Podcast

Podcast Highlights

An oil trade driven relationship….

• China is the largest energy consumer in the world and has become increasingly reliant on GCC oil supplies. The trend is going to continue in the foreseeable future
• In 2011, the GCC countries supplied about 1.7m barrels of oil per day which represents about 33% of China’s total oil imports for the year
• Forecasts expect Middle East oil supplies to China to double by the year 2030 and this will largely serve as the catalyst for increasing trade and investment between the two

With a non-oil trade impact….

• Some forecasters are predicting that China will become the GCC’s most important trading partner by 2020
• In terms of volumes, total non-oil trade between the GCC and China amounted to US$92.4bn in 2010 as compared to US$6.1bn recorded in 2002, that’s a 15 fold increase and makes China the largest exporter to the Middle East surpassing the U.S.
• The GCC has maintained a strong demand for Chinese goods and services with a 30.5% YOY growth in imports to the GCC as of June 2012 primarily led by consumer goods and construction
• GCC products such as aluminum, fertilizer and petrochemicals are in high demand by China and are all strategic industries the GCC countries are investing in

Growth sectors

Energy and petrochemical related businesses will be the engine of growth for the years to come. There is also significant activity in construction particularly infrastructure projects as well as consumer goods.

Future of Middle East- China relationship

• This relationship will continue to grow and diversify in the coming year. 
• Visiting Chinese CFOs have expressed wishes to be involved in a diverse range of opportunities in the GCC, among which an interest in identifying sources of Islamic financing for development projects in China.
• Chinese investors in the Middle East are continuing to focus on large scale infrastructure projects, and acquiring stakes in energy sector previously held by Western companies. There is also a move to Financial Services with a number of Chinese banks opening up in the region.

Potential impacts of China slowdown

According to the recent IMF reports, China slowdown has the potential to negatively impact the GCC more than the European Debt crisis. For example, if the slowdown results in a reduction of oil demand from China, this could have a knock-on effect to the large scale infrastructure projects and social reform programs underway in the region, where an enormous amount of funding has been committed.  On a positive note, a slowdown within China could spur more outward investments from Chinese companies seeking growth, this could strengthen the trade prospects. In the long term,  trade prospects would continue to increase between China and the GCC.