Overview of the Development of the United Arab Emirates

The United Arab Emirates (UAE) is located at the southeastern end of the Arabian Peninsula and is a federal state consisting of seven emirates, with Abu Dhabi as its capital. In ancient times, the inhabitants of this region had advanced shipbuilding and navigation skills, leading to a thriving maritime trade. In the first half of the 20th century, the UAE consisted of sand dunes, sparse oases, and rudimentary villages, inhabited mainly by nomadic tribes, fishermen, and sailors. The pearl industry used to be the most lucrative profession in the UAE until the advent of cultured pearls. In the 1960s, with the discovery and extraction of oil, the semi-nomadic society began its transition to modernization. Under the influence of the Arab national independence movement, the UAE declared its formation on December 2, 1971.

From a fishing village engaged in pearl and spice trade, to a desert nation selling oil, and then to a country with diversified economic development, the UAE always attracts worldwide attention for its economic transformation and development. The UAE is strategically located at the entrance of the Persian Gulf into the Indian Ocean, and it is rich in oil and gas resources. According to EIA statistics, as of the end of 2022, the UAE has proven oil reserves of 109.75 billion barrels and proven natural gas reserves of 8.1 trillion cubic meters, with a daily crude oil production reaching 4.123 million barrels (2022 average), all ranking among the top in the world.

The oil industry is the backbone of the UAE's economy, and the substantial and stable oil revenue is the main source of its fiscal income, making it one of the largest economies in the Gulf region and one of the wealthiest countries in the world. At the same time, in order to reduce reliance on the oil industry, mitigate the impact of oil price fluctuations on economic growth, and achieve sustainable development, the UAE is committed to implementing a policy of economic diversification, encouraging innovative development. It has gradually developed into a center for finance, commerce, aviation, logistics, exhibitions, and tourism in the Middle East, and has rapidly become a hub for knowledge-driven enterprises such as information technology, artificial intelligence, biotechnology, financial services, and global supply chain management.

Overview of China-UAE Economic and Trade Cooperation

The Belt and Road Initiative (BRI) aligns closely with the rapidly advancing economic diversification process in the UAE. The depth and breadth of cooperation between China and the UAE, as well as the tangible outcomes, position the UAE as a key partner in China's efforts to promote the BRI.

The UAE is China's second-largest trading partner, largest export market, and largest Chinese investment destination in the Arab countries, attracting over 6,000 Chinese enterprises. With the continuous enhancement of Sino-UAE cooperation, the UAE is becoming the "gateway" for Gulf countries to look east. The two countries are seeing increasingly robust collaboration in areas such as energy infrastructure construction, production capacity cooperation, and project contracting. Additionally, cooperation is flourishing in fields including finance, currency, technological innovation, aerospace, biopharmaceuticals, and telecommunications.

In terms of bilateral trade, China's main exports to the UAE include machinery and electronics, high-tech products, textiles, and light industrial goods, while its major imports from the UAE consist of crude oil, refined oil, and aluminum products. Potential export commodities from China to the UAE include new energy vehicles, photovoltaic products, machinery and equipment, and construction materials. Potential import commodities from the UAE to China include petroleum, petrochemicals and their derivatives, as well as high-quality agricultural products.

In terms of investment, China's investment in the UAE mainly focuses on the areas of energy, steel, building materials, construction machinery, hardware, and chemicals. Sino-UAE energy cooperation has enormous potential in the areas ranging from traditional energy to clean energy, low-carbon economy, and energy transformation.

Key areas of economic and trade cooperation between China and the UAE

[Oil and Gas] Since the signing of the Belt and Road Initiative cooperation agreement between China and the UAE, the oil and gas cooperation between the two countries has steadily progressed, expanding from exploration and development to trade, engineering technology, and construction. On January 16, 2023, China Petroleum Engineering & Construction Corporation (CPECC) Gulf Regional Company officially signed the Pre-Construction Services Agreement for the Hail and Ghasha project with the ADNOC. The Hail and Ghasha project is currently the world's largest offshore sour gas development. Once completed, it will help the UAE achieve self-sufficiency in natural gas. Chinese energy companies currently operating in the UAE include CPECC, Sinochem Group Atlantis Company, and PetroChina International Co., Ltd.

