China is offering the GCC countries access to a new global marketplace
Dr Jin Liangxiang and Dr N. Janardhan
July 11, 2018
Kuwait's ruling emir, Sheikh Sabah Al Ahmad Al Sabah and Chinese President Xi Jinping arrive for the opening session of the China-Arab States Cooperation Forum AP
China’s Belt and Road Initiative invokes historic memories of the Silk Road, which facilitated communication, trade and exchanges between civilisations. In its current form, the initiative is designed to further China’s economic and foreign policies. It is rooted in China enjoying economic success through infrastructure development.
As China takes on a more global role, the plan is to replicate this strategy abroad, with BRI becoming a tool to build a “common human community with a shared future”.
By attempting to create land and maritime trade routes linking China with Europe, through Asia (including the Middle East) and Africa, Beijing intends to help its own growth and that of others too.
Of the six proposed corridors, none formally includes the Gulf Cooperation Council countries. But the five BRI connectivity themes – infrastructure, policy implementation, trade facilitation, financial facilitation, and people-to-people communication – keep the doors open for the GCC countries.
At least two factors become pertinent here: one, the region’s financial liquidity, which is evident in the bloc being home to some of the largest sovereign wealth funds; and two, the region’s infrastructure capabilities, especially in the air and maritime sectors, which have made them major trade and financial centres.
The GCC countries are among China’s top energy suppliers and have benefited from Chinese trade and investment during the last two decades. The progress in Gulf-China ties is visible in the strengthening of policy coordination mechanisms. Together they have devised the China-Arab Cooperation Forum and the Strategic Dialogue between China and the GCC countries.
In fact, Beijing has underlined that “any type of bilateral cooperation [with China] can be considered part of the Belt and Road.”
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China’s first Arab Policy Paper published in 2016 states that joint efforts will be made to adopt the ‘1+2+3 cooperation’ pattern: energy cooperation as the core; construction and trade and investment facilitation next; and then collaboration on innovative technologies in nuclear energy, space satellite and renewable energy.
Accordingly, China has signed strategic partnerships with eight Arab countries and BRI-related construction agreements with six Arab countries. A further seven Arab countries – including Oman, Saudi Arabia and the UAE – are founding members of the Asian Infrastructure Investment Bank (AIIB).
Chinese companies have also participated in the construction of several ports in the region, and talks are reportedly under way about constructing economic zones in several GCC countries.
Further, DP World has about 20 terminals that could take advantage of the Belt and Road Initiative, including six in South Asia, four in China, and others in Thailand, Vietnam, South Korea and Indonesia. It is also contributing to the development of the Khorgos Eastern Gate terminal near the China-Kazakhstan border.
In July 2017, Abu Dhabi Ports signed a 50-year Musataha agreement with China’s Jiangsu Provincial Overseas Cooperation and Investment Company Limited for setting up projects in the Khalifa Port Free Trade Zone.
In terms of financial cooperation China has signed currency swap agreements with a number of GCC countries. By the end of 2017, four Chinese banks had seven branches in the UAE, which open doors for joint investment.
Saudi Arabia, which is located at a strategic intersecting point of the two main routes, feels that reviving ancient trade routes complements the Kingdom’s Vision 2030, based on their agendas’ “common features and notions.”
In Oman, China has invested billions of dollars since late 2016 to transform Duqm into an industrial centre. In a sign of multilateral cooperation, Saudi Arabia announced in early 2018 a $210 million grant for two projects in Duqm.
Apart from the Belt and Road components, the 2017 BRI Forum highlighted a third dimension – the Digital Silk Road. The joint communique supports “innovative action plans for e-commerce, digital economy, smart cities and science and technology parks.” These gel well with some of the plans announced by Saudi Arabia and the UAE.
However, like most opportunities, there are challenges too. These include some of the misperceptions surrounding China’s geopolitical motives behind the BRI; some political and financial challenges with projects in South Asia; possible geostrategic competition with other projects such as the North South Transport Corridor; and most importantly, concerns that China could use the BRI to form a closer alliance with Iran.
Nevertheless, as protectionism rises in some parts of the world, China is offering the GCC countries access to a new global marketplace. Riding the BRI wave would be more beneficial than detrimental.
Four factors make this ride imperative: one, given the importance that Beijing has assigned to the project, it bears the potential to influence GCC-China ties in the future; two, the initiative adds to the region’s basket of economic diversification considerations; three, it offers the GCC countries scope for multilateral partnerships beyond the region; and four, the GCC countries becoming a part of the BRI could serve as an incentive for China to get more involved in the region’s political and security dynamics.
Dr Jin Liangxiang is Deputy Director, Center for West Asian and African Studies, Shanghai Institute for International Studies. Dr N. Janardhan is Senior Research Fellow, Gulf-Asia Programme, Emirates Diplomatic Academy.