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Dubai’s DIFC aims to forge new ties with reopened China

People, Person, Man
DIFC governor Essa Kazim unveiled its 2022 results on Monday
  • DIFC working to strengthen links with financial services companies
  • Governor Essa Kazim says it will organise roadshows in China
  • Number of companies in Dubai centre grew by 20% in 2022

The Dubai International Financial Centre has plans to generate a new wave of interest from Chinese financial services companies as the world’s second-largest economy returns to the global stage.

China reopened its borders last month, after dropping the strict controls imposed at the start of the pandemic.

In 2022, when the zero-Covid restrictions were still in place, China became the UAE’s largest non-oil trading partner and the Emirates remained China’s second-largest trading partner.

“China has been closed, but certainly we are going to resume our activity now,” said Dubai International Financial Centre (DIFC) governor Essa Kazim on Monday.

“Four of the biggest Chinese banks already have a presence here. We continuously engage not only with China but all the major economies of the Far East to use the DIFC as their hub to access markets of the Middle East and North Africa.”

Bank of China, Agricultural Bank of China (ABC), Industrial and Commercial Bank of China and China Construction Bank Corporation – the country’s four largest banks in terms of total assets – have fully fledged branches in the DIFC. 

The UAE is also a major gateway for Beijing’s Belt and Road initiative for infrastructure. The DIFC acts as a platform for Chinese financial services companies and other businesses that are looking to launch and manage their investments and operations across the South-South corridor.  

Kazim added that the DIFC would organise roadshows on optimistic expectations of an economic recovery in Beijing.

More than 6,000 Chinese companies already have operations in the UAE. 

GCC-China trade doubled to $180 billion between 2010 and 2021, according to think tank Asia House. China is the biggest trading partner for all GCC economies, with the exception of Bahrain.

China’s trade with Saudi Arabia also exceeded Riyadh’s with the US and Europe combined for the first time in 2021. Asia House also expects the UAE’s trade with China to overtake that with Western economies.

The difference between UAE trade with China and with the US, UK and Europe combined is narrowing. It stands at approximately $3.4 billion, down from $28 billion in 2010. 

Passengers queue for boarding at Yantai Penglai airport in Shandong province, eastern China, on February 9. Travel restrictions have been lifted after three years. Picture: CFOTO/Sipa USA

The DIFC announced record-breaking growth last year, with the number of active companies in the financial hub rising 20 percent – from 3,644 in 2021 to 4,377 in 2022.

Growth was driven largely by fintech and innovation firms, which became the fastest-growing sector in the centre with 291 new companies.

It has also been attracting high levels of interest from hedge funds seeking shelter from global instability. 

Kazim said about 60 hedge fund firms, which have assets under management of more than $1 trillion dollars in total, were waiting to be licensed. The DIFC has also subsidised licence fees to attract the pipeline of funds. 

‘The region has been decoupled from the global economy’

Kazim said the DIFC had not been negatively affected by macroeconomic challenges. 

“We are not seeing any specific risk that we need to mitigate,” he said. “The dynamics of our region are a bit different from the rest of the world.

“This is the first time in a while that we are seeing that the region has been decoupled from the global economy. Our performance has been in one direction and the global economy has been in another direction.

“Fortunately, the past three or four years have been some of the best years we’ve ever had. We doubled the number of companies in the last four years and the number of companies licensed last year is equivalent to 13 years of our operation.”

Kazim attributed the positive growth to “good planning” and the UAE’s management of the pandemic, as well as government reforms to attract new businesses, talent and investment.

He added that the DIFC’s success was a result of continuing to explore new markets, prospects and sectors. However, Kazim said the DIFC had seen little interest from Russian financial firms.

A year after the Russian invasion of Ukraine, he said: “There is no interest of Russian companies to come here – I have not seen any.

“In order for a Russian company to be licensed here, our regulator has to feel comfortable with their counterpart in Russia and that usually happens through signing memorandums of understanding to be able to share mutual information.

“That has not happened. And I don’t see that happening in the near future because the prerequisites are not still there.”

DIFC chief business development officer Salmaan Jaffery added: “There are no regulated Russian entities in the DIFC. Even before the current crisis, we’ve had no basis for working or accepting applications from the Russian central banks and they are below our risk appetite.”

The centre is home to 17 of the world’s top 20 banks. It also hosts five of the top 10 insurance companies, five of the top 10 asset managers and many global legal and consulting firms.

The DIFC’s combined revenue exceeded AED1 billion ($272 million) for the first time in 2022. Revenue rose 18 percent year-on-year to hit AED1.06 billion, up from AED897 million in 2021.