A hectic exchange of visits between the UAE and China over the past years has sharply boosted their economic ties and the trip by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President, Prime Minister of the UAE and Ruler of Dubai, to Beijing is set to seal that partnership.
Chinese officials have been upbeat about the visit as it is made by a high-ranking official from a country that is one of the largest markets for Chinese products in the Middle East and is set to become one of the top oil suppliers of China.
“We are looking forward to this visit with high expectations,” a Chinese foreign ministry spokeswoman told Emirates Business from Beijing. “We are certain His Highness’s talks with the Chinese leadership will produce very good results in the short and long term for both countries.”
The UAE is already the second largest trading partner of China in the Middle East after Saudi Arabia but economists expect it to become the top destination in the near future on the grounds China is targeting Dubai as the Gulf commercial hub to penetrate more Middle East markets.
With its proven oil reserves dwindling steadily and domestic crude consumption growing rapidly, China is set to sharply increase its reliance on oil from the UAE and other Gulf producers. One scenario forecast China’s crude oil imports from the Emirates would reach 600,000 barrels per day in 2025.
Sheikh Mohammed is expected to discuss such issues during his four-day trip and talks with President Hu Jintao and other Chinese leaders. A large delegation will accompany Sheikh Mohammed, the highest-ranking UAE leader to visit China since the historic trip by late Sheikh Zayed in 1990.
The UAE is now China’s second largest trade partner among the Gulf Cooperation Council (GCC) countries,” said Zhuang Ruijin, Chinese Economic and Commercial Counsellor in Abu Dhabi.
“China’s main exports to the UAE are textile products, clothes, light industrial products, metal products, handicrafts, machinery and other items… China’s main imports from the UAE include aluminium, chemical fertilisers and petroleum.”
According to Ruijin, more than 150,000 Chinese citizens live in the UAE while more than 40 Chinese companies operate in the country, with investment of nearly $300 million (Dh1.1 billion). “This proves the attractive business environment of the UAE. At the same time, China is also receiving more and more investment from the UAE.”
“In recent years, China-UAE economic relationship has come into a peak period,” the Chinese counsellor said. “The coming visit by His Highness Sheikh Mohammed will push that relationship to another peak.”
Ruijin said the visit would also help push forward the negotiations between China and the GCC to sign a free trade agreement, which he described as a landmark accord that would largely expand co-operation between the two sides in all fields.
The UAE and other GCC countries have been negotiating for a free trade agreement with China for several years and UAE officials said last month the deal could be finalised this year.
China has become one of the largest commercial partners of the GCC, with their two-way trade totalling around $35bn in 2006. It was expected to have exceeded $40bn in 2007 and is projected above $50bn this year.
Although coal will inevitably continue to play a large role in China’s energy supply, Chinese oil consumption is now rising fastest in the world thanks to a burgeoning transportation sector and the Middle East is projected to be its main supplier despite its efforts to diversify supply sources .
By 2015, new vehicle sales in China will exceed those of the US. However, with Chinese oil production anticipated to peak and then decline beginning in 2015, satisfying future oil demand presents a significant energy security problem. China now imports half of its oil, making it the world’s third-largest net importer. By 2030, China will be importing 80 per cent of its oil.
China’s current crude oil production is estimated at 3.5 million bpd and is projected to growth to 3.8 million bpd in 2010 and four million bpd in 2015 before it starts its decline. Consumption peaked at more than 6.5 million bpd last year and is forecast to surge to 8.7 million bpd in 2010, to 10 million bpd in 2015 and 11.7 million bpd in 2020. It would then swell to 13.2 million bpd in 2025 and 15 million bpd in 2030 to turn China into the second largest oil consumer after the US, according to the Energy Information Administration. “Last year China’s dependence on imported oil rose to 47 per cent of annual demand, or an increase of 4.1 per cent over the previous year,” the EIA said.
Industry analysts said China’s crude oil output grew by less than two per cent, while its demand for both crude and oil products rose by about six per cent. That means its dependency on imported oil is increasing every year.
MIDDLE EAST SUPPLIES
“Despite China’s efforts to diversify sources of imports, it still relies heavily on Middle Eastern oil. In 2005, China’s imports of crude oil from the Middle East accounted for 61.1 per cent of its total crude oil imports, making it the most import link in the country’s oil-supply chain… this dependency is set to surge in the coming years… as for the UAE, one scenario expects China’s oil imports from the Emirates to jump to 600,000 bpd in 2025 or 2030,” a source said.
SHEIKH ABDULLAH’S VISIT
During a visit to China last year, Foreign Minister Sheikh Abdullah bin Zayed said the UAE is seeking stronger ties with China given its significant political and economic position and the role it can play in the Middle East.
Sheikh Abdullah signed a memorandum of understanding to set up a high-ranking joint committee tasked with expanding ties in all fields. “The UAE is interested in boosting relations with China to the best interest of the two countries,” he said.
China upbeat about Mohammed’s visit