[Renewable Energy] The UAE government is accelerating the development of renewable energy, and China and the UAE have extensive cooperation in areas such as photovoltaics and solar thermal energy. The Al Dhafra Solar Park project, located south of Abu Dhabi, has a total installed capacity of 2,100MW, making it one of the largest single-site solar projects globally. It involves the participation of Chinese companies such as Sinomach, JinkoSolar, Trinasolar, and Lazzen, and serves as a significant practical implementation of the BRI in the Middle East. The fourth phase of the Mohammed bin Rashid Al Maktoum Solar Park is a joint investment by companies from the UAE, Saudi Arabia, and China. As the engineering, procurement, and construction contractor, Shanghai Electric Group Co., Ltd., currently hosts the world's largest installed capacity, the largest investment, and the highest molten salt tank thermal storage capacity in a concentrated solar power project, effectively aligning Chinese production capacity with the UAE's energy development strategy. As the BRI continues to advance and as UAE-related strategic policies are implemented more rapidly, the cooperation between China and the UAE in the field of photovoltaics will deepen. In the field of wind power, in October 2023, the first wind power project in the UAE, the UAE Wind Power Demonstration Project, constructed by a Chinese enterprise, was put into operation in the UAE capital, Abu Dhabi, achieving grid-connected power generation.

[Desalination] To meet the water needs of residents, as well as industrial and agricultural water demands, the UAE government has invested heavily in promoting the development of desalination technology and has constructed several large-scale desalination plants. Chinese companies, leveraging their advantages in relevant technologies, have continued to expand their cooperation with the UAE. The Abu Dhabi Taweelah Desalination Plant, undertaken by SEPCO Third Company as the EPC contractor, is the world's largest under-construction reverse osmosis desalination project. It uses reverse osmosis membrane desalination technology, along with a supplementary photovoltaic power generation system, effectively reducing energy consumption with a conversion rate of up to 37.5 percent, placing it at the forefront of global technology. Similarly, the Umm Al Quwain Desalination Plant, the world's second-largest membrane desalination plant constructed by China Energy Engineering Corporation Limited, also employs reverse osmosis membrane technology and can produce 682,000 cubic meters of fresh water daily. These two projects have effectively alleviated local drinking water issues and have provided Chinese enterprises with a technological advantage in participating in desalination project construction. In the future, with the implementation of the UAE Water Security Strategy 2036 and the active promotion by the UAE government of the combined application of reverse osmosis and low-carbon energy-saving technologies in the field of desalination, there remains significant room for cooperation.

[Finance] The UAE has a well-developed financial system, and its strong economic complementarity with China makes deepening financial cooperation between the two countries beneficial for optimizing trade structures, expanding investments in emerging sectors, and promoting the transformation and upgrading of infrastructure cooperation. Financial cooperation between China and the UAE has long played an important demonstrative role in the Middle East. All four major state-owned commercial banks of China have branches in the UAE. The Agricultural Bank of China established the first renminbi clearing center in the Middle East in the UAE, and the Industrial and Commercial Bank of China became the largest overseas issuer of bonds listed on Nasdaq Dubai. Sovereign wealth funds of the UAE and major banks have successively established branches in cities such as Hong Kong, Beijing, and Shanghai. The Abu Dhabi Global Market established its first overseas office in Beijing. The two sides have taken the lead in conducting local currency swaps, digital currency bridges, joint investment funds, green investment and financing cooperation, and have achieved significant results. These efforts have provided strong financial support for the deepening of pragmatic cooperation between China and the UAE.

