Saudi and China sign 34 deals on first day of President Xi’s visit

Saudi Press Agency

• China’s president landed in Riyadh on Wednesday December 7
• Agreements cover sectors including energy, transport and housing
• 2022 Q3 bilateral trade between the two countries totalled $27bn

Saudi and Chinese companies signed 34 investment agreements on Wednesday as President Xi Jinping started his visit to the kingdom.

The agreements further bolstered trade between the countries which last year exceeded Riyadh’s with the US and Europe combined for the first time.

Bilateral trade between Saudi Arabia and China totalled SAR304 billion ($81 billion) in 2021, while trade exchanged in the third quarter of 2022 reached SAR103 billion ($27 billion).

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The agreements covered sectors in the fields of green energy, green hydrogen, photovoltaic energy, information technology, cloud services, transportation, logistics, medical industries, housing and construction.

They were signed in the presence of Saudi Arabia’s Minister of Investment, Khalid bin Abdulaziz Al-Falih, who said the visit reflected the two countries’ keenness to develop and strengthen relations and partnerships “in all fields, including economic and investment”.

He added that the visit will contribute to “raising the pace of economic and investment cooperation between the two countries”.

Three summits are planned during President Xi Jinping’s three-day visit and agreements worth more than $29.3 billion are expected to be signed, in addition to a strategic partnership document between the kingdom’s Vision 2030 and the Belt and Road Initiative.

The nations are also preparing to launch the SABIC-Fujian Petrochemical Industrial Group Co, a joint venture to produce petrochemical products, with an estimated value of $6 billion.

“All the projects are in areas the countries are prioritising at home and globally and in areas they have previously prioritised,” Rachel Ziemba, founder of geo-economic advisory firm Ziemba Insights, told AGBI.

“The core of the relationship for now will remain oil and gas, but greater deployment and research in green energy will not only help Saudi Arabia achieve its energy and development goals, but also facilitate continued oil and gas exports.

She added: “This is a case where geopolitics and economic interests overlap. Saudi has an interest in economic and political hedging, it also has an interest in access to new technologies and technology transfer.

“The closer ties with China are not just a rebuke to the US but a reflection that trade ties have been strong for a long time.”

The visit comes as GCC trade with emerging Asia – which refers to a list of 34 Asian economies, including China and India – is expected to surpass the region’s trade with advanced economies by 2028 if current growth rates are maintained.

This is according to a report published last month by independent think tank and advisory service, Asia House, which said that trade between the GCC and emerging Asia is expected to reach $578 billion by 2030.

GCC-China trade is driving the growth and has doubled from approximately $90.6 billion to $180 billion between 2010 and 2021, says Asia House. China is already the biggest trading partner for all GCC economies, with the exception of Bahrain.

Freddie Neve, senior Middle East associate at Asia House, said: “GCC-China trade has never been higher and 2021 was the first time it had surpassed the GCC’s trade with the US and Europe area combined.”

Saudi’s sovereign wealth fund, the Public Investment Fund (PIF), also looks set to start making major investments in Chinese companies. 

Last month, the PIF applied for a Qualified Foreign Institutional Investor licence in China to enable it to directly trade renminbi-denominated stocks on Chinese stock exchanges, rather than having to go through third parties. 

To date, Saudi has mostly limited its overseas holdings to the US and Europe.

Speaking to local media, Chinese president Xi commented that he will discuss bilateral ties as well as international and regional affairs with both King Salman and the Crown Prince Mohammed bin Salman during his visit, his first to the kingdom since 2016.

Xi also noted that he and King Salman had strengthened ties between the two countries due to the establishment of the comprehensive strategic partnership in 2016 “strongly contributing to improving peace, stability and development in the region”.

Meanwhile, Saudi foreign minister Prince Faisal bin Farhan, commented: “The relations between the kingdom and China are strategic and close in light of the international developments and changes taking place.” 

“As ever trade and politics can rarely be divorced,” Chris Doyle, director of the Council of Arab British Understanding, told AGBI.

“It is no secret that the Saudi leadership and the Biden administration in Washington have had their clear differences. This opens up space for China to fill,” he said.

“That said, Saudi knows that at least for the time being, its key security relationship remains with the US. Cosying up to China sends a signal that perhaps this should not be taken for granted.”