Why Arabs should embrace China’s Silk Road
The maritime silk road is becoming the center piece of Beijing’s economic diplomacy
A few months ago, on June 5, during the opening ceremony of the sixth ministerial conference of the China-Arab States Cooperation Forum, Chinese President Xi Jinping delivered an important speech entitled “Promoting Silk Road Spirit and Deepening China- Arab Cooperation.” Xi urged Arab countries to join China’s “Silk Road Initiative” that would build the “Silk Road Economic Belt” and the 21st Century “maritime Silk Road.”
According to the official Chinese map, the Maritime Silk Road (MSR) is a trade route snaking through Southeast Asia all the way to Europe by way of South Asia through the Strait of Malacca, to India, Africa and the Middle East. Oddly enough, only four days after Xi’s speech, ISIS seized control of Iraq’s second largest city of Mosul and diverted attention from the Chinese initiative. Indeed, Xi’s important plan was lost in the midst of unfolding developments in Iraq and Syria. Perhaps what happened was a reminder to China’s leadership not only of the economic opportunities in the Middle East but also the risks that come with engaging some countries in the region.
However, Beijing cannot afford to ignore the Middle East. Indeed, since China became a net oil importer its oil consumption rose dramatically and nearly quadrupled in only twenty years, increasing from 2.9 million barrel a day (mb /d) in 1993 to around 10.7 mb/d in 2013 and it could jump to over 17 mb/d by 2030. As a result, oil imports have also rapidly increased, rising from zero in 1993 to around 6 mb/d or 58 percent of China’s total oil supply in 2013 and could double again in the next decade.
Vital seaborne imports
With this in mind, China relies heavily on sea transport to import most of its energy needs. According to the UNCTAD’s “Review of Maritime Transport 2014” which was published last month, China’s seaborne crude imports increased by 6.8 per cent reaching 7.7 mb/d and therefore it surpassed the United States as the world’s largest net oil importer. To underline the importance of maritime transport to China and the Arab countries, about 63 percent (56.5 million barrels per day) of the world’s oil production in 2013 is transported on maritime routes. In 2013, nearly 17 mb/d (over 30 percent of the world’s oil production) traveled through the Strait of Hormuz, and 15.2 mb/d (almost 27 percent of the world’s oil production) crossed through the Strait of Malacca.
Today, the Arab countries supply Beijing with nearly one in every two barrels of China’s total oil consumption. Over the last decade, China’s oil imports from Arab countries have jumped over three-fold from about 0.8 million barrel per a day (mb/d) in 2003 to nearly 2.8 mb/d, which is about half of China’s total oil imports by the end of 2013. Tellingly, of China’s top ten oil suppliers, five were Arab states (Saudi Arabia, Iraq, Oman, UAE, and Kuwait). Saudi Arabia has been China’s largest source of oil imports since 2002 and accounted for 19 percent of China’s total crude oil imports last year. Qatar supplied China with over one-third (37.7 percent) of its total liquefied natural gas (LNG) demand, subsequently becoming Beijing’s largest supplier. As a result, the two-way trade between China and Arab countries has been growing stronger for more than a decade, with the trade volume increasing almost tenfold from around $25 billion in 2003 to over $241 billion (almost 70 percent of the total with GCC states) in 2013, according to IMF Data. China is now the Arab world’s second-largest trading partner and the largest trading partner for nine Arab countries.
Three trillion trade
In a broad picture, China’s interests at stake are enormous and cannot be ignored. In 2013, China’s aggregate trade with the EU was nearly $559 billion, its aggregate trade with the Association of Southeast Asian Nations (ASEAN) which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam was over $443 billion with the Middle East it was nearly $257 billion. With Africa, it was almost $192 billion. The four areas combined represent over one third ($1.45 trillion) of China’s total trade ($4.2 trillion) with the world according to the latest IMF data. China’s burgeoning trade with Europe, ASEAN, the Middle East and Africa further increases China’s dependence on sea lanes through the Suez Canal, Bab al-Mandeb, Strait of Hormuz, Indian Ocean and Strait of Malacca. In this sense, one can understand the importance of the sea lines of communication for China and why Beijing has been very active in economic diplomacy to promote the maritime silk road.
