Strategic ties that stabilize the world
China and Saudi Arabia have realized close collaboration will help to secure each country’s core interests
Rarely in the history of diplomacy does a newbilateral relationship change the existing order. But one was symbolized recently in Beijing by the meeting between Chinese President Xi Jinping and Saudi Arabian Crown Prince and DefenseMinister Salman bin Abdulaziz Al Saud. Xi hailed Saudi Arabia as China’s good friend, brother and partner. The crown prince said his visit aimed to enhance the Kingdom of Saudi Arabia’s strategic partnership with China.
Though there are obvious cultural, religious and historical differences between the kingdom and China, and their policies on sensitive issues such as Syria and Iran may differ, both recognize that to secure each country’s “core interests”, close collaboration is needed.
Putting principles into practice, a Saudi China Investment Forum was held in Beijing during the crown prince’s visit. I was privileged to participate.
The forum was organized by the Saudi Arabian General Investment Authority, the vision of its governor, Abdullatif Al-Othman. “China is a natural strategic partner for Saudi Arabia,” Al-Othman said. “Our complementarities should enhance business and stimulate entrepreneurs.” Saudi Ambassador to China Yahya Al-Zaid stressed that the cornerstone of bilateral relations is co-investment from private companies as well as national enterprises.
We began the forum with three premises: mutual dependency on crude oil (Saudi Arabia is China’s largest supplier and China is Saudi Arabia’s largest customer); economic development as a mutual necessity to create jobs and raise standards of living; and the public commitment of both national leaders to strengthen and broaden economic relations.
The kingdom has the world’s largest oil reserves; it is the world’s 19th largest economy. Politically, Saudi Arabia claims commitment to stability and modernity. Socially, to education, science and technology, and public services. Economically, to diversifying away from energy and restructuring toward knowledge-based industry.
Demographically, Saudi Arabia’s population is almost 30 million, with 50 percent younger than 25 and 35 percent younger than 15. Geographically, the country sits at the crossroads of Asia, Africa and Europe. Culturally and religiously, the kingdom, with the holy cities of Mecca andMedina, is the center and most respected country of the Islamic world.
High-growth industries include energy, downstream petrochemicals, alternative energy, construction and infrastructure, manufacturing, science and technology, healthcare and medical. Business is facilitated by low-cost inputs (energy and land) and soft government loans (50 to 75 percent of investment). SAGIA Governor Al-Othman stressed the “ease of doing business”, the “level playing field”, and that “no partner is needed and no minimum capital is required”. Affirmative financial programs support small and mediumsized businesses.
For prospective investors, SAGIA facilitates the commercial assessment and investment process. Operated like a business, SAGIA radiates an entrepreneurial spirit— Al-Othman was a businessman (CFO of Saudi Aramco). The kingdom’s two major corporations, Saudi Aramco, the world’s largest oil company, and SABIC, a leading petrochemical company, have innovative programs to assist local businesses. Aramco Executive Director Ahmed Al Subaey highlighted Aramco’s policy of mandating local content in procurements, such as signing long-term contracts and setting favorable pricings. Aramco may even consider minority investments, Al Subaey said. In addition, the Council of Saudi Chambers, can introduce local businesses and professionals.
SaudiMinister of Commerce Dr Tawfiq Al-Rabiah highlighted the increased annual trade between China and Saudi Arabia, from under $300 million in 1990 to $73 billion in 2012, and how the kingdom’s industrial plans resonate with Chinese interests. The president of King Abdulaziz City for Science and Technology, Dr. Mohammed Al-Suwaiyel (who speaks Chinese), arrayed a long list of high-tech research in the kingdom, including water desalinization and a just-signed aerospace agreement with China, through which Chinese rockets will carry Saudi satellites into orbit.
Question: “Why is Saudi Arabia, with its huge amounts of capital, seeking foreign investment?” Money alone cannot create value, the Saudis explained; technology, knowhow, markets and management enable the kingdom’s essential economic transformation.
One Chinese company complained that by Saudi Arabia using Western standards to set technical specifications, the Chinese were disadvantaged, even if they offer lower prices. Also noted were Chinese losses in a large, fixed-price railway construction project. That realworld issues were discussed openly and candidly reflected the seriousness of the forum.
I stressed that companies should focus on commercial criteria, not on political directives, though the support of both governments could help reduce the risk of investments and thus improve the risk/return ratio.
One question thrown at me was whether closer collaboration between Saudi Arabia and China would ”threaten” any other country (meaning, with a wispy thin veil, the US). I replied that theUS welcomes enhanced international stability and encourages China and Saudi Arabia to assume more of the burden of responsibility in world affairs.
Sulaiman Ababtain, president of AramcoAsia, said “we look forward to deepening our participation inChina’s society as well as inChina’s economy”. Quoting AramcoCEOKhalid Al-Falih, Sulaiman said: “We do not just sell oil toChina, but we are longterm strategic partners withChina.”
Disclosure: I facilitate business between China and Saudi Arabia. Sure, I see commercial opportunities, but more than that I support the strategic relationship— for the prosperity of both countries and for the stability of the world. The author, an international corporate strategist and investment banker, is the author ofHowChina’s Leaders Think and the biography of former Chinese president Jiang Zemin. He is a commentator on BBC, CNN, CCTV, Bloomberg and other media.