[Transportation] As a key logistics hub in the Middle East, the UAE has extensive cooperation with China. Chinese companies export goods to the global markets through the UAE cross-border e-commerce platforms, while the UAE is also vigorously developing its own logistics industry, becoming an important entrepot for entering the Middle East market. In April 2023, Etihad Cargo and SF Airlines signed a memorandum of understanding to deepen their cooperation in the air cargo market and further enhance their cargo capabilities. On August 16, 2023, an SF Airlines all-cargo aircraft took off from China's first professional cargo airport, the Hubei Ezhou Huahu Airport, and flew to Abu Dhabi, the capital of the UAE, marking the opening of a route from China's first professional cargo airport to Abu Dhabi. In August 2023, the Phase IIA of the Etihad Rail project in the UAE, built by China State Construction, was completed and delivered on schedule. The Etihad Rail is the first railway in the UAE and an important part of the Gulf Railway Network. Once completed, it will cover major industrial centers, manufacturing centers, logistics centers, densely populated areas, and important ports in the UAE. The Chinese construction project team worked closely with local suppliers to overcome complex environmental factors, selecting high-quality soil locally to build sand barriers and windbreaks, using innovative technologies to promote green construction, and carrying out protective migration of endangered plants and animals along the railway. In the future, along with the deepening of trade cooperation between the two countries, China and the UAE will cooperate more closely in logistics, promoting trade exchanges between China and the Arab countries.

[Digital Economy] The UAE is one of the most attractive information technology markets in the Middle East, and the Sino-Arabian digital economy cooperation is constantly expanding and enriching. In May 2015, Dubai's Meraas Group and Alibaba announced a joint investment to construct a data center project in Dubai; in November 2016, Alibaba Cloud's data center in Dubai was put into operation. Huawei has also signed cooperation agreements with major local communication operators in the UAE on comprehensive network transformation, advanced network technology research and development, and cooperation. In March 2023, du, the UAE telecom operator, signed a 5.5G strategic cooperation memorandum of understanding with Huawei, marking a new phase of strategic cooperation.

[Health Care] The UAE is the second-largest pharmaceutical producer in the six Gulf countries, only behind Saudi Arabia. As the leading economic performer and logistics hub in the Middle East and the Gulf region, the UAE has leveraged its unique geographical and economic advantages in responding to the global COVID-19 pandemic. It was the first country in the world to conduct Phase III clinical trials for the inactivated COVID-19 vaccines. In the post-COVID-19 era, public health cooperation will be an important area for China and Arab countries to jointly build the “Belt and Road”. China and the Arab states will continue to enhance their investment cooperation in the health industry such as medical equipment procurement and vaccine production, and jointly build the Health Silk Road.

[Processing and Manufacturing Sector] The UAE has been a leader in industrial diversification in the Arab countries, and manufacturing has consistently been one of the UAE's primary industry sectors. To incentivize the growth of the manufacturing sector, the UAE government has implemented a series of strategic plans to attract more foreign direct investment (FDI) in manufacturing, with a target of $75 billion of FDI in manufacturing by 2025. China is a manufacturing powerhouse, with a complete range of industrial sectors, which is highly complementary to the UAE's economic diversification goals, and there are broad prospects for bilateral cooperation.

[China-UAE Industrial Capacity Cooperation Demonstration Zone] To implement the Framework Agreement on Strengthening Production Capacity and Investment Cooperation between China and the UAE, the Jiangsu Provincial People's Government, entrusted by the National Development and Reform Commission to represent the Chinese side, and the Mubadala Investment Company and Khalifa Port representing the UAE, will promote the establishment of the China-UAE Industrial Capacity Cooperation Demonstration Zone in the Khalifa Industrial Zone in Abu Dhabi. The Chinese side is composed of China Jiangsu International, the Suzhou Industrial Park, Jiangning Development Zone, and Haimen Economic Development Zone. These three development zones jointly established Jiangsu Provincial Overseas Cooperation and Investment Company Limited (JOCIC) as the Chinese investment entity for the demonstration zone.

Read more about the zone: https://www.cas-expo.org.cn/zh/newsDet.html?id=868

Source: Department of Commerce, Ningxia Hui Autonomous Region