Posts   |   China and the UAE Speak the Same Language: Connectivity and Trade

July 23, 2018
China and the UAE Speak the Same Language: Connectivity and Trade

China and the UAE Speak The Same Language: Connectivity and Trade

By Afshin Molavi

Chinese President Xi Jinping completed a historic three day visit to the United Arab Emirates last week, reflecting the dynamic growth of a relationship of two countries that speak the same language: the language of connectivity and trade. Taking place during heightened tensions between the U.S and a wide range of countries over tariffs and threatened tariffs, the visit also reflects a snapshot of an emerging post-American commercial world order.

While Washington was embroiled in the latest titillating scandal from the administration of U.S President Donald Trump and American allies scratched their heads about mounting tariff threats, the United Arab Emirates rolled out the reddest of red carpets for President Xi, according him the highest civilian honor, the Order of Zayed, and lighting up prominent UAE landmarks in the colors of the Chinese flag. Additionally, the UAE rolled out a program of China-themed cultural events, movies, and television programs during the visit, and even issued a commemorative stamp to mark the summit.

This relationship, however, is far from just bright lights and glitzy receptions. It’s a $55 billion trade relationship — more than double the size of the US-UAE trade relationship — and increasingly a strategic one spanning coordinated energy and infrastructure investments in the UAE and across the New Silk Road from Africa to Asia to the Middle East.

The UAE commercial city of Dubai has emerged as something of a “Hong Kong West” for China, a major re-export hub for Chinese goods across the Middle East, Africa, and South Asia (MEASA) leveraging Dubai’s extraordinary sea and air connectivity to the world via its ports and airports. There are some 4,000 Chinese businesses operating in the UAE, principally in Dubai, and nearly 200,000 Chinese residents.

This helps explain why the UAE, a country of less than 10 million people — attracts more Chinese exports than India, a country of 1.3 billion consumers. More than 60% of those exports are re-exported across the MEASA region and beyond, via the country’s busy air cargo and shipping hubs. Chinese banks have also set up in Dubai’s International Financial Center and many UAE banks have developed renminbi clearing capabilities.

The Dubai-China commercial relationship has been growing rapidly over the past decade, but the broader UAE-China relationship began to take strategic depth after the visit of Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahyan to Beijing in December 2015. The fact that President Xi chose the UAE as his first foreign visit of his second term reflects the elevated strategic nature of the relationship in the aftermath of Sheikh Mohammad’s visit.

Indeed, the visit of President Xi to the UAE did not have the feel of a powerful and rich rising power delivering “patronage” in the form of investments and loans to a supplicant country — as some Chinese head of state visits across Asia and Africa have to come resemble. As a result, the visit seemed like a meeting of “equals” despite the enormous size difference and GDP difference between the two countries. Indeed, Chinese companies benefited from the signing of contracts and partnerships with Abu Dhabi National Company for seismic surveys and strategic cooperation in both the upstream and downstream oil sector.

The countries have something fundamentally important in common: Both have benefited from economic globalization, while serving as a catalyst for accelerating the same process via trade and investment across the world. The UAE, in fact, seems purpose fit for President Xi Jinping’s signature Belt and Road Initiative that aims to support infrastructure investment across the Eurasian landmass and Africa to bolster connectivity networks that will accelerate trade.

The United Arab Emirates has been building an infrastructure of connectivity at home even before its founding as a federation of emirates in 1971, and today boasts the busiest international airport in the world (Dubai International Airport), one of the top ten busiest container terminal ports in the world (Dubai’s Jebel Ali Port), and free trade zones that have attracted some of the world’s leading companies.

UAE state-owned and semi state-owned companies are also investing globally and across the New Silk Road in infrastructure (Mubadala), telecommunications (Etisalat), ports (DP World), tourism (Jumeirah), and real estate development (Emaar). The UAE also hosts four of the fastest growing airlines in the world, including Dubai-based Emirates, among the largest carriers of international passengers in the world, as well as Abu Dhabi-based Etihad Airways and the budget carriers Air Arabia (Sharjah-based) and FlyDubai.

Meanwhile, one of the more under-the-radar developments has been UAE companies investments across Africa, in ports, telecommunications, and infrastructure, and the rise of Emirates Airline as one of the most important commercial carriers in the continent. Given China’s significant investments across Africa, this, too, represents a shared language of the two countries.

While Washington and the US media has been seized with the latest scandal from Donald Trump’s soap opera presidency and while the U.S President ups the ante in his trade fight with China and the broader world, President Xi’s visit was obscured by other headlines, but it deserves broad attention in U.S and global policy circles.

The UAE-China relationship seems to be accelerating into the trade fight winds roiling the world, rather than retreating. When two countries with broad trading networks across the MEASA region and Europe and significant surplus capital join hands, geo-economic observers should pay heed.