China’s exports and investments are flowing into Saudi Arabia as the oil-rich kingdom’s demand for green technology strengthens bilateral ties. For years, bilateral trade primarily consisted of China purchasing Saudi oil. However, Chinese exports to Saudi Arabia are now approaching record highs, reaching $40.2 billion in the first ten months of 2024, up from $34.9 billion during the same period last year, according to Chinese government data.
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Quốc gia chủ chốt BRICS vượt mặt Mỹ, ồ ạt đầu tư vào ‘đại gia’ dầu mỏ, kỳ vọng thách thức petrodollar- Ảnh 1.
China has also become the kingdom’s largest new foreign direct investor. From 2021 to October 2024, China invested $21.6 billion in Saudi Arabia, with roughly one-third of the capital directed toward clean technologies like batteries, wind, and solar power, as reported by fDi Markets. The US, with $12.5 billion in investments, ranks as the second-largest foreign investor in the kingdom. These figures highlight a significant shift, with China overtaking Saudi Arabia’s traditional investment partners, the US and France.
A Shift in Global Dynamics
This shift signifies a broader trend. Camille Lons, an expert on China and the Middle East and a policy fellow at the European Council on Foreign Relations, observes, “When the Saudis look at the world map, they increasingly see themselves as a ‘middle power.’ They are trying to lessen their dependence on the US. Deepening relations with China is one way to do that.” Analysts attribute the strengthened economic cooperation to high-level political and diplomatic efforts, including Chinese President Xi Jinping’s visit to Riyadh in late 2022.
Quốc gia chủ chốt BRICS vượt mặt Mỹ, ồ ạt đầu tư vào ‘đại gia’ dầu mỏ, kỳ vọng thách thức petrodollar- Ảnh 2.
Strategic Importance for Both Nations
For China, trade with Saudi Arabia is strategically crucial for expanding its influence beyond the US and Europe, especially as Beijing faces increasing threats of sanctions and tariffs. For Saudi Arabia, Chinese investment supports its Vision 2030 modernization plan, a strategy focused on diversifying the economy, transitioning to cleaner energy, and elevating the kingdom’s global standing.
Saudi officials maintain that Riyadh remains cautious about balancing its relationship with the US, its most important military partner, and limiting trade with China in sensitive areas such as defense and artificial intelligence.
Energy Trade and the Petroyuan
Saudi investment in China’s oil and gas sector, coupled with Chinese investment in the kingdom’s renewable energy, is fueling bilateral trade. Ken Liu, head of China energy, utilities, and renewables research at UBS, projects an additional $432 billion in annual energy-related trade between the Middle East and China by 2030.
Beijing is also seeking to strengthen ties with Saudi Arabia to promote international use of the Chinese yuan. The kingdom, like most international oil producers, has yet to accept yuan payments for oil due to the limited global usability of the Chinese currency.
However, in a study, S&P analysts suggest that while yuan-denominated oil trading between China and Saudi Arabia might still be decades away, the broader relationship between the two countries could eventually support the petroyuan – a term coined in China to rival the petrodollar, referring to the use of the yuan in cross-border crude oil transactions. The S&P analysts added that the relationship between the two nations is increasingly “moving beyond oil.” “If Saudi Arabia is looking for countries that can industrialize at speed, China offers the best example. This aligns the two countries’ long-term interests.”
Conclusion: A Partnership of Mutual Benefit
The burgeoning relationship between China and Saudi Arabia marks a significant shift in global investment dynamics. Driven by Saudi Arabia’s ambition to diversify its economy and China’s strategic interests in expanding its global influence, this partnership is poised to reshape energy markets and potentially challenge the dominance of the US dollar in international trade. The increasing focus on green technologies further solidifies this alliance as a key driver of future economic growth and innovation.
