Ties develop between GCC and China

China could soon be the GCC’s biggest trading partner by the end of the decade


The world’s fastest growing economy over the last decade is set to significantly increase its trade with the Gulf Cooperation Council (GCC) over the coming years. China already has strong links with GCC member states, enthusiastically buying as majority of its oil from the region. As well as energy, trade between the two regions is increasing at such a rate that The Economist Intelligence Unit expects that by the end of this decade, China will be the GCC region’s most important trading partner.

As China becomes more urbanised and affluent, the energy demands of its citizens will inevitably rise, therefore increasing the need for a stronger economic relationship with key strategic partners within the GCC. China’s oil demand is said to double by 2030, resulting in a significant increase in the need for imports. The GCC, made up of oil rich Bahrain, Oman, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, is becoming an ever more important partner for China’s ambitions.

China’s relationship with specific countries in the GCC area is dominated by its relationship with Saudi Arabia, where it buys most of its oil, with the oil rich state supplying just under 1.4m barrels a day to China in February. It has also asked Saudi Arabia to open up its considerable oil and gas reserves to further overseas investment; while a recent deal to build 16 new nuclear reactors in the Kingdom by 2030 will see the Chinese contribute towards the $100bn cost.

Saudi and Chinese collaboration has increased further after departing Prime Minister Wen Jiabao toured the Gulf at the beginning of the year, culminating in an $8.5bn joint venture between state oil firms Sinopec and Saudi Aramco to build a refinery near the Red Sea.

Aside from oil, China is also now the leading exporter to the region, with exports climbing to $60bn per year to GCC over the last ten years. For the entire Middle East and North Africa, trade with China increased 22 percent in early 2012 to $111.7bn. Of this figure, GCC countries contributed to $77bn. During the next decade, trade between the GCC and China is thought to exceed $350bn. China is also increasingly importing other products that include aluminium, industrial chemicals and plastics from the region.

Since 2002, China’s trade with the UAE has increased by five times, from just $3.12bn to $15.6bn last year. Elsewhere, China’s trade with Qatar climbed to $5bn in 2011 off the bank of sales of liquefied natural gas, which could reach five million tonnes each year, according to Zhang Zhiliang, China’s ambassador in Doha.

According to the former US ambassador to Saudi Arabia, Charles Freeman, GCC countries look at China as an ideal trading partner that won’t try to meddle in their political or social affairs: “The Arabs see a partner who will buy their oil without demanding that they accept a foreign ideology, abandon their way of life or make other choices they would rather avoid. They see (in China) a country that is far away and has no imperial agenda in their region, but which is internationally influential and likely in time to be militarily powerful.”

Such is the enthusiasm that each region has for one another; many believe that a significant reshaping of the world economy through a new Silk Route could emerge.

HSBC’s Chief Economist Stephen King recently told Chinese news agency Xinhua that economic collaboration between the regions was “irreversible”. While China requires more energy to help sustain the rapid economic growth of the last decade, ties with resource rich partners in the GCC will only get stronger.