Sheikh Mohammed’s China visit to boost economic cooperation

Dubai: The state visit of His Highness Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, to China from Sunday comes at a time when the trade and economic relations between the two countries are booming.

China is the UAE’s second largest trading partners, with almost $60 billion (Dh220) bilateral trade in 2017. The UAE and China are keen to expand economic collaboration with trade set to hit $70 billion in 2020.

Since the 2015 state visit of Sheikh Mohammed Bin Zayed to China, the high-level bilateral interactions have become more frequent.

China signed a number of MoUs with the UAE during the visit of President Xi Jinping to the UAE last year.

The state visit of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, to China in April 2019 witnessed announcements of two mega projects worth a total of $3.4 billion investments.

The first one was a megaproject to build a ‘traders market’ that would be built along Sheikh Mohammed Bin Zayed Road opposite to Expo Dubai, over an initial area of 20 million square feet, which could go up to 60 million square feet.

The Chinese company Yiwu will invest $2.4 billion in the project that includes large logistics warehouses and wholesale retail outlets, which will strengthen Jebel Ali Free Zone’s role in supporting regional and global trade movement.

The second agreement was signed with the China-Arab investment Fund, which would invest $1 billion to implement a ‘vegetable basket’ project in Dubai comprising huge complexes and cold storage warehouses for importing, processing, packaging, storage and re-export of agricultural, livestock and fish products.

Strategic partnership

In his comments on Saturday, Dr Ali Obaid Al Daheri, UAE Ambassador to China, said: “The state visit will deepen ties and build on the foundation of the comprehensive strategic partnership announced in July of last year, during President Xi Jinping’s visit to the UAE. Since this momentous visit, the relationship between the UAE and China has now achieved diversity and richness at various levels and we look forward to now capitalising upon this.”

“This visit will see a series of high-profile meetings with key influential Chinese business leaders and we expect significant progress to be made in the development of several projects. The UAE and China currently have a series of agreements in dedicated sectors. Cooperation will be strengthened across energy, education, health care, artificial intelligence, infrastructure, manufacturing and culture and tourism. There is also consideration being given to cooperation across new areas.”

The UAE is keen to promote and develop its bilateral relationship with the People’s Republic of China and reinforce a strategic relationship that is both robust and long-lasting. The UAE and China’s relations are based on decades of cultural, civilisational communication and trade exchange. This year marks 35 years since the establishment of diplomatic ties between the UAE and China and as such is a special time for the UAE-China bilateral relationship. We are working hard to fulfil the promise made by the late Sheikh Zayed Bin Sultan Al Nahyan, Founder of the UAE, towards achieving our country’s strategy for economic development, diversification and long-term growth, he added

OBOR Initiative

Trade activity between the UAE and China is expected to get a massive boost from the One Belt, One Road Initiative (OBOR).

The OBOR initiative is a $900 billion project initiated by the Chinese government to build on ancient trade routes from China through central Asia by rail (Belt) and to Africa and beyond by sea. The initiative covers 69 countries which make up 60 per cent of the world’s population and 40 per cent of global gross domestic product (GDP), according to a report released by Knight Frank.

The purpose of the project is to link up countries in trade that involves movement of people, money and material across the borders and total infrastructure investments are estimated more than $8 trillion.

OBOR is expected to result in manifold growth in trade between China and the Middle East and Africa region and massive scale infrastructure development across the region.

The UAE, already a major hub of regional trade corridor between China and the Middle East, Africa, Europe and beyond is expected to attract significantly larger volumes of trade transiting through it.

The financing needs of project linked to BRI (Belt and Road Initiative) across various countries and jurisdictions are expected to be in several trillions of dollars. BRI in the region involves 13 countries and the cooperation between China and Arab region would focus on energy, core infrastructure trade and investment. As the Middle East adjusts to a lower oil price environment, governments in the region are speeding up both structural and fiscal reforms leading to opening up domestic markets to attract foreign investment across infrastructure, trade, investment, services and supply-chain.