Looking ahead, China’s trade with these four areas (EU, ASEAN, Middle East and African countries) which is spread over three continents (Asia , Europe and Africa) could double to a staggering amount of $3 trillion by the end of this decade. In this regard, the Chinese president is very optimistic about the relations with the Middle East as his country is looking to increase the bilateral trade volume with Arab countries from last year’s $240 billion to $600 billion; increase China’s non-financial investment stock to the Arab countries from last year’s $10 billion to over $60 billion; accelerate negotiations to conclude the free trade agreement (FTA) between China and GCC states and push forward the Arab countries participation in the Asian Infrastructure Investment Bank to get an early harvest.
While the Chinese Premier Li Keqiang in his recent tour to Africa laid out a framework for China-Africa cooperation in a speech at the headquarters of the African Union and set the target for bilateral trade volume to top $400 billion by 2020, China also wants to explore the possibility of a free trade agreement (FTA) with the EU and aims for $850-900 billion in trade by 2020. Most importantly, Southeast Asian countries hope to achieve the two-way trade goal with China of $500 billion by 2015 and $ 1trillion by 2020, as well as two-way investment of $150 billion by 2020. All in all, the proposed Chinese Maritime Silk Road makes economic sense and could turn into a vital element to increase China’s standing globally. To be sure, President Xi captured the vitality of initiative to China and its neighbors in his major speech to the Chinese central foreign affairs meeting held on November, 28 to 29, 2014 in Beijing: “We have advocated the building of a new type of international relations underpinned by win-win cooperation ... pursuing shared interests ... We have endeavored to build a new model of major-country relations, put forward and practiced a neighborhood policy featuring amity, sincerity, mutual benefit and inclusiveness.”
Ultimately, it’s so vital that Arab Countries, GCC states in particular, actively embrace China’s maritime silk road and accelerate the negotiations to reach a free trade agreement (FTA) with China. Additionally, the interests of China and the Gulf states intersect in two areas important to both sides, the first is Bab al-Mandab and the second is Suez Canal. It is in the interest of Gulf states to involve China in any future initiative aimed at achieving political stability in Yemen and Somalia. Here, we must not ignore the fact that many Chinese companies are still actively working in both countries and Beijing’s relations with Cairo are also growing steadily. On the economic level, it is important for a country like UAE to continue providing logistical facilities for Chinese companies as an investor gateway to Africa, Middle East and the Indian sub-continent.
Great power politics
Despite Beijing’s growing trade and increasing reliance on seaborne trade, China’s navy currently has limitations to protect the countries sea lines of communication. Some experts think it requires at least two decades, possibly more, to rival the U.S. navy. However, as China’s military capabilities grow and their dependence on oil from the Arab countries is apt to rise significantly over time, Beijing is likely to use its navy to protect its vital interests in the Middle East and Africa in the coming years. From a Chinese perspective, the new capabilities are not necessarily to rival the U.S. but to protect China’s vital energy and trade lifelines, conduct humanitarian assistance and disaster relief and, if the need arises, to evacuate Chinese citizens working overseas, as it did in Libya and Iraq.
While the Maritime Silk Road becomes the center piece of Beijing’s economic diplomacy, other countries are not so sure and are still looking at the issue through the prism of great power politics or their fears about the growing Chinese influence. Indeed Xi’s vision has been interpreted as a response to the American “pivot” or “rebalancing” toward Asia and U.S. efforts to establish regional and global trade agreements that explicitly exclude China. As the Financial Times noted recently: “Defense experts in New Delhi and Washington have watched warily as China has funded a series of naval ports with potential military uses in Pakistan and Myanmar, as well as Sri Lanka’s Hambantota, an approach some analysts have labeled Beijing’s - string of pearls.”
Although Beijing has so far shown no interest in challenging America’s influence and strategic interests in the Gulf region and beyond; China cannot afford to ignore the so-called realpolitik, or as Mearsheimer straightforwardly put it: “A powerful China is sure to have security interests around the globe, which will prompt it to develop the capability to project military power into regions far beyond Asia. He then added that the Gulf will “rank high on the new superpower’s list of strategically important areas.”
Dr Naser al-Tamimi is a UK-based Middle East analyst, and author of the forthcoming book “China-Saudi Arabia Relations, 1990-2012: Marriage of Convenience or Strategic Alliance?” He is an Al Arabiya regular contributor, with a particular interest in energy politics, the political economy of the Gulf, and Middle East-Asia relations. The writer can be reached at: Twitter: @nasertamimi and email: firstname.lastname@example.org
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