Contesting the West: China’s Middle East strategy
China seeks a wider political role but limits engagement
As a sign of China’s ambitions to play a greater political role in the Middle East, Beijing has intensified its advocacy for the Palestinian cause since the start of the Israel–Hamas war in October 2023. The China–Arab forum’s final communiqué (the ‘Beijing Declaration’), called for an international peace conference to settle the conflict. The communiqué also condemned Israel’s invasion of Rafah and the United States’ exercising of its veto over resolutions on Palestinian statehood at the United Nations Security Council. At other international fora China has taken a similarly vocal pro-Palestinian stance and has attempted to mediate reconciliation between Fatah and Hamas, hosting them for talks in Beijing. During proceedings at the International Court of Justice in February, China defended the Palestinians’ right to armed resistance against Israel’s illegal occupation of Palestinian territories.
Beijing also used the China–Arab forum as an opportunity to make inroads with Arab states it had previously neglected. China established a comprehensive strategic partnership agreement with Bahrain, which holds strategic significance for China due to its close defence and security ties with the United States and its current presidency of the Arab League. Among North African states, China signed a strategic-partnership agreement with Tunisia and held high-level meetings with Libyan Prime Minister and Foreign Minister Abdul-Hamid Dbeibah in Beijing.
Ironically, China owes much of its political success in the Arab world to its main rival, the United States. As surplus regions with trillions of dollar-denominated assets, China and the Gulf states share concerns over the United States’ unprecedented weaponisation of trade, finance and technology against Russia. Moreover, the United States’ perceived inconsistent enforcement of international law in Ukraine and Gaza has severely undermined its claims to uphold the international rules-based order. According to the US-based Arab Barometer, the United States’ standing amongst ordinary Arab citizens has declined ‘dramatically’ compared to 2022; its latest polling from late 2023 and early 2024 ‘made it clear that the United States’ loss has been China’s gain’.
Although China often seeks to contest US influence in the Middle East, there is no reason to believe that it aims to fully displace the United States’ political and security role. Beijing is building on its success pushing a Saudi Arabia–Iran normalisation deal past the finish line in March 2023, but it avoids costly entanglements in the region. For instance, despite the additional costs incurred by Chinese exporters due to Ansarullah (Houthi) attacks on vessels in the Red Sea, China has not intervened militarily, leaving the burden of keeping sea lines of communication open to the United States and its close allies. China and Russia have instead negotiated with the Houthis for assurances that their ships would not be targeted. Although Chinese exports of uninhabited aerial vehicles have increased, as has defence cooperation in the form of port calls and joint exercises with local militaries, China does not offer its Arab partners security guarantees, and is seemingly uninterested in replacing the United States’ regional security presence.
Deepening economic ties
China’s relations with the Arab world are rooted less in politics and defence than in energy and commerce. China is a top trading partner for some of the largest Arab economies, including the Gulf Cooperation Council (GCC) bloc, Egypt, and Iraq. In 2022, it sourced over half of its oil imports from the Gulf region. Under the Belt and Road Initiative (BRI), Chinese investments in Arab countries took an upward turn, encompassing various sectors including oil and gas, renewable energy, digital connectivity, and ports and logistics. Meanwhile, negotiations between China and the GCC on a free-trade agreement, in the works since 2004, have accelerated, with trade ministers from the GCC and China convening in Beijing in October 2023. Recent reports suggest that negotiations have hit a stumbling block, however, likely due to Saudi concerns that inexpensive Chinese imports would stunt its manufacturing ambitions.
During the first China–Arab States Summit held in Riyadh in 2022, President Xi set the tone for the next phase of economic cooperation with the Gulf region by emphasising the use of local currencies in trade. Since then, the UAE has settled a liquified-natural-gas deal on the Shanghai exchange in renminbi, while Saudi Arabia is also considering using renminbi for its oil trade with China. Moreover, Saudi Arabia and the UAE have signed currency swaps and are experimenting with central bank digital currencies (CBDCs) with the People’s Bank of China. Buna, a UAE-based payments-clearing system launched in 2020, is slated to link with China’s UnionPay as part of a wider expansion strategy, allowing for easier transfers in local currencies. Chinese and Gulf sovereign wealth funds have also increased their exposure to one another’s markets, though this remains modest. Nonetheless, the Arab Gulf states remain anchored to the US dollar as a trading and reserve currency even as they experiment with alternative arrangements.
As China’s economy slows down, Chinese investors are increasingly looking to Arab markets as a potential source of growth. Chinese tech and e-commerce conglomerates including Alibaba (e-commerce), Tencent (data storage) and Meituan (food delivery) are reportedly looking to expand operations in Saudi Arabia in search of investments and market share. Saudi Arabia is also using sovereign investments to entice Chinese car-tech manufacturers to establish facilities in the kingdom.
More broadly, US–China geo-economic friction is having mixed effects on Chinese–Arab trade and investment ties. The UAE’s G42 and Saudi Arabia’s Alat have signalled their willingness to divest from China on artificial intelligence (AI) under pressure from the United States. Washington placed restrictions on the sale of Nvidia semiconductors to the Gulf states for fear they would end up in China and forced Prosperity7, a Saudi Aramco-backed venture-capital fund, to liquidate its stake in US-based AI startup Rain AI. As US and European tariffs close off markets to Chinese exporters, however, new opportunities arise for Arab economies. US and European Union tariff hikes on Chinese electric vehicles, for instance, may prompt Chinese exporters to divert sales towards Arab and other consumer markets. Meanwhile, Morocco and Egypt have generated interest from Chinese manufacturers of electric vehicles, batteries, steel and chemicals looking to sidestep US and European tariffs, move geographically closer to markets in Europe and North America, and avail themselves of the preferential-trading arrangements that Egypt and Morocco enjoy with the EU and the US.
A regional strategy with global implications
China has successfully positioned itself as an alternative partner on economic development and conflict resolution. Through extensive economic and energy ties, and a steady improvement in political relations, China has proved adept at contesting the United States’ influence in a region Washington has dominated since the end of the Cold War. Nonetheless, China’s coalition-building strategy among countries of the Global South faces multiple obstacles in the region, including the enduring appeal in Arab capitals of obtaining defence and security commitments from the US; cultural barriers; and the risk of countries losing interest in forging deeper economic ties with China if its economic slowdown endures. But against the backdrop of a catastrophic war in Gaza and with intensifying global trade wars on the horizon, there is a pronounced regional interest in upgrading ties with China and joining international groupings it leads, notably BRICS+. This suggests that Beijing’s projected emphasis on state sovereignty and vision for a more equitable, multipolar world order is likely to continue resonating in the Arab world.
