China investments to boost financial services

China and the Middle East have historically shared strong synergies across the trade, culture, education and investment sectors. In recent years, China’s investments in the region have grown tenfold, particularly within non-oil industrial domains that include infrastructure, transportation, construction, finance, economics, diplomacy and security.

China’s engagement with the Middle East is well poised to rise further, with total trade between the regions forecast to reach between $350 billion and $500 billion (Dh1.28 trillion and Dh1.83 trillion) by 2020.

Trade with the GCC countries accounts for the bulk of this volume. The Economist Intelligence Unit further predicts that by 2020, China will emerge as a key economic partner for the GCC region.

China and the Asian economies are also looking specifically for high-growth, high-return markets and for them, that’s well represented on the African continent, among others.

It’s also true to say that both Asia and the GCC have grown so rapidly that they’ve not really needed to look at investment opportunities elsewhere. As they globalise and their financial institutes expand abroad, the opportunities for overseas investment will increase. Financial institutions are key to increasing trade flow.

The UAE features as a crucial player in this equation. The country is on course to becoming China’s number one trading partner, with trade between the two valued at $54.8 billion in the in 2014. With China set to become the world’s largest trading nation by 2016, it highlights the immense potential in the country’s increasing trade relations with the rest of the world.

Furthermore, approximately 60 per cent of the trade between China and UAE is re-exported to other Gulf countries, Africa and Europe — making the UAE the central gateway for Chinese investors to tap into the rest of the Middle East and Africa.

The UAE’s relationship with China is now moving beyond vehicles and consumer goods. Chinese companies are arriving in the UAE to take advantage of massive rail and road-building investment now underway in the region.

Synergies between Dubai and China have significantly grown over the years with trade volume reaching $48 billion in 2014, increasing 29 per cent relative to 2013. China is the largest supplier for Dubai’s market, accounting for 15 per cent of its total imports.

These synergies are driven partly by Dubai’s 200,000-strong Chinese community that accounts for nearly 10 per cent of its resident population. Moreover, the rise in the number of Chinese visitors to the emirate — some 344,000 visitors in 2014, marking a 25 per cent increase over the previous year — has also contributed to increasing China’s awareness of Dubai as a valuable trading partner. Serving as a regional hub for Asian trade, Dubai is currently home to more than 4,200 Chinese companies.

China’s awareness of Dubai is growing; it is natural that Chinese firms are seeking ways to finance their entry into the regions of Africa and Middle East. As China booms, so do business, trade and tourism opportunities with the UAE.

Dubai is emerging as a crucial hub along the New Silk Road, a multi-trillion dollar trading highway that links Asia to Africa and Latin America directly through the Middle East. The emirate is not only providing an important regional base for Chinese state companies and private businesses, but also offers Gulf companies fresh opportunities to invest and market their Asian services.

The Dubai International Financial Centre (DIFC) has been a key driver in expanding the South-to-South corridor over the past decade. The DIFC provides a robust platform for companies keen to transact business throughout the region and offers them advanced infrastructure and an enabling regulatory and legal framework that conforms to the highest international standards.

More importantly, the DIFC has attracted major Chinese financial firms, who over the years have achieved significant growth in the region. There are a number of Chinese entities operating in the DIFC. These include China’s top four banks — the Agricultural Bank of China, the Bank of China Middle East (Dubai) Limited, China Construction Bank (Dubai) Limited and Industrial and Commercial Bank of China — as well oil giant PetroChina International (Middle East) Limited. These financial bodies are setting up in the DIFC to do real business with a lot of depth.

Through leveraging the expertise of the DIFC, Dubai is well set to consolidate its position as a major hub for Chinese investors and companies.

In addition, the recent ‘Belt and Road’ initiative put forward by Chinese President Xi Jinping provides a significant opportunity for China and the UAE to deepen their all-round engagement. The connectivity on projects between UAE and China will help align development strategies to tap the market potential in these regions.

The New Silk Road could see trade between Asia, the Middle East and Africa, which will provide huge opportunities for Chinese companies to invest in Dubai to access the MEA region.

Given these trends, one can safely estimate that the Chinese presence in the UAE is likely to grow further, ensuring a greater passage of manufactured Chinese goods and industrial equipment to the UAE and the wider Middle East.

The writer is Deputy Chief Executive Officer of the DIFC Authority.