Red Star in the Morning, Business Warming: A Recent Visit by the Chinese President to the Middle East Shows the Growing Importance of the Arab World for China's Burgeoning Economy. Eamonn Gearon Examines the Different Aspects of This Cooperation and Wonders If America Should Be Worried

By Gearon, Eamonn | The Middle East, July 2006 | Go to article overview

Red Star in the Morning, Business Warming: A Recent Visit by the Chinese President to the Middle East Shows the Growing Importance of the Arab World for China's Burgeoning Economy. Eamonn Gearon Examines the Different Aspects of This Cooperation and Wonders If America Should Be Worried


Gearon, Eamonn, The Middle East


THIS APRIL, CHINESE President Hu Jintao visited Saudi Arabia and Morocco, where he met with the leaders of both countries to sign a number of agreements, as well as laying the groundwork for future business deals. The timing of Hu's trip to the Middle East, immediately after his visit to the US, where Washington is clearly desirous of fostering closer ties with China, had many observers asking if it did not contain an implicit message or perhaps even a warning to the Americans not to imagine they are the only power with a role in the region.

President Hu's decision to visit Saudi Arabia just three months after King Abdullah was in Beijing also speaks volumes about both countries' recognition of the need for closer relations. Saudi Arabia is now China's biggest trading partner in the Middle East.

Abdullah's trip to China was the first by a Saudi king since the two countries established diplomatic relations in 1990, not to mention the fact that Abdullah chose China as his first overseas destination since his August 2005 accession to the Saudi throne. While in Beijing the Saudis signed a number of trade agreements with the Chinese, which related not only to oil but also to gas and other natural resources.

During Hu's time in the Gulf, the nations of the region made it clear that they all recognise and respect the potential power inherent in increased partnerships with China. This was most ably demonstrated in Hu's meeting with Abdulrahman Al Atiyyah, secretary general of the Gulf Cooperation Council (GCC). The foremost of the region's trade organisations could be signing a free trade agreement with China by the end of the year, according to Al Atiyyah. Such a development would have enormous significance for both sides.

With the Gulf's oil-producing nations benefiting from high oil prices, and with China's economy growing at just below 10% in 2005, there is no reason why such multilateral cooperation should not continue to grow. During Hu's April visit to Riyadh, he and King Abdullah oversaw the signing of a series of agreements on matters relating to security, defence, health and trade. The fact that the terms of these agreements were not initially made public suggests that both signatories are fully aware of how closely their burgeoning business relationship is being monitored by other nations with an interest in the region--America and a number of European states in particular.

By 2005, Chinese imports of Saudi oil accounted for the majority of bilateral trade, worth $16bn. But non-oil trade between the two is growing fast. Consumers among the GCC nations are increasingly discarding a long-held prejudice against Chinese-made products. For years considered of variable quality; in recent years they have gained greater acceptance, and even favour, in part because of lower prices than imports from other parts of Asia and the wider world.

Another factor that has encouraged this growth is a sea change in Chinese domestic policy in recent years. Whereas in the past, China was seemingly driven entirely by ideology, today economics is the driving force.

The resultant boom in the Chinese economy means that the country is now the world's second largest energy consumer (after the US) and since 2002 it has been responsible for a staggering 40% of the increase in global oil demand. By 2005, Saudi Arabia was supplying China with 17% of its imported oil needs, making it China's largest foreign energy supplier.

The energy sectors in both countries are controlled by a handful of giant firms, and many foreign observers describe these companies as little more than organs of the state. By extension therefore, any consolidation of Sino-Saudi energy ties could be seen as an extension of state policy or diplomacy by other means.

In Saudi Arabia, the energy sector giants are Saudi Aramco and Saudi Basic Industries Corporation (SABIC), the Middle East's largest petrochemical company, while in China CNPC, Sinopec, and CNOOC dominate the sector.

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Red Star in the Morning, Business Warming: A Recent Visit by the Chinese President to the Middle East Shows the Growing Importance of the Arab World for China's Burgeoning Economy. Eamonn Gearon Examines the Different Aspects of This Cooperation and Wonders If America Should Be Worried
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