Analysis Trade China dominates Saudi trade in Q1 as ties strengthen By Andy Sambidge June 6, 2023 Saudi Press Agency via Reuters Saudi's King Salman greets China's President Xi Jinping in Riyadh on December 8, 2022 Saudi Arabia’s trade with China totalled $24.3bn in Q1 2023 Beijing was Riyadh’s top trading partner for imports and exports Analysts report ‘great momentum’ in bilateral relationship China’s trade with Saudi Arabia topped SAR91 billion ($24.3 billion) in the first quarter of 2023, making up 19 percent of the kingdom’s total commerce. Data from Riyadh’s General Authority for Statistics (Gastat) said China was the top trading partner for both imports and exports. Exports to China, which are dominated by crude oil, amounted to $13.7 billion – 16.4 percent of total exports – in Q1. Imports from China, led by electronic goods, totalled $10.7 billion – 21.5 percent of total imports. China-GCC free trade deal will be a game changer Saudi dominates Chinese Belt & Road investment in GCC Harrods checks into hotels as it awaits return of Chinese shoppers Gastat said imports from China were worth more than imports from Saudi’s No 2 and No 3 trade partners added together. These are the United States and the UAE, which had a combined figure of $7.8 billion. The Q1 figures showed a 14.6 percent drop in total international exports to $84 billion. Imports rose by 18 percent, as analysts described “great momentum” in Chinese-Saudi relations over the past few months. Co-operation in technology is “moving at pace”, said Freddie Neve, senior Middle East associate at Asia House in an updated research briefing. Chinese tech companies such as Huawei are winning contracts to work on Saudi's digital transformation. The recent visits to the kingdom by President Xi Jinping and Hong Kong chief executive John Lee will accelerate growth in economic and political ties, Neve said. Bilateral trade hit $87.3 billion in 2021. China's crude oil imports made up almost half the total. During Xi's visit last December, some 35 deals worth $50 billion were signed with Gulf nations. Key areas included technology, logistics and renewables. Neve said: “Chinese investment in Saudi Arabia may amplify China’s focus on the wider Middle East. The China-brokered deal between Saudi Arabia and Iran to restore diplomatic ties is an example of this. “The US would have struggled to broker a similar rapprochement, given its relations with Iran. So the deal points towards an emerging shift in the Middle East’s power dynamics, where China is more willing to exert greater diplomatic and political influence in the region to secure its interests at Washington’s expense.” Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington, pointed to a “great deal of momentum” over the past few months. He told AGBI: “The Chinese are likely to double down on economic cooperation and then look for niche areas in non-economic realms where they can advance their interests and gain prestige on the world stage.” Mogielnicki added that it was important to distinguish between China's political leaders and its business chiefs. "While there are strong ties and coordination between them in China, implementing a grand strategy in this region is not an easy task, if that’s even the aim. “My sense is US government officials won’t be phased by Saudi-Chinese economic co-operation but will be on the lookout for various forms of collaboration that raise red flags.” Asia House said Saudi's expanding manufacturing and logistics industries were particularly attractive to Chinese firms. J&T Express is a Chinese logistics company that entered Saudi Arabia at the start of 2022. Within a year, it had established seven warehousing and distribution centres and taken on 2,000 staff. Beijing hopes its economic ties with Saudi will strengthen to the point that Riyadh begins to accept payment for oil in yuan, according to Asia House. There are signs of the yuan gaining greater influence in the Middle East, particularly as Russia is increasingly conducting trade in the Chinese currency. However, Neve said: “There are some reasons why Saudi Arabia may not wish to trade its oil in yuan. The Chinese currency is less stable than the dollar and replacing it could undermine Saudi Arabia’s fiscal outlook, its ability to deploy capital abroad and weaken its US dollar peg.” Some of the biggest China-Saudi deals in 2023 The Red Sea Industrial Aluminium Company, a subsidiary of China’s largest private manufacturer of aluminium alloys, plans to invest $10 billion to build a factory in the kingdom. It will create 5,500 jobs. Shenzhen Capital Group has launched a $1 billion private equity fund focused on Saudi Arabia. The Public Investment Fund bought a $265 million stake in Chinese e-sports company VSPO. The Saudi wealth fund is now VSPO's single largest equity holder. Saudi Aramco acquired a 10 percent stake in Rongsheng Petrochemical Company for $3.6 billion.