This report examines the economic relationship between the People’s Republic of China (China) and the Gulf Cooperation Council (GCC) states in the period 2014-2019, analyzing the latest developments regarding the Belt and Road Initiative (BRI) in the Gulf. The scope of this report includes the six GCC states: Bahrain, Kuwait, Oatar, Oman, Saudi Arabia, and the United Arab Emirates (UAE).
Since 2014, China and the Gulf monarchies have established several initiatives to promote economic engagement and deepen trade. These efforts include transnational programs like BRI as well as national development projects like Saudi Arabia’s Vision 2030. This period also saw many obstacles to deeper Sino-GCC ties, including economic and political crises in the Gulf and major strains on the China-U.S. relationship. The report finds that the GCC states – caught between the United States, their closest security ally, and China, a major commercial partner – have sought a balanced relationship with each superpower to maximize their national economic and political interests.
Progress in Sino-GCC relations varies across sectors, over time, and between countries. While trade, finance, and business relations between GCC states and China have generally grown from 2014-2019, foreign direct investment from China to the Gulf states dropped precipitously in 2019. Despite this general drop in investment, two GCC states – Saudi Arabia and the UAE – dominate their neighbors as China’s preferred economic partners.
This report demonstrates that the 2014 crash in the price of oil and the 2017 Gulf crisis which divided the GCC did not affect economic relations in a significant way. It also suggests that Chinese investment in Gulf countries has not contributed to the economic diversification programs backed by GCC leaders.
Finally, this report includes policy recommendations for GCC states, Chinese political leaders, Gulf oil companies, and private Chinese firms to encourage the growth of Sino-GCC relations. These include:
- Shifting the focus of Chinese investment toward technological and infrastructure projects instead of the hydrocarbon industry.
- Exploring and overcoming barriers to economic diversification within the GCC states.
- Employing diplomatic hedging strategies in Gulf capitals to facilitate friendly relations with the United States and China during a period of increased international competition, thereby maximizing national interests and securing necessary financial backing for economic diversification.
- Contextualizing and individualizing BRI projects to meet national needs and opening up new areas for economic integration.
The findings from the research provided in this report offer policymakers and international observers a better understanding of the history and trajectory of Sino-GCC economic relations. By increasing knowledge on this important relationship, both China and the GCC states may address the obstacles to further economic cooperation and overcome future challenges.