Currency swap

The UAE is fast emerging as the regional launch pad for many Chinese business across the Middle East and Africa region. Currently more than 4,000 Chinese companies are operating in the UAE. The UAE accounted for 30 per cent of Chinese exports to Arab countries, and 22 per cent of the Sino-Arab trade in 2017.

The UAE with a total investment of over $2.1 billion, leads the Arab countries with investments in China. The total value of the Foreign Direct Investments (FDIs) from China in the UAE reached $9.1 billion (Dh33.42 billion) in 2017, according to the Chinese Business Council in the UAE.

Recognising the rapid growth in trade and investment flows between the UAE Central Bank and the People’s Bank of China signed a bilateral currency swap agreement and a MoU to establish a Renminbi (RMB) Clearing Centre in the UAE in December 2015.

China has signed a series of currency swap agreements in recent years with key trading partners in a bid to boost the use of the RMB for the direct settlement of international trade. Bankers say the scope of offshore RMB settlements are fast catching up as demand for foreign direct investments into China and RMB denominated fund raising from the international markets are gaining momentum.

According to the UAE central bank statistics, currency swaps through the Renminbi (RMB) Clearing Centre in the UAE grew reached $7.01 billion (Dh25.7 billion) during the first 11 months of 2018. Growing transfers through the RMB Clearing Centre is seen as a reflection of the continued overall growth in trade between the two countries.

Apart from cross-border clearing and remittance services, the RMB Clearing Centre also provides RMB buying and selling, money market lending and international trade support between the UAE and China. These services have strengthened the ability of local and international financial institutions and economic stakeholders in both countries to do business more efficiently.

Bilateral trade between the two countries is estimated to have hit $53 billion last year, a 17 per cent increase on 2017, and is forecast to double over the next decade, according to HSBC.

Chinese property investors are now among the top four foreign nationalities who invest in the emirate of Dubai. According to industry research, the UAE saw a 245 per cent increase in Chinese tourists in the third quarter of last year and double-digit annual growth is forecast until 2022, and the number of UAE businesses seeking to expand into China is also an upward trend.

‘HSBC’s Navigator: Made for China’ survey says that nearly half of UAE businesses already doing business with China plan to grow sales there in the next three to five years. A further 10 per cent of UAE companies yet to enter the Chinese market will prioritise expansion in the country.

China-UAE relationship at its best in history: Chinese envoy

China and the UAE are enjoying their “best period” in history now while celebrating a milestone in their relationship, according to a top Chinese diplomat.

“This year marks the 35th anniversary of the establishment of diplomatic relations between China and the UAE. Our relationship is currently at its best period in history,” Ni Jian, the Chinese Ambassador to the UAE, told the Emirates News Agency, WAM, in an exclusive interview.

Among all Middle East countries, the UAE has the deepest, broadest and most fruitful cooperation with China, he said.

“The exchange of visits between our top leaderships within a year is testimony to the high standards and special significance of China-UAE Comprehensive Strategic Partnership, thus marking a milestone in the development of our bilateral relationship,” he explained.

“The upcoming visit by Sheikh Mohammed Bin Zayed is expected to consolidate and deepen our political and strategic mutual trust, and elevate our political, military, commercial, cultural, people-to-people and technological cooperation across the board,” the ambassador said.

It will further substantiate the Comprehensive Strategic Partnership to open “a glorious new chapter of China-UAE friendship,” he said.

What the visit seeks to achieve

The visit by Sheikh Mohammed Bin Zayed aims to highlight the strength of strategic ties between the UAE and China.

It also aims to take UAE-China strategic cooperation to greater heights in all areas, while recognising the UAE’s other relations with the west, India and other strategic allies.

Other goals include highlighting the strong friendship binding the leaderships of the two countries and its impact on bilateral ties and joint efforts to achieve world peace and security.

It demonstrates the UAE’s cultural openness and its respect for the Chinese culture.

The UAE has strategic relations with China, based on longstanding economic cooperation via the ancient maritime Silk Road.

Shaikh Mohammed’s visit is an important step to strengthen the deeply rooted and strategic bilateral ties between the two nations.

The UAE and China work together to enhance international peace and security, reject extremism, combat terrorism and resolve disputes peacefully.