Since 2004, GCC countries and China have strived to advance their economic, trade, and investment relationship, and achieving levels that benefit both sides and extending that influence into the wider global economic framework.
While China's economy is the world's second largest with a GDP of $17.7 trillion, the Gulf's combined influence makes it the ninth largest globally, boasting a GDP of $2.4 trillion.
Despite the extended duration of negotiations - 10 rounds and numerous technical and ministerial committee meetings - the September 2022 summit between the two sides laid fresh foundations and provided a strong push to hasten the finalization towards a free trade agreement. Recent reports suggest that such a deal is nearing completion, particularly following last weekend's China-Gulf Cooperation Forum for Industries and Investment, which helped resolve several lingering issues.
A deal with potential upscale
While the GCC has entered free trade agreements with various countries and economic blocs, the deal with China is pivotal and promises substantial trade and investment outcomes. China is the foremost trading partner for the GCC, with volumes reaching $286.9 billion last year, according to Chinese customs data. China also ranks as one of the top importers of oil, petroleum products, and petrochemicals from the Gulf, and it supplies these markets with a variety of vital products incorporating advanced technologies.
China has also successfully marketed various industrial products in the GCC, including automobiles, electronics, and food items.
The planned FTA between the GCC and China stands out from previous treaties due to its significant future prospects. China's economy is increasingly reliant on Gulf oil, with oil and gas exports expanding annually. Moreover, the acceptance of sophisticated Chinese products and technologies in the Gulf markets is on the rise, exemplified by Huawei's strong presence in the region, in part also attributed to its competitive pricing and advanced services.
In addition to trade, there are growing opportunities in the investment sector. The past decade has seen substantial growth in joint investments and numerous collaborative projects, both within the GCC and in China. The Gulf countries have made significant investments in China’s fertilizer, refining, and chemical industries. Meanwhile, Chinese investments in the GCC have broadened considerably, covering sectors such as EV production, equipment manufacturing, real estate, tourism, transport, and infrastructure.
Easing of import duty
Given the significant mutual benefits, expediting the FTA between the GCC and China by overlooking minor details has become a priority. This move aims to harness the anticipated outcomes of the agreement, including bolstering trade exchanges, accelerating growth rates, and drawing more investments. With the elimination of customs duties, Gulf products are poised to penetrate the vast Chinese market, home to a 1.3 billion population, potentially doubling Gulf exports in the future.
Conversely, Chinese products will gain access to the expanding Gulf markets, where they will enjoy enhanced competitiveness compared to products from other nations. This increased trade activity is expected to facilitate numerous development projects, significantly boosting GDP and generating substantial employment opportunities.
It’s important for the GCC countries to establish the necessary frameworks to maximize the benefits of this FTA, including streamlining investment laws and developing the requisite infrastructure for future projects, both at the national and regional levels within the GCC.
