East Meets Middle: China's Relationship with Saudi and the UAE

Written by Anais Brakha (BSc International Social and Public Policy)

Last month, Chinese premier Li Qiang returned from Saudi Arabia and the United Arab Emirates as the countries’ celebrated their current successes and plans for future collaboration. China seeks to cement its presence in the gulf region as it furthers ties with the two key players in the region. China is set out to ‘win over’ the GCC countries, as it increasingly relies on crude oil exports and the countries’ essential roles in the belt and road initiative.

Saudi and the UAE have always been comfortable with their relationship with the USA, providing military protection in exchange for the pricing of oil in US dollars. China is continuously challenging this relationship, as the USA continues to meet crude oil needs through its own production- the GCC exported nearly 8.5 times more crude oil to China than the USA in 2022.  Although KSA and UAE seek to refrain from ‘taking sides’ with each of the powers, the countries continue to enhance their relationships with China in numerous ways. In comparison to the US pushing the GCC to take a stance on Ukraine, normalise relations with Israel and support counter-terrorism efforts in the wider MENA region; China’s non-interference policy is extremely attractive for all involved.  While the partnerships have previously been focused on mutual economic interests, these alliances have had added political elements as China seeks to protect its affairs in the region.

Saudi Crown Prince Mohammed bin Salman receives China's Prime Minister Li Qiang in Riyadh, Saudi Arabia, September, 11, 2024.

China and the UAE recently celebrated 40 years of cooperation, who according to Xinhua, have signed over 130 bilateral agreements and memorandums throughout the years. Saudi and China’s relationship is fresher than that of the UAE’s, yet Beijing is ultimately looking into investing into SA as the country seeks to advance in technology and tourism, and move away from its reliance on oil exports.

Ultimately, China is concerned with pushing the petroyuan. Global oil sales have been exclusively in US dollars, yet Iraq was the first to partially adopt the yuan in for trade in the MENA region. Since this, Egypt has also expressed its intention to issue yuan bonds. China continues to court Saudi Arabia into ending its monogamous relationship with the USA and partially adopt the yuan for oil trade. As it stands, the yuan is currently the 5th most traded currency globally, and Riyadh has expressed its openness to accepting the yuan for crude oil payments during Li Qiang’s visit last month. The UAE and China have participated in a 7 billion currency swap across three years, signalling that the presence of the yuan in the region will remain strong, and most likely increase. 

Aside from trade, China has aided Saudi in diversifying its economy. It is clear that the relationship between these two states is transactional, as China made up nearly 8% of SA’s GDP in 2022. China has been involved in multiple of Saudi’s projects and vice versa. This year, Saudi’s tech conglomerate Alat partnered with Lenovo group, issuing 2 billion in convertible bonds and the establishment of regional headquarters in Riyadh. Mohammed bin Salman hopes to transform Riyadh into a global tech hub, producing new jobs in industries such as electronics, AI and more, as part of vision 2030.  Chinese firms continue to invest in Saudi’s renewable energy projects including solar parks, as the countries partner to boost Saudi’s renewable energy sector and support Chinese technological advancements in the sustainable energy market.

Saudi’s central location between Africa, Asia and Europe makes it a key player in China’s BRI,  receiving the largest amount of BRI funds in the first half of 2022, signifying China’s commitment to expanding the relationship and enhanced connectivity in line with Saudi’s vision 2030. The Global Logistics forum 2024 saw plans for the creation of a logistics special economic zone, establishing a logistics hub over 12 years in four phases.  The project will enable the kingdom to produce and distribute goods on a much larger global scale, offering great opportunities for local Saudi businesses in addition to Chinese manufacturers. The next decade can expect to see increasing partnership between SA and China, as each countries’ goals for economic prosperity coincide with each other. 

China takes a more proactive role inside the UAE when it comes to the BRI. As the countries mark over a decade of cooperation, there is no sign of slowing down as Dubai’s chamber of commerce signed a memorandum of understanding committed to increased trade and collaboration between Dubai and Tianjin last month. One of the core projects between the two countries is the Yiwu market UAE in the Jebel Ali Port and Free Zone (JAFZA), making UAE China’s primary economic partner within the gulf. The market contains over 324 warehouses, containing furniture, electronics, beauty products and clothing. To ensure smooth, low-cost distribution an international logistics line between Yiwu market Dubai and China Yiwu market has been established. JAFZA accounts for one third of the emirates GDP and is the largest of its kind in the region. Yiwu plays a crucial role in China’s attempts to reinstate the silk roads maritime transport routes, almost two thirds of Chinese exports to Europe, the Middle East and Africa pass through Emirati ports. Recent meetings between the Emirati president and Li Quiang mean that we can expect to see an expansion of relations between the true countries as the pair discussed future economic collaborations and possible defence strategies.

China has previously been criticised for its non-intervention policies, consistently underlining its respect for the sovereignty of individual countries. In line with China, Saudi and the UAE have yet to condemn Russia’s invasion of Ukraine, with Sheikh Mohammed meeting with Putin in Moscow to support mediation on both sides.

The US continues to provide an unrivalled level of security to the GCC countries that China does not. Currently, China’s military engagement in the region is limited to arms sales and some anti-piracy operations. Questions have been raised as to whether China seeks to play a security role overseas, establishing its first overseas military base in Djibouti. The base is located near the Bab el-Mandeb strait, aiming to protect its military interests in the region.

China’s most significant political achievement in the region is the mediation of Saudi and Arabian ties, with Tehran and Riyadh both a strategic partner, China cannot afford to align itself with one country. Brokered by China, the deal challenges the US’ role as an international mediator and makes way for continuous political engagement in the region. China is yet to intervene on the attacks by the Houthis in the red sea, signifying that the PRC solely aims to protect its own interests in the region, and is not yet ready to take a more active security role in the wider Middle East. 

New possibilities between the three countries may arise as the UAE joined BRICS this year and membership is on the cards for SA. The GCC country’s primary goal is economic diversification and a switch from unipolarity. Joining BRICS will offer an opportunity to play a significant role on the world stage. Alliance with China and BRICS membership is proving that Saudi and the UAE are willing to position themselves as part of the growing Eastern leaders and move away from the donor-recipient relationships it has with the West.