Economy Slowing Chinese economy no threat to Saudi oil exports – yet By Andrew Hammond July 17, 2024, 4:14 AM Arab World Press/Reuters The Saudi defence minister, Prince Khalid bin Salman bin Abdulaziz (right) and the Chinese defence minister, Dong Jun, at a ceremony in Beijing last month, where the two held talks on defence cooperation Year-on-year growth down to 4.7% Deflationary pressures bring price cuts Banks lower growth forecasts Slower economic growth in China in the second quarter of this year has raised concerns about Saudi Arabia’s ability to maintain funding lines from its main trading partner. The Chinese economy grew at a year-on-year rate of 4.7 percent, down from 5.3 percent in the previous quarter. In the retail sector, the pace of growth slowed to an 18-month low as deflationary pressures forced businesses in the world’s second-largest economy to cut prices on everything from cars to food and clothes. NewsletterGet the Best of AGBI delivered straight to your inbox every week The price of new homes fell 0.7 percent in May from the previous month, the 11th straight month-on-month decline, and the steepest drop since October 2014. Goldman Sachs lowered its 2024 growth forecast to 4.9 percent from 5 percent, the government’s target for the year, after the release of the second-quarter figures. JP Morgan lowered its own forecast to 4.7 percent, from 5.2 percent. Oil export dip fails to dent Saudi trade with China Gulf to ‘see more rather than less’ despite China’s slowing economy Gulf oil producers anticipate peak in Chinese demand The slowdown in China, Saudi Arabia’s top trade partner, could have an impact on the kingdom. China is Saudi Arabia’s leading export market, accounting for nearly 15 percent of exported goods in the first quarter, while it was also the number one importer into Saudi Arabia, accounting for 22.4 percent of imports. Saudi Arabia is nevertheless trying to drive a hard bargain in GCC talks on a free trade deal with Beijing, fearing that China will dump cheap consumer goods in its market. China’s industrial output continues to outstrip domestic consumption and export figures are still strong, which could raise trade tensions with many countries. Policy fellow Hasan Alhasan, of the UK’s International Institute for Strategic Studies, wrote in a recent report: “As China’s economy slows down, Chinese investors are increasingly looking to Arab markets as a potential source of growth.” Some of this is welcome. Chinese tech companies including Alibaba, Meituan and Tencent have been considering investing in Saudi Arabia. China recently approved its first exchange-traded funds investing in Saudi Arabia equities. Saudi Arabia wants Chinese electric vehicle and aircraft manufacturers to consider opening factories in the country. Seeking more investment Representatives of the leading Saudi giga-project Neom met 500 business leaders and officials in Beijing and Shanghai during the China leg of a global funding tour in March. But the mayor of Beijing told the visiting Public Investment Fund governor, Yasir Al-Rumayyan, he hopes to see more investment from PIF, which has an estimated $925 billion in assets under management. This came after Qatar’s sovereign wealth fund agreed to buy a 10 percent stake in China’s second-largest mutual fund company. The key element for Saudi Arabia is its status as China’s leading oil supplier. Saudi Arabia set its flagship Arab Light crude oil official selling price to Asia for July with a cut of 50 cents per barrel, the first cut in five months, in an attempt to hold up its market share. Bill Farren-Price, senior researcher at the Oxford Institute for Energy Studies, said China’s oil imports are seen rising in the short term if China’s industrial output holds up. “China oil imports have been down on refinery maintenance rather than soft GDP and should actually recover somewhat,” he said. “Gas imports are more correlated to GDP, but they’ve been strong due to low gas prices. They could soften if industrial and power demand softens.”