In March, the West sounded the alarm over China’s $400 billion deal with Iran, worrying that the United States was losing influence in the region to China. But observers have largely overlooked China’s deepening relationship with the United Arab Emirates.
The United Arab Emirates and China have close ties that reach beyond a mutually beneficial economic relationship. China is the Emirates’ biggest trading partner. Their shared finances include a series of 2018 agreements, as well as a $10 billion investment fund backed by the countries’ state-owned and sovereign wealth funds. The U.A.E. also uses Huawei equipment in its 5G networks, a decision reported on in early 2019 as a break from the United States. There are also a significant number of Chinese ex-patriates living in the Emirates,1Exact numbers are elusive, but one official put the number at over 300,000 in 2015. and several Chinese state-owned enterprises (SOEs) have set up offices in the country as a home base for projects in the Middle East.
The pandemic has seemingly brought the two countries even closer, or at least revealed the depth of their relationship. In March, the U.A.E. announced that one of the Chinese Covid-19 vaccines would be manufactured in the U.A.E. for distribution in the region. “The U.A.E. has really, really become pretty important to China in the Middle East,” says Jonathan Fulton, a nonresident senior fellow with the Atlantic Council who studies China’s relationship with the Gulf. “This is a really big deal because this shows a level of political trust that China doesn’t really have with any other countries in the region.”
This week, The Wire examines the relationship between China and the United Arab Emirates, looking at trade, investments, and other major projects — largely driven by state-owned companies on both sides.
Imbalanced Trade Flows
The Emirates’ business-friendly environment and position as a key re-exporting point also contributes to its deepening relationship with China. “It’s the only significant Gulf country that actually has a trade imbalance that consistently works in China’s favor because they import so much stuff from China and then redistribute around the region,” Fulton says.
Exports to the Emirates therefore may not reflect what Chinese goods Emiratis are actually consuming. Twenty-seven percent of goods imported from China were re-exported in 2019, according to U.A.E. customs data.2Twenty-seven percent is a local peak: the proportion went up from 16 and 23 percent in 2017 and 2018, and dropped to 22 percent in the first nine months of 2020. Calculated by value, using total China, Hong Kong and Macau numbers as reported by U.A.E. customs. As a result, imported goods show the needs or appetites of Europe and the Middle East in addition to the Emirates themselves.
China’s thirst for oil increased in 2020, when energy prices were low and there was room to stockpile. The United Arab Emirates was China’s seventh largest supplier of crude oil in 2020 — it sent China over 31 million metric tons, more than double 2019 figures.
Building Connections
The Chinese relationship has expanded beyond the key city of Dubai in recent years. One significant project is the Etihad Rail that crosses across the Emirates. It’s a significant portion of the Gulf Railway, a 2,500-km project to connect Gulf Cooperation Council member states. China Railway Construction (CRCC) and China State Construction Engineering (CSCEC)3The Department of Defense labelled both CRCC and CSCEC as affiliates of the People’s Liberation Army. both secured major contracts on its construction, which is shown with the solid red line on the map.
See more of the U.A.E. projects with Chinese backing, spanning energy, transport, and construction.
Bankrolling Energy and Trade
China’s biggest investments in the Emirates are largely driven by state-owned companies. One key project is the Khalifa Port, situated between Dubai and Abu Dhabi, which began operations in 2012.
Chinese Investments and Joint Ventures in the United Arab Emirates | ||||
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Year | Chinese Funders | Emirati Companies | Cost (millions) | Description |
2019 | Roadbot Tire | Abu Dhabi Ports | $614 | Roadbot is constructing a tire production plant in KIZAD’s China-UAE Industrial Capacity Cooperation Demonstration Zone. The project is part of the 50-year agreement between Jiangsu Provincial Overseas Cooperation and Investment Company (JOCIC) and Abu Dhabi Ports. At full capacity, it is expected to produce 11 million tires annually. Construction started in January 2019 and the plant was supposed to be operational in October 2020, but has yet to come online. |
2018 | CNPC (PetroChina) | Abu Dhabi National Oil Company | $1,750 | PetroChina paid the Abu Dhabi National Oil Company (ADNOC) a total of 1.75 billion for two 10 percent stakes in offshore oilfield concessions. The two oilfields are the Umm Shaif and Nasr concession and the Lower Zakum concession. The agreements have 40-year terms. |
2018 | Silk Road Fund | Noor Energy 1 | $930 | The Silk Road Fund bought a 24 percent stake in the 950MW NOOR Energy1 thermo solar tower project, which is being constructed, in part, by Shanghai Electric. The fund is backed by Chinese sovereign wealth funds State Administration of Foreign Exchange and China Investment Corporation, as well as state-owned Export-Import Bank of China and China Development Bank. |
2017 | CNPC (PetroChina) | Abu Dhabi National Oil Company | $1,770 | PetroChina purchased an 8 percent stake in the ADCO onshore oil concessions, which allows PetroChina to explore oil and produce in the region for 40 years. Other companies that invested in the oilfields include Chinese CEFC, which took a 4 percent stake in 2017, and American BP, which owns a 10 percent stake. |
2017 | CEFC | ADNOC | $888 | CEFC purchased a 4 percent stake in ADNOC-owned oilfields, ahead of the 8 percent stake that PetroChina purchased later that year. It is unclear if CEFC still owns the stake, or if it’s been re-sold. |
2017 | Jinko Solar | Noor Abu Dhabi Solar | $170 | Jinko Solar, the world’s largest solar company, bought a 20 percent stake in Noor Abu Dhabi Solar, a 1.2GW project in Abu Dhabi. It began commercial operations in June 2019. |
2017 | Jiangsu Overseas Cooperation and Investment-led consortium | Abu Dhabi Ports | $300 | The consortium signed a 50-year agreement for 2.2 square kilometers in the Kizad (Khalifa Industrial Zone Abu Dhabi), which it will in turn lease out to various industries. |
2016 | Harbin Electric | ACWA, DEWA | $690 | Harbin Electric owns a significant stake in the 2.4GW “Hassyan Clean Coal Power Project” in Dubai, which it also helped construct. Other investors include Saudi Arabian ACWA and the Emirati Dubai Electric and Water Authority (DEWA). |
2016 | COSCO | Abu Dhabi Ports UAE | $670 | State-owned China Ocean Shipping (COSCO) formed a joint venture with Abu Dhabi Ports UAE through a subsidiary. The entity is building and operating Khalifa Port Container Terminal 2, and the agreement is set to last 35 years. COSCO controls 90 percent of the joint venture. |
2013 | CSCEC | Viceroy Dubai Palm Jumeirah | $450 | State-owned China State Construction Engineering was the lead contractor on the Viceroy Hotel Project in Dubai, now owned by SKAI Holdings. The company also took a 45 percent stake in the hotel, according to AEI. It completed construction on the 60-story tower in 2016. |
Hannah Reale is a staff writer with The Wire. Previously, she reported for the GBH News Center for Investigative Reporting, The West Side Rag, and her college newspaper, The Wesleyan Argus. @hannahereale