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02 Maggio 2011 • di Piero Formica

Subterranean markets. Trade relations between the Middle Kingdom and Arabia Felix

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Mythical creatures in Arabia, mystical priests in the Middle Kingdom. Really it is an amazing combination of legends and beliefs that weaves bonds between the two out-of-the-ordinary re-emerging economic powers at the dawn of the 21st century.
Streams of trade between China and America, China and Europe, China and Asia, and albeit China and Africa look like swollen rivers on the world map of the “meteorology of economics”. Not less powerful, invisible to the naked eye, are the subterranean currents of trade relations between the Middle Kingdom and Arabia Felix, the peninsula at the junction of Africa and Asia, which plays a critically important geopolitical role because of its vast reserves of oil and natural gas.
The following is an account of Mr Peter Why, an Australian forward-looking trader who splits his life between Beijing and Perth.

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  1. China’s growth shifts the geopolitics of oil
  2. Sunday, September 26, 2010: a new impetus to Sino-Arabic relations forged by Muslim communities
  3. Moving toward the middle

Now I will believe
That there are unicorns; that in Arabia
There is one tree, the phoenix' throne, one phoenix
At this hour reigning there.
William Shakespeare

We send missionaries to China so the Chinese can get to heaven,
but we won’t them into our country.
Pearl S. Buck


1. China’s growth shifts the geopolitics of oil

The rapid economic development of China clearly has major implications for its foreign relations with the oil producing countries of the Middle East. Strong bonds of mutual dependence are being created. The Chinese government, which officially inaugurated diplomatic relations with the Kingdom of Saudi Arabia in 1980s, has in recent years expended considerable effort in laying the basis for a close and cooperative relationship. At the heart of this relationship is the economic dimension, centred around oil and petrochemicals.

This is not just a matter of importing oil from Saudi Arabia, with commercial goods being exported in exchange, but also far-reaching investment deals. These relate, on the one hand, to Chinese investment in Saudi oil production and, on the other, to Saudi investment in petrochemicals development in China. More Saudi oil goes to China than to U.S. Saudi sales to China surged above a million barrels a day in 2009, nearly doubling from the previous year. The Kingdom now accounts for a quarter of Chinese oil imports.

These trends impinge on security issues. Saudi Arabia has increased the purchase of military equipment from China. From the Chinese government perspective this is presumably intended to empower China’s ability to foster stability in the Middle East region – in keeping with its own interests.



2. Sunday, September 26, 2010: a new impetus to Sino-Arabic relations forged by Muslim communities

The 2010 China Investment and Trade Fair and the first China-Arab States Economic and Trade Forum opened Sunday in north-western Yinchuan City, with aims to strengthen investment and trade ties between China and the Arabic states.

"The forum will certainly strengthen and deepen the traditional friendship and win-win cooperation between China and the Arabic states, as well as the Muslim regions, to realize mutual development," Chinese Minister of Commerce Chen Deming said at the opening ceremony of the five-day event at the capital of Ningxia Hui Autonomous Region.

Wan Jifei, chairman of the China Council for the Promotion of International Trade, said the forum has been held "in the right place" because Ningxia has a large Muslim population, and the region has played a significant role in Sino-Arabic relationships over history.

Ningxia is home to at least 10 percent of China's 20 million Muslims. It has drawn up plans to expand trade and economic cooperation with the world's Muslim community.

"We hope the future cooperation between the two sides will not be limited to trade. We hope to strengthen cultural cooperation, based on better mutual understanding of society, education and people," said Nader Al Dahabi, former prime minister of Jordan.

The five-day forum and fair has attracted more than 6,000 government officials and businessmen from 66 countries, regions and international organizations, including Chinese Vice Premier Hui Liangyu.

"We welcome China's enterprises to invest in energy and water resources and also in other promising fields, including hi-tech industries, food processing and electrical manufacturing," said Jaafar Hassan, minister of Planning and International Cooperation of Jordan, at the Summit Meeting of the forum. China had offered 116 million U.S. dollars of interest-free and preferential loans to the country as of the second quarter this year, Jaafar Hassan said.

The Chinese economy and the United Arab Emirates (UAE) are complementary to each other, said Abdullah Bin Ahmed Al Saleh, director-general of the Ministry of Foreign Trade of the UAE. "Chinese labour services export had extended from construction to other fields, including medical treatment and sea transportation. More and more Chinese workers can be seen in the UAE. At the same time, China has opened its door to the Arab states with its 1.3 billion potential consumers," he said.

Su Jing, commercial counsellor of the Department of Foreign Trade of the Ministry of Commerce of China, echoed his views. The Arabic states taken as a whole is a large market with a population of 339 million. The states rely on oil and gas production but lack a machinery manufacturing base, while China is a large importer of oil and its machinery exports take up a large market share of the states, Su said.

The total volume of Sino-Arabic trade grew to 132.8 billion U.S. dollars in 2008 from 5.8 billion U.S. dollars in 1996, but fell slightly in 2009 due to the economic crisis, to 107.4 billion U.S. dollars. The trade volume made a rapid recovery in the first six months of this year and reaching 69.1 billion U.S. dollars, he said.

Chinese Vice Premier Hui Liangyu said cooperation between China and the Arab states has great potential and a broad future, as two-way trade continues to grow. As of the end of June 2010, direct investment from China to the Arab states reached 3.78 billion U.S. dollars and the investment fields have extended from resource exploring, food and textile to those including leather manufacturing, automobile assembly and petrochemicals, Hui said. At the same time, investment from the Arab states to China was 2.15 billion U.S. dollars, covering fields of petrochemicals, food, real estate and investment framework, he said. Also other sectors, which have received investment from the Arab states, including finance, tourism, aviation and new energy sectors, are booming. Hui said to strengthen mutual cooperation more strategic partnerships need to be developed.


3. Moving toward the middle

Travelling into the future, we saw the Middle Kingdom and Arabia Felix moving toward the middle instead of drifting toward the extremes. Virtue is in the middle, even though it does not lie in the exact middle – as Aristotle put it. In the search for the gold mean for intensifying their trade relations, the virtue of Confucian proper behaviour was to get easier the life to the 2010 AD info knowledge average man in the era of radical innovation at an accelerating pace.


DOI 10.4439/ig2

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