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Xi Hosts Arab Leaders as China’s ‘Soft Power’ Expands in Mideast
(Bloomberg) -- President Xi Jinping will meet Arab leaders this week seeking deeper ties in a region where China does plenty of business — and increasingly diplomacy, too.
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Xi will address the China-Arab States Cooperation Forum in Beijing on Thursday with heads of state from Egypt, the United Arab Emirates, Bahrain and Tunisia among the attendees. Talks will likely focus on fast-growing trade and investment, and regional security concerns amid the Israel-Hamas war.
As the Biden administration backs Israel in the conflict, China sees eye-to-eye with Arab nations, supporting an immediate cease-fire and recognition of a Palestinian state. That alignment is helping Beijing to extend its political sway in countries that until recently saw China chiefly as an economic partner — and win new allies in its global contest for influence with the US.
Xi’s visit to Saudi Arabia in late 2022 was hailed as a landmark by both countries. Last year, China followed up by brokering a surprise accord between the kingdom and Iran, the Islamic world’s biggest rivals. The détente has held up even amid the strains caused by the Gaza war, and there are signs it’s been followed by an acceleration of investment between China and the Middle East.
Beijing-based Lenovo Group Ltd. announced a deal Wednesday to sell $2 billion of convertible bonds to Saudi Arabia’s sovereign wealth fund, and build research and production facilities in the kingdom. State oil firm Saudi Aramco is in talks to buy a $1.5 billion stake worth in a Chinese petrochemical firm, while carmaker China FAW Group is part of a push to make electric vehicles in Egypt. UBS analysts estimate that growing Chinese ties to the Middle East could add more than $400 billion to global energy-related trade by 2030.
Read More: Alibaba Seeks Middle East Partners as Beijing Deepens Gulf Ties
“China is developing soft power in the region,” said Shirley Yu, director of the China-Africa Initiative at the London School of Economics.
On top of commercial ties that fit the needs of both sides, she said, “the relationship extends to mutual political support at the existing US-led global institutions” — as well as new ones like BRICS, which China co-founded. Egypt and the UAE joined the group this year, and the Saudis are weighing a similar move.
Outlining the meeting’s agenda at a briefing on Monday, Chinese vice foreign minister Deng Li cited a tenfold increase in trade with the Middle East over the past two decades.
For Beijing, the crucial import is oil. China gets more than one-third of its crude from members of the six-nation Gulf Cooperation Council, with the lion’s share coming from Saudi Arabia.
In overall trade, the UAE – even though its economy is only half the size of Saudi Arabia’s – has become a bigger partner for China.
The UAE plays a “key role in the Belt and Road Initiative” – Beijing’s global infrastructure drive – and has more than 6,600 Chinese brands registered in the country, Bloomberg Intelligence wrote last week. Through the end of 2022, which is as far as Beijing’s official data goes, the UAE had gotten about $12 billion in Chinese direct investment — four times as much as the Saudis.
Read More: Asia-Gulf Investment Flows Strengthen, But US-China Risk Looms
The picture may have changed last year. Saudi Arabia attracted $16.8 billion in greenfield investment from China in 2023, including in the auto and semiconductors industries, Arab News reported in April citing a study by the Dubai-based bank Emirates NBD.
While China’s economic and diplomatic weight in the region are rising, the US remains the key security partner for Gulf Arab states. It has major military bases in countries like Bahrain and Qatar, and supplies defense technology.
Washington is also pursuing a new defense accord with Saudi Arabia that’s supposed to be part of a wider regional realignment in which the Saudis would grant diplomatic recognition to Israel.
Read More: US and Saudis Near Defense Pact Meant to Reshape Middle East
That project could slow China’s commercial advance in the Middle East by raising hurdles in high-tech sectors with a security element. There are signs that the US is pressing Gulf firms to cut ties with Beijing in such fields.
The UAE’s top artificial intelligence firm, G42, recently agreed to divest from China and pivot to American technology, signing a $1.5 billion accord with Microsoft Corp. Saudi Arabia’s $100 billion AI fund signaled it’s willing to do the same.
“The Gulf is moving from strategic hedging in the tech sphere to strategic alignment with the US,” said Ahmed Aboudouh, an associate fellow at UK thinktank Chatham House who also heads China research at the UAE’s Emirates Policy Center.
Still, there’ll be plenty of other industries where Gulf countries will welcome a wider partnership with Beijing, Aboudouh said, including renewable energy, electric vehicles and infrastructure investments.
That fits a wider global pattern. The main Gulf economies exemplify a reluctance among many emerging-market nations — from East Asia to Latin America -– to get caught up in a Cold War between the US and China. They’d prefer to keep the doors open, and the money flowing, with both sides.
Saudi Arabia “will not put all its eggs in one basket,” said Hongda Fan, a professor of Middle East studies at Shanghai International Studies University. “Saudi Arabia’s defense cooperation with the US will not come at the expense of its relationship with China.”
(Updates with Lenovo deal with Saudi wealth fund in fifth paragraph)
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