China companies expand in Middle East, tapping opportunities as oil-rich countries diversify economies

As China seeks to end decades of over-reliance on the US market amid persistent trade tensions, forays into wealthy Middle East countries are starting to pay off.

Huang Yingming, chairman of Shanghai-based supply-chain company Origin Holding Group, said he now spends almost half the year in the United Arab Emirates to embed trade ties there.

Taiyuanhang, a subsidiary under the group, runs an exhibition hall in the UAE, displaying and promoting Chinese-produced electric vehicles. It provides a complete chain of import-export services for Chinese mainland automakers, including customs clearance, logistics, paperwork and financial services.

"We've discovered that despite the very favorable gas prices in the region, electric vehicles still enjoy a promising future," Huang told China Biz Buzz. "Chinese EVs possess distinct advantages. Some brands' models rival sports cars in performance but come at a much lower price. Additionally, the cars we market feature smart driving assistance systems, which are rapidly gaining popularity in the Middle East."

A new chapter

The Middle East region opens a new chapter for the group in its two-decade operations. In the past, Origin focused mainly on providing import services for luxury cars, fashion and cosmetic brands, helping them take root in China.

"The era of mass imports has passed and is unlikely to return," said Huang. "However, with China's manufacturing capabilities soaring, export business has thrived. As traditional markets such as the United States become more volatile, we expanded our horizons overseas, searching for new markets and ultimately choosing the Middle East, a region with robust consumer spending power."

Dubai has seen a dramatic increase in direct investment from China, with figures surging from US$1.12 billion in 2023 to US$3.42 billion last year. This influx of capital is primarily concentrated in sectors such as automotive manufacturing, hospitality and tourism, automotive parts, and logistics and transportation, which has delivered astonishing 800 percent growth.

Meanwhile, according to the Saudi Ministry of Investment, Chinese companies significantly increased their investments in the Arab world's largest country in the first quarter, with 217 new projects involving more than a record US$5 billion. At the same time, value of "fast-moving" consumer goods from China reached US$3.2 billion.

Prospecting for golden opportunities

What is the gold mine for Chinese companies? Experts and insiders say it mainly lies in development of clean energy, digital economic and entertainment.

"The Middle East is at a pivotal point in economic transformation, shifting away from its traditional reliance on oil and diversifying its economy, particularly with a strong focus on new-energy sources," said Professor Zhang Xiaodi, director of the division of open economies at Shanghai Academy of Social Sciences.

He noted that Saudi Arabia's "Vision 2030" plan seeks to raise the nation's share of renewable energy to 50 percent by 2030, including large-scale development of solar and wind energy projects. The vast stretches of desert and relentless sunshine make construction of large-scale solar power plants ideal.

"However, the Middle East currently lacks sufficient technological expertise and industrial infrastructure in this sector," Zhang told China Biz Buzz. "This presents a significant opportunity for Chinese companies to help achieve a greener energy mix through technology transfer, joint ventures or direct construction."

Assistance in super-city project

A prime example of this visionary shift is Saudi Arabia's smart city project in the northwestern Red Sea port city of Neom. The US$500 billion project, started by Crown Prince Mohammed bin Salman in 2017, aims to create a futuristic city that seamlessly integrates intelligent transportation, renewable energy and modern communications.

PowerChina and Chinese technology giant Huawei have begun an energy storage project at the site, levering solar power and battery storage systems to supply 100 percent clean energy.

Meanwhile, the large youth population in the Middle East, especially in Saudi Arabia and the UAE, provides a lucrative market in the lifestyle, tourism and entertainment sectors.

"Middle Eastern countries are heavily investing in tourism to diversify their economies and enhance their international image," said Zhang. "As the number of visitors increases, Middle Eastern nations will need a more diverse range of tourist activities and facilities. This presents an excellent opportunity for Chinese companies to invest in the development of theme parks, museum projects and cultural entertainment venues."

Paul Owens, co-founder of UK-based BOP Consulting, was in Shanghai last week to attend Shanghai International MCN Conference. At the conference, he said he focused on tourism and cultural events between China and Saudi Arabia, which his business largely covers.

Owens told China Biz Buzz that he is seeking to expand footprint in China in activities such as livestreaming, creation of Internet protocol content and online community building.

"One important factor is how we leverage culture to tell our stories better, and the Chinese are starting to really do that in a very big way," he said. "I was doing some work for Tencent, where there is this idea that you take local cultural content and put it into a digital format. It doesn't change the content, but it attracts new audiences."

He added, "The Saudis are very, very interested in that. We're looking for partnerships around culture and tourism, but also content creation."

Tourist projects

China is already involved in some tourist projects with Saudi Arabia. Haichang Ocean Park in Shanghai signed an agreement with the Saudis to build and manage a theme park there.

But every new market presents its own set of challenges. In the Middle East, those including regional geopolitical risks and, perhaps more importantly, cultural differences. For example, Zhang said, Chinese entrepreneurs need to understand different labor laws and gender demarcations, and the importance of religious events like Ramadan.

"If Chinese businesses are insensitive to local customs or laws, they risk causing disputes or damaging their reputations," he said. "The Islamic financial system adheres to Sharia law (which bans traditional usury). Chinese companies need to understand and adapt to specific financial instruments and compliance requirements."

Chinese fashion brand Semir has been developing its Middle East market since 2018. For the first years, it concentrated on studying the characteristics of the market and its taboos.

"For example, pig skin can never be used in products, rainbow colors are not acceptable, and women's clothing always needs a cape or other outerwear for sleeveless dresses or tops," said Zhou Jing, executive director of overseas business for the company. "In our stores, areas for ladies and men need to be kept strictly apart."