Tensions with West ‘boost China’s ties with Mideast’
Commercial ties between China and the Middle East are enjoying a revival as geopolitics, energy transition and supplychain upheavals create new opportunities for major exporters like carmakers and battery firms, according to Oliver Wyman.
China’s fractious trade relations with the United States and its allies were strengthening diplomatic and commercial ties between the regions, said Ben Simpfendorfer, a Hong Kongbased partner at the management consulting firm.
“China’s commercial relations with the Middle East are experiencing a renaissance. The past few years have been transformative. It’s no longer a story of simply trading oil and consumer goods. It’s now a much broader and deeper relationship,” he said.
China and the Middle East traded US$507.2 billion of goods in 2022, according to customs data, double the level in 2017. The 27 per cent growth recorded that year surpassed that with Southeast Asian nations (15 per cent), the European Union (5.6 per cent), and the US (3.7 per cent).
“What we are seeing is that Chinese electric-vehicle [EV] makers are increasingly investing in other markets,” Simpfendorfer said. “They are beginning to open factories in the emerging markets, [while] also looking at options in Europe or the US. That is an encouraging dynamic because it does help ease trade tensions and support employment growth in other markets.”
But he warned trade tensions between China and the West could worsen, especially after the US presidential election. Exports would remain under pressure over the next few years and worries about overcapacity in China would stay on the front pages, he added.
Policymakers in the US and Europe have raised concerns about excess production of EVs, batteries and solar panels, among others. If China keeps offloading excess output overseas, Western firms could be forced to cut prices and jobs, they warned.
During her trip to China this month, US Treasury Secretary Janet Yellen sought to formalise discussions about excess capacity in the EV sector. Beijing officials countered by saying local exporters had already “fully responded” to those concerns.
Despite tensions, China would remain the world’s top manufacturing hub and a major exporting country due to its size and ability to innovate, Simpfendorfer said.
“It’s difficult to replace its scale, efficiency, speed, and increasingly, its innovation, whether that is battery storage or new EVs, which will remain compelling for other countries seeking to import these products,” he said.