As the world’s second-largest consumer of oil, China in the past decade has relied heavily on the Middle East to secure the resources required to fuel its ascendancy to become an economic superpower. In doing so, it overtook the U.S. as principal investor in the Middle East and played a pivotal role in transforming the region by lifting its economic and living standards.
Those strong economic ties are now broadening beyond China’s demand for commodities and will further shape the Middle East – and Africa – for at least another generation to come, according to an HSBC report on the impact of China’s economic globalization on the region.
The gross domestic product of the Gulf region’s exporters has risen by $1 trillion to $1.7 trillion in the past decade alone, lifting per capita GDP to an average of $35,000 and close to $100,000 in Qatar and Abu Dhabi, according to the report.
HSBC expects the economic partnership between China and the Middle East to further develop in sectors such as construction, transportation and banking with the emirate of Dubai serving as the main regional hub.
But despite the impressive contribution of China to the Middle East, HSBC says there are a few hurdles that both blocs need to overcome to deepen their relationship.
“The Middle East’s ties with China are uneven, and further development faces significant structural obstacles,” according to the report whose authors argue that because the Gulf and China generate current account surpluses, capital flows remain constrained. Chinese investors are not actively participating in the region’s equity and debt markets, while demand for non-oil goods from the Middle East remains low.
HSBC also highlights the lack of “deep and longstanding” social ties, noting the absence of a single Chinatown in the region, while pointing to the relatively low-key political and military cooperation between the regions.
Still, with China importing almost three quarters of its oil from the Middle East and Africa and its appetite for resources the fastest-growing in the world, economic cooperation is likely to further strengthen. Trade between the MENA region and China stood at $300 billion in 2013, a 50-fold increase in the last decade.
“In a region that was once led by US investment, it is now China that sets the rhythm for economic growth – a structural shift to a new era that we think will persist for a generation to come,” HSBC said.
