For nearly 600 years, under the imperial tributary system of the Ming and Qing dynasties, foreign “barbarians” travelled to Beijing to pay homage to the emperor in order to trade with China. Redolent of those times, President Xi Jinping is refashioning a modern version of the ancient imperial system, and it may result in a powerful challenge to US interests in the Middle East and North Africa.
In May, 1500 delegates from more than 130 nations met in Beijing for the biannual Belt and Road Forum for International Cooperation. Launched in 2013, the One Belt One Road (OBOR) initiative aspires to expand links between Asia, the Middle East, Africa, and Europe by recreating the ancient Silk Road trade routes by land and sea. The goal is the restructuring of the global economic order by building what has been labelled the “project of the century.” And it is the Middle East where the two routes come together for Europe and Africa.
The region holds great appeal for China. With fast growing populations, rising middle classes and increasing wealth accumulation across the Middle East and North Africa (MENA) region, there is a chance for Chinese companies to do what they do best – build.
China’s promise of a great infrastructure and investment programme is understandably attractive for many MENA countries as their economies slow due to falling oil prices or political instability. Warranties related to OBOR may reach as high as a trillion dollars and will encompass more than 60 countries. China is also expanding its cultural and educational exchanges, promoting people-to-people dialogue, as well as offering to train technical experts from OBOR member countries. Thus, it is not surprising that many MENA countries are embracing China’s vision.
For example, Egypt has synchronised its own domestic economic plan with China’s OBOR priorities. Jordan, the UAE and Saudi Arabia are donning similar garbs.
In Egypt, Chinese companies have already promised close to $20 billion in infrastructure financing, and have been given contracts for building major portions of the new capital to be established east of Cairo. The Chinese have listed Egypt as one of the top five destinations for mergers and acquisitions under the OBOR initiative.
The UAE has similarly stepped up bilateral ties, creating bases in China to support Emirati companies and directing several large trade missions. It will also serve as one of the main transport hubs for OBOR. In preparation, COSCO, China’s largest shipping company, has united with Abu Dhabi Ports to build new terminals to support the expected increased flow of commodities along the OBOR routes. The UAE is also a founding partner of the Asian Investment Infrastructure Bank, a multilateral development bank, introduced by China, which aims to support the building of infrastructure in the Asia-Pacific region.
Foreign policy still buttresses the China-Saudi Arabia relationship, but economic ties are growing, especially as the Arab country’s economy slows. Energy is the main area of trade, as China is the world’s largest importer and Saudi Arabia the largest exporter of crude oil. In the past 20 years, China’s oil consumption has risen dramatically from 2.9 million barrels per day in 1993 to 11.9 million in 2016.
Earlier this year, Saudi King Salman led a trade mission to China that resulted in more than $65 billion worth of economic and trade deals signed. It is also the Chinese who built, and run, many of the logistical amenities in Mecca during Hajj. Expect to see these ties grow as Saudi brings into line its own domestic economic priorities with those of OBOR.
Against the backdrop of these developments, it’s not difficult to see the emerging pattern.
The Chinese pursue control of the necessary natural resources required to maintain their own economic growth. It is estimated that China’s oil and gas import reliance will reach 67 percent in 2020, and it is MENA countries that will meet that demand. The Gulf Cooperation Council (GCC), Iran, and Iraq now account for 60 percent of China’s imported oil, with China now the second largest oil export market for these countries.
Growing its trade relations with the Arab states is also of top importance for China. Its goal is to double its trade with the region to $600 billion by 2020. It is now the largest trading partner with the region. The Chinese are negotiating a free trade zone with the GCC and have already established one with Egypt. It would not be a surprise to see China pursue one with Iran as well.
While the Chinese government is cautious about taking sides in any regional conflicts, its foreign policy in the region is significantly more active under Xi as a result of the growing trade and economic ties.
China’s foreign minister, Wang Yi, has been dynamic in the talks to resolve the Syrian crisis. And after the Iran nuclear deal, Xi was the first major foreign leader to visit the country seeking trade and investment opportunities. Xi’s visit was balanced with additional stops in Egypt and Saudi Arabia.
The reality is that China has something that America has not able to offer to these countries but is much needed – infrastructure financing combined with a large export market. And all with limited strings attached. Even if all of OBOR does not fully come to pass, the initiative has situated China in direct competition with the United States for economic authority in key countries around the world.