Chinese, Saudi Arabian firms to boost economic ties
Saudi Arabia pledges to enhance private economy to attract foreign investors
Business representatives from China and Saudi Arabia gathered in Beijing Thursday afternoon to sign 21 memorandums of understandings ( MoUs), covering various sectors such as IT, energy and construction.
China’s State- owned enterprises such as the National Building Material Group and China Machinery Engineering Corp and private firms like Shenzhen Topray Solar Co Ltd all showed interest in investing in Saudi Arabia, a country whose geographical advantage places it at the crossroad of three continents – Europe, Africa and Asia. In addition, firms like Chinese telecommunication services provider Huawei Technologies Co who have already entered the Saudi market signed new deals to expand their presence in the country.
On Thursday morning, China and Saudi Arabia signed 14 cooperative agreements at the Great Hall where Chinese President Xi Jinping and Saudi Arabia’s King Salman bin Abdulaziz Al Saud were in attendence, according to the Xinhua News Agency.
The deals involving 35 cooperative projects worth $ 65 billion and industries such as trade, energy and technology
At the meeting, President Xi welcomed Saudi Arabia to become a partner in the One Belt, One Road ( B& R) initiative and pledged to continue to be an important business partner of the country.
During King Salman’s visit to China, enterprises from the two countries are expected to deepen business ties in various sectors including energy, airline, petrochemical and infrastructure, Qian Keming, Chinese Deputy Minister of Commerce, said at the opening ceremony of the forum.
“Also, the two countries will push forward with negotiations on the PRCGCC [ China and Gulf Cooperation Council] free trade agreement, which will be beneficial for both sides,” he said.
China imported $ 24.55 billion in goods from Saudi Arabia in 2015, down 42.7 percent year- on- year, a drop due to sluggish crude oil prices, according to China’s Ministry of Commerce. Meanwhile, exports from China to the country jumped 6.1 percent to $ 24.64 billion.
Saudi Arabia is striving to lower its dependence on the energy sector while looking for an economic transformation, which requires further diversification of its industries and deepening the level of its global cooperation, Yousef Abdullah Al- Benyan, vice chairman and chief executive officer of SABIC, the world’s fourth largest global diversified chemical company based in Saudi Arabia, told the Global Times on Thursday.
China and Saudi Arabia are economically complementary and have cooperation potential in several areas including energy, infrastructure, IT, finance and culture, McKinsey & Company partner Katrina Lü told the audience during the forum.
Chinese companies have been actively participating in infrastructure projects overseas and have earned a reputation for fulfilling high- quality project commitments on time.
“There were large infrastructure projects in Saudi Arabia worth $ 744 billion in 2015, which could be attractive to Chinese investors,” Lü added.
Some Chinese companies that have already entered the Saudi market may set an example for other firms that intend to go there. For instance, since Stated- owned China Railway Construction Corp won a bid worth 6.7 billion Saudi Riyal ($ 1.8 billion) in 2009 to build the first 18 kilometers of a metro in Mecca, it has won six major projects in the country worth about $ 5 billion, local news site arabnews. com reported in January 2016.
In addition, China and Saudi Arabia may find common ground in the B& R initiative as well as Saudi Arabia’s Vision 2030, a national transformation program which defines the country as a powerhouse for investment worldwide.
Vision 2030 shows that the country’s GDP is expected to grow from $ 653 billion to $ 1.1 trillion, while small and medium-. sized enterprises ( SMEs) are expected to account for 35 percent of GDP, increasing from the current contribution of 20 percent.
Enhance private sector
SMEs in Saudi Arabia have been restricted by state- owned business and they enjoy no privilege, experts said.
“It has only been in recent years that these enterprises have started to develop,” Zhou Rong, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Thursday.
“Chinese enterprises may face some challenges concerning investment in Saudi Arabia,” Zhou noted.
“We are not very familiar with the Saudi Arabian private sector because we are inclined to deal with its top royal members, who make the decisions on politics and the economy. Further, its private economy covers limited areas due to the restrictions of the stateowned economy, in which crude oil plays the pivotal role,” Zhou explained.
The Saudi Arabian government, which recently established a new SME authority, pledged to improve the business environment by easing services and looking after financial solutions, Eng. Adnan AL- Sharqi, executive general manager of investor services for the Saudi Arabian General Investment Authority, told the Global Times at the forum.