Middle Eastern Countries Promote Economic Diversification and Accelerate and Upgrade China Arab Cooperation

Since the first half of this year, despite the impact of oil price fluctuations and regional turbulence, international institutions have still shown an optimistic attitude towards the economic growth expectations of the Middle East region. The International Monetary Fund (IMF) and the World Bank both predict that the region's economic growth rate will be 2.7% in 2024, higher than the 1.9% in 2023. PwC analysis suggests that the process of economic diversification in Middle Eastern countries remains resilient, and the non oil sector is gradually becoming an important support for economic growth in the region. In recent years, China and Middle Eastern countries have accelerated their industrial and investment cooperation, providing vigorous momentum for the transformation of the Middle East economy.

Rapid development of non oil sectors

International oil prices experienced a volatile decline after climbing to $91 per barrel in early April this year. Since May, the futures price of West Texas light crude oil in the United States has remained at $76/barrel to $80/barrel, while London Brent crude oil is basically below $85/barrel. According to the latest forecast from the International Energy Agency, the outlook for global oil demand growth may continue to weaken due to sluggish industrial activities, and oil demand growth is expected to decrease to 1.1 million barrels per day this year.

In response, Middle Eastern oil producing countries have extended measures to reduce oil production and slow down the pace of oil production and exports. "The demand for oil plays a crucial role in the economic growth of Middle Eastern oil producing countries," said Richard Bokshal, partner and chief economist at PwC Middle East. "Nevertheless, strong growth in the non oil industry is expected to offset these impacts."

Gao Shangtao, Director of the Center for Middle East Studies at the Diplomatic Academy, stated that Gulf countries have put forward many ambitious plans, including Saudi Arabia's "2030 Vision", the United Arab Emirates' "2071 Centenary Plan", Qatar's "2030 Vision", and so on. These plans and visions focus on livelihood projects and infrastructure construction, increasing investment in new energy, artificial intelligence, digital economy, and high-tech fields.

Previously, the IMF predicted that the average growth rate of non oil sectors in Gulf Arab countries in 2023 would be 4.2%. According to data currently disclosed by some countries, the Gulf countries have exceeded IMF expectations. Among them, the non oil sector in Saudi Arabia increased by 11% year-on-year in 2023, with revenue reaching 457.7 billion Saudi riyals, accounting for 50% of the actual GDP; The non oil sector of the United Arab Emirates achieved a year-on-year growth of 6.2% in 2023, with revenue reaching 1.25 trillion dirhams, accounting for 73% of the actual gross domestic product.

Since the first half of this year, driven by new orders and a sharp increase in production, non oil economic sectors in countries such as Saudi Arabia and the United Arab Emirates have continued to expand. Saudi Arabia's non oil exports in the first quarter increased by 3.3% compared to the same period in 2023, with a significant increase of 19% in the export volume of chemical and related industrial products in March compared to the previous month. The IMF recently estimated that given the broad economic growth foundation of the UAE, with strong growth vitality in the tourism, construction, manufacturing, and financial services industries, the country's actual GDP growth is expected to reach 4% in 2024.

Attracting a large amount of external funds

In the process of promoting economic diversification in many Middle Eastern countries, continuously improving infrastructure, open policies, and economic and trade environment are bringing new opportunities for the development of the region.

Taking the transformation achievements of the United Arab Emirates as an example, Wang Jin, associate professor at the Institute of Middle East Studies at Northwestern University, told reporters that with the goal of building a business hub in the Middle East, the UAE has introduced a series of policies to promote economic openness, including allowing foreign investors to have 100% ownership of onshore companies, implementing more flexible visa policies, etc., creating a more relaxed investment and financing environment, thereby better attracting global funds and talents. According to a report from the United Nations Conference on Trade and Development, while global foreign direct investment (FDI) decreased by 18% in 2023, the UAE's FDI increased significantly by 28%, ranking second in the world.

The current influx of foreign funds into the "hot land" of investment in the Middle East not only focuses on traditional energy and infrastructure fields, but also makes new energy, big data, artificial intelligence, artificial satellites and other fields popular for investment. "The rapid development of emerging technologies has become an important measure for some Middle Eastern countries to promote economic transformation," said Zou Zhiqiang, a researcher at the Middle East Research Center of Fudan University. In recent years, Saudi Arabia and other countries have restructured their domestic investment institutions to better guide the flow of funds to emerging scientific and technological fields; At the same time, in order to address issues such as insufficient technological reserves, we are constantly creating a favorable environment to attract technology startups and multinational corporations.

However, there are also hidden concerns about the transformation and development of the Middle East economy. Zou Zhiqiang stated that due to the continuous tightening of monetary policy by the Federal Reserve, many countries in the Middle East have been under pressure from currency depreciation and inflation in recent years. The current Federal Reserve's interest rate cut policy has yet to be implemented, which is not conducive to attracting foreign investment to emerging economies and has also caused significant financial pressure for Middle Eastern and non oil producing countries such as Egypt and Morocco; At the same time, inflation in some areas is still difficult to ease. For example, Türkiye's consumer price index (CPI) rose 75.45% year-on-year in May this year, seriously threatening local people's livelihood and market stability.

In addition, the IMF pointed out that the geopolitical situation in the Middle East is complex and severe, which will put pressure on economic activities in the region.

Accelerating and upgrading China Arab cooperation

Currently, China is accelerating the development of new quality productive forces, and Middle Eastern countries are also promoting diversified economic development. Gulf countries and China are mutually optimistic, based on their respective resource endowments and market factors, forming a rapidly growing wave of cooperation.

Gao Shangtao stated that China's cooperation with Middle Eastern countries upholds the spirit of equal and friendly partnership, respects the independent choices of regional countries, and truly benefits the people of both sides. More and more countries in the Middle East are willing to connect their own development with the "the Belt and Road" initiative, which will be the unchanging direction of bilateral cooperation.

At present, all 22 Arab countries and the Arab League have signed cooperation documents with China to jointly build the "the Belt and Road". Under the framework of the joint construction of the "the Belt and Road", China and Argentina have implemented more than 200 large-scale cooperation projects, ranging from infrastructure construction to upgrading of production equipment to improving logistics and transportation conditions. The results of cooperation have benefited nearly 2 billion people from both sides, effectively promoting the circulation of goods, capital, technology and personnel in relevant regions.

The 10th Ministerial Conference of the China Arab States Cooperation Forum, which was recently held, has once again achieved fruitful results. "The China Arab Cooperation Forum has been established for 20 years, and the relevant cooperation mechanisms are relatively mature and sound, which is conducive to Middle Eastern countries' cooperation and docking with China based on their own development needs," said Zou Zhiqiang.

Wang Jin stated that with the development of the times, especially after China proposed to accelerate the development of new quality productive forces, the space for cooperation between China and Arab countries has further opened up. Whether in innovation or in the energy and economic and trade areas where both sides have already cooperated extensively, it reflects the new potential and new momentum of China Arab cooperation, which will inject strong momentum into promoting the construction of a community with a shared future between China and Arab countries. (Economic Daily - China Economic Net reporter Yang Xiaolin)