The Gulf needs a place in China’s Silk Road
China as a global power ranks first in so many economic indicators. Within a few years, it has moved from the world’s sixth largest economy to being second after the US and is to assume the top position over the next two decades.
Recently, China announced the launch of an initiative “One Belt … One Road” that could cost more than $2 trillion to create two new trade routes from China to Europe, thus revamping the ancient Silk Road. The first route will cross Central Asia while the other will cross Africa.
In fact, China has the necessary potential to bring about its objectives. Besides being the second largest economy, it has become the world’s largest goods exporter and biggest car importer.
It has also become the main investor in the Middle East and Africa and a major real estate investor in Europe as well as the second largest holder of US Treasuries. And don’t forget to take into account it imports 40 per cent of the Gulf’s petrochemical products
Although countries in central Asia and East Africa welcomed the new Silk Road such initiative, they don’t in reality hold the necessary infrastructure to operate such a project as evidenced by Iran’s request to invest $40 billion in its infrastructure as the route will cross its northern part.
Other Asian and African countries are also suffering from similar obstacles, which might hinder the implementation of the initiative as China cannot fund infrastructure projects on its own in those countries even though it had established the Asian Infrastructure Investment Bank (AIIB) with a capital base of $100 billion.
However, the UAE and GCC countries are enjoying state-of-the-art trade, service and business infrastructures that contribute to develop trade (Including re-exports and air transportation) between China, Middle East and Africa.
Interestingly, the Gulf’s infrastructure is expected to go through major advances thanks to the projected volume of investment, which exceeds $200 billion.
Among the anticipated progress would be the Gulf rail project, which could be further develop the link with Europe to complete the trade circle between the East and West through Gulf ports and airports with their advanced infrastructure.
The GCC states have also become a model for emerging countries, in terms of their financial and investment capabilities that make them able to fund multiple projects.
Therefore, if China wants to materialise its initiative, it had better revamp the new Silk Road so that it crosses the GCC, which account for 60 per cent of its trade with Arab countries and totals $240 billion compared with the $20 billion with Iran for instance. This in fact reflects the economic weight of the GCC countries in case they are included in the Silk Road passage, especially with China likely to conclude a free-trade agreement with the GCC this year, making for a paradigm shift in the trade and investment.
Shared interests between China and the six Gulf States are incomparable to any that bind China with other countries in the region. The GCC states, beside their strategic location and advanced infrastructure, are considered a key source of energy that China needs, where it currently imports 14 million barrels a day while the Chinese market is considered a significant gateway for Gulf exports
This was discussed by the recent Emirates Policy Center at its workshops and indeed, it requires further follow-up to discuss the Chinese initiative, which will have a great influence on global trade once completed.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.