Two countries hungry for growth, China and the UAE have discovered they need each other. Find out who's who in the China/UAE game.

One is a global superpower, the other growing super fast. It's no surprise then that China and the UAE have forged close economic ties.

Exports, investment and construction companies tied to the Asian giant are helping fuel UAE growth, while Abu Dhabi and Dubai investment houses are investing in everything from property and infrastructure to hotels and agriculture in China.

Bilateral trade between the countries was Dh74.9 billion last year, an increase of 41.2% in 2006. Not only is the UAE home to more than 2,000 Chinese companies, it also hosts 200,000 Chinese nationals.

This week, we look at some of the major economic and commercial developments in the bilateral relations between the two countries.

ADIH joins forces

Last month Abu Dhabi signalled its interest in China's real estate sector, after seeing Dubai's state-owned developers extend their influence in recent years.

Abu Dhabi Investment House (ADIH) will form a Dh22 billion joint venture with a top Chinese construction firm, announced Rashad Janahi, managing director of ADIH.

The government-owned investment house signed a memorandum of understanding with the Shanghai Construction (Asia) Co Ltd (SCAC) and aims to purchase up to 16 real estate projects in China.

"The signing of this MoU signifies our commitment to unique and successful projects with major international strategic partners," Janahi told Gulf News.

"China is the biggest growing economy in the world and it is essential for us to be part of its development."

Amara eyes Asia

In spite of the global financial crisis, Dubai's Amara Holding has announced that it is investigating investment opportunities in China, India and the Middle East due to growing demand for Islamic finance in those markets.

The Sharia-compliant investment firm, which has an office Hong Kong, plans to raise up to $200 million, mainly from investors in the Gulf region, an Amara executive told Reuters.

It plans to invest in real estate, utilities and other sectors. "The sectors we plan to invest in are the most resilient to economic downturn," Musab Jassim, the firm's chief executive, told Reuters.

The DIFC fund

The China relationship is a two-way street. While local developers bid for property projects in China, the UAE is trying to attract Chinese companies, particularly construction firms, that have synergies with the UAE's economic growth.

Dubai International Capital LLC (DIC), the global investment arm of Dubai Holding, and Chinese First Eastern Investment Group (First Eastern), a Chinese equity firm and investment bank, have formed a fund called China Dubai Capital, which is targeting opportunities in China.

Part of the DIC's Emerging Markets division, China Dubai Capital will invest in a wide range of sectors including infrastructure, resources, healthcare and services.

First Eastern is the first Chinese investment bank to be listed at DIFC.

Dubai Group

The government-backed investment company, Dubai Group, plans to invest as much as $2.5 billion in China and India over 2007 and 2008, The Wall Street Journal reported.

Soud Ba'alawy, executive chairman of Dubai Group, said the investment company has spent the past three or four years familiarising itself with Asia and building its portfolio.

With a portfolio in excess of Dh3.5 billion, the firm is looking at larger-scale investments in real estate, finance and manufacturing, according to the report.

Dubai Group bought into the initial public offerings of large state banks including Bank of China Ltd, but the firm is also looking to invest in a smaller Chinese bank or insurer, the Wall Street Journal reported.

Limitless plans projects in China

Limitless, the global master development arm of Dubai World, set up two companies in China last year to launch the first of many large-scale urban real estate projects.

It has established Limitless World China in Hong Kong and Limitless Consultancy Company in Shanghai to act as operating and holding companies for its future project developments in China, Gulf News reported.

The company is planning numerous mixed-use developments covering the hospitality, retail, commercial and residential sectors.

According to a statement released by Limitless, China has seen a 20% annual growth in real estate over the last decade.

The company said more than 750 cities will be built in China over the next 15 years, while about 2,500 projects - including waterfront developments, industrial free zones and tourism projects - are either underway or in the pipeline.

Istithmar World eyes China

Dubai government investment agency Istithmar World is looking at potential investments in China, the Wall Street Journal reported.

Istithmar, Dubai World's private equity and international investment house, has offices in Shanghai as does Limitless.

Following the backlash that DP World faced in the US over its proposed port acquisitions, Istithmar chief executive David Jackson signalled to the Wall Street Journal that the investment agency was looking at opportunities in Asia.

"Countries such as China, where we recently opened an office, are welcoming to sovereign wealth funds, so more are looking to invest there."

Emaar

In June 2006 Dubai-based developer Emaar opened an office in Shanghai with the aim of developing modern residential properties in China's major cities.
In April, the developer signed a MoU with Shanghai China-News Enterprise Development Ltd, a Chinese government entity that explores development projects in key cities.

Emaar's first focus is on lifestyle developments in Beijing and Shanghai, similar to high-end UAE residential projects. These will feature amenities such as fitness centres, retail malls, schools and hotels.

Anchor's away

Dubai World's growing investment portfolio in China was pioneered by DP World's port operations in the country.

In a sign that more investment is to come H.E Sultan Ahmed Bin Sulayem, chairman of Dubai World met the president of China Shipping, China's leading shipping conglomerate, recently to discuss further business opportunities.

"Dubai World has a strong investment base in China, mainly through DP World, the group's global marine terminal operator," said Bin Sulayem.

Dubai World has a multi-billion dollar global portfolio, including P&O, UwS retailer Barney's, a stake in the UK's Standard Chartered banking group, and about $20 billion in real estate assets around the world outside of Dubai.

Cityscape China

In a sign of the Gulf-China connection, the 15 countries represented at 2008 Cityscape China in Shanghai were all from the Middle East.

Aside from attracting Chinese investment for building projects in the UAE, property companies were scouring China for opportunities too, according to a report in the China Economic Review.

It noted that Cityscape exhibitors Jumeriah, Istithmar World and Emaar have all set up offices in Shanghai.

Stephen Yeung, head, real estate division, KAB China, an asset management company that deals in Dubai property products, told the China Economic Review that most Chinese are looking to invest in mid- to high-level residential properties to let or re-sell.

The starting price tends to be no less than $1.2 million with an expected return of around 20% on the investment.

Due to the high prices and unfamiliarity of the market, Chinese private property investment in Dubai is only for high-end investors, Yeung told the Review. The majority of the deals involved institutional investors going into joint ventures to get construction and development contracts.

Trade relations

The bedrock of China and the UAE's relationship is its trade relationship. In April 2007, the two countries signed a Memorandum of Understanding aimed at developing economic relations.

The UAE and China have healthy trade ties, which have been increasing steadily over the past five years. Trade between the countries has been expanding at a rate of more than 30% annually since 2003, according to a Gulf News report.

"China is the biggest exporter to the UAE. Our total exports to this country were worth $17 billion in 2007," Gao Yusheng, Chinese ambassador to the UAE, told Gulf News.

A piece of China in Dubai

While UAE developers pursue opportunities in China, a Chinese investor attracted media attention by buying a an island in Nakheel's The World development.

Hu Bin, a real estate tycoon, paid $28 million for 40,000m² Shanghai Island. Hu told Chinese media he was prepared to spend $200 million more developing the island, saying "It could be a good business opportunity."

By Andy van Smeerdijk, Contributing Editor

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