Towards Strengthening Gulf-China Relations

  • 3 January 2015

China became the world’s largest exporter in 2009 and overcame Japan the following year to become the second biggest economy after the United States. The country has a great opportunity to become the world’s largest economy by the end of this decade. It is expected to become the world’s largest consumer market by the end of this year (2015), which means its consumer spending will become the main engine of global economic growth, making the Chinese consumer the most important consumer in the world. Despite the fact that China is now the second-largest oil consumer in the world, following the United States, the Chinese oil market captures the attention of oil and energy producers due to its advantage as the fastest growing market in the world.

On the other hand, economies of the Gulf Cooperation Council (GCC) countries – whether considered individually or under the GCC umbrella – are a rising economic power and occupy top rankings on the indices of development, prosperity, and in terms of trade and investment. GCC economies are financially stable compared to many regions around the world, which make them among the most attractive markets in the world owing to their liberal economic policies. They also have relative advantage as the largest grouping of energy producers in the world. The GCC countries produce nearly a quarter of global oil and also have distinctive capabilities in natural gas and renewable energy production.

Considering the economic position of the two sides, China and the GCC have become increasingly important commercial and investment partners, especially in these current unstable global economic conditions. The Chinese government’s recent statements, and its intention to push for free trade talks with the GCC, expresses its strong desire to arrive at a final agreement. Some difficulties have hindered the progress of FTAs for some time. The unstable global economic conditions that helped both the sides become global powers also give them an opportunity to make further economic convergence, through the conclusion of a free trade agreement, the negotiations for which were launched in 2004.

China and the GCC countries share a strong economic relationship that goes back decades. The current bilateral trade stands at around $155 billion and is growing at over 15 percent every year. According to a report by The Economist, bilateral trade is expected to reach about $279 billion by 2020 which indicates rapid economic exchange between the two sides and the opportunities available to benefit from each other. In light of the current global economic climate, the importance of economic convergence does not end with supporting and stimulating growth of economies but also add to the strategic dimensions that will help them achieve long-term goals related to global trade. This is evident in their roles in the ‘New Silk Road’, which will make the two economic powers more sustainable.