences.”⁷

It practices bilateral relations along with participation in multilateral organisations.

Thus Saudi Arabia, the UAE and Egypt (along with Iran) have been raised to the status of “global strategic partners”, the highest rank in China’s diplomatic hierarchy. And they have been taken into the BRICS+ group (Brazil, Russia, India, China, South Africa and, since 2023, Ethiopia, Egypt, Iran, the UAE and Saudi Arabia), even though Riyadh still has reservations, delegating only its foreign minister to the last summit meeting in Kazan on 24 October 2024.

They are also invited as “discussion partners” to the Shanghai Cooperation Organisation where the emphasis is on security and the fight against terrorism. And finally they are also parties to the international initiatives launched by Xi Jinping in favour of world security and development⁸.

In addition, Beijing proclaims that it has no intention of bypassing or replacing anyone in the region (Xinhua, 24 January 2025), any more than it wants to be a clan boss in the manner of the late USSR. The Chinese power structure supports the Palestinians, demands a two-state Middle East solution and even managed last July to bring together all the factions (including Hamas and Fatah) in Beijing. But it continues to do business with Israel more or less as if nothing were amiss - which isn’t a problem for Abu Dhabi or even for Riyadh.

All in all, China’s policies go down rather well with some of the Arab elites. “Its ’peace through development’ model, very different from the western model which stresses deficits in democracy or hegemony, is the key to conflict resolution in the Gulf,” according to Sun Degang, Yang Yingqi and Liu Si. There is little evidence to support this contention, apart from the (fragile) rapprochement between Iran and Saudi Arabia.

On the other hand China’s image, which has seriously paled in the West, has begun to shine a bit more in the Middle East. As the Deakin University scholars Shahram Akbarzadeh and Arif Saba explain, its “ambitious plan for soft power projection leverages its economic weight and promotes values associated with a strong state and social stability” - greatly prized by the authoritarian regimes of the Gulf. China’s “political system is also considered attractive⁹.”

We must always be wary of opinion polls, but these two scholars show that while 65 % of respondents in Saudi Arabia and 63 % in the Emirates believe that it is important to remain neutral in the confrontation between China and the USA, 29 % of Saudi respondents and 26 % of Emiratis are inclined to favour China if they had to choose their camp, as opposed to 6 % and 11 % respectively for the United States.

Quite a turnabout historically. For now, Washington still holds powerful weapons of persuasion (oil, military, dollars...) and a considerable power of negotiation. But Donald Trump’s brutal approach may yet weaken the US position.

Translated from French by Noël Burch