The trade flows that link the Gulf to Asia, along the so-called “Silk Road,” are ancient, but today, there is a renewed focus on this linkage against the backdrop of strengthening diplomatic ties and ambitious economic diversification plans.
The Gulf Corporation Council (GCC), which comprises Bahrain, Kuwait, Oman, Qatar, Kingdom of Saudi Arabia and the United Arab Emirates, has long been a hub of wealth and energy resources. China, with its strategic Belt and Road Initiative, has emerged as a pivotal player in the GCC’s diversification and modernisation efforts.
This relationship is centred around opportunity and innovation and shows no sign of slowing down. Gulf-China trade is expected to grow from US$225B to US$325B by 2027, surpassing Gulf trade with Western economies, while Gulf-emerging Asia trade growth is expected to expand from US$451B in 2023 to around US$682B by 2030.
This momentum is generating interest from investors seeking to capitalise on two regions experiencing phenomenal transformation.
Innovative Solutions and New Market Opportunities
Geographically, the Middle East is a crossroad for trade, opportunities and ideas, as well as a launchpad for entrepreneurial ventures. The region has shown resilience to economic challenges and has comparative advantages in sectors like renewable energy, technology and infrastructure which are expected to yield high returns due to rapid growth and increasing demand in these sectors.
This is a deliberate play in the region as part of its diversification efforts, which complement China’s same intentions to target sectors that offer long-term advantages and the chance to compete on the global stage.
One of the biggest moves in recent years has been investment by Middle Eastern sovereign wealth funds into Asian companies to bring manufacturing and innovation back to the Middle East. This trend is part of a broader strategy to diversify economies and reduce dependence on oil revenues. As a result, we are seeing the establishment of various manufacturing and trade initiatives such as special economic zones which act as the home base for Chinese firms looking to localise manufacturing in the Middle East.
Investment Case
Investment opportunities reside on both sides of the partnership. China’s sheer size, with a population of around 1.4 billion, means the country needs to develop infrastructure and services to support its people, which the Middle East is happy to provide.
Meanwhile, Asia recognises the opportunity to deliver technologies to an increasingly affluent Gulf population, one which is enthusiastic to partner with key players for the national interest. China’s slowdown in economic progress has also compelled it to look more actively outside its domestic market in the quest for growth.
Several high-profile visits and announcements in 2024 have made it clear that Asia and the GCC intend to continue down the path of collaboration. In September, Chinese Premier Li Qiang made a visit to Saudi Arabia and the United Arab Emirates to discuss the strengthening of the China relationship and to co-chair the fourth Saudi-Chinese High-Level Committee with Crown Prince Mohammed bin Salman Al Saud. China issued its first U.S. dollar bonds in Saudi Arabia in three years, and the Kingdom’s sovereign wealth fund acquired stakes in some Chinese firms. The Shenzhen Stock Exchange and Dubai Financial Market signed a memorandum of understanding (MOU) to promote cross-border investing in China and the United Arab Emirates, and two exchange-traded funds tracking shares in Hong Kong and China debuted in Saudi Arabia. Singapore signed its own MOU with Saudi Arabia to enhance cooperation in the health care sector. In 2025, the Hong Kong Stock Exchange will open its first office in Riyadh.
Shared Goals
The level of activity between these two fast-developing regions shows the scale of ambition that exists in driving global investment opportunities and enhancing market accessibility. At the same time, the ambition goes beyond just the bilateral relationship, with many special economic zones being set up in the GCC to facilitate trade onwards into other regions, given the GCC sits at the apex of the East and West.
2025 will be a crucial year for China’s economy, which faces pressure from President Trump’s policies and possible trade tariffs. The country will need to respond in a way that allows it to retain its place in the global hierarchy. Meanwhile, the countries within the GCC each have their economic diversification programmes, tied largely to the year 2030, which may also mean a ramping up of activity as they seek to meet their deadlines.
The relationship between the two is predicted to go from strength to strength as they recognise in each other a common ambition and foster partnerships in the pursuit of long-term growth.
