I wasn’t planning to write yesterday’s post. I was scrolling through the news while in a waiting room, and the frequent shoddy analysis I came across inspired the quick essay. When I shared it on LinkedIn, Ambassador Anil Trigunayat, who is an astute thinking on the Middle East (or West Asia, as he’d correct me), replied, “as of now it's a distant second but trying to run faster in the geoeconomic domain.” Which is true; I’ve argued over and over again that China’s interests in the Middle East are primarily economic and there are lots of big numbers to back this up.
First and foremost is the tremendous surge in China-Middle East-North Africa trade this century. In 2022, this trade accounted for just short of $430 billion dollars, an astonishing number if you’ve been tracking it over a couple of decades. Of the 25 countries (Arab League members plus Iran, Israel and Turkey), China was the top source of imports for 11, and a top five source of imports for every regional country. The other side of the ledger looks different if you’re not an energy exporter. Gulf countries (except Bahrain) have China as a top five export destination but for others it’s a very one-sided relationship where they buy more from China than they sell to it. A few examples, all from 2022, all in millions of US$:
Country Value of imports Value of exports
Egypt 11,461.71 1,798.26
Jordan 4,165.46 268.52
Lebanon 2,688.77 15.89
Tunisia 3,890.92 57.4
So, not especially balanced, and while cheap consumer goods are always nice for customers, the impact this has on local manufacturing or local markets is probably not entirely positive.
Looking from the other angle, where trade is balanced in favour of the MENA country, let’s look at Saudi Arabia. In 2022 Saudi imported an impressive $39,083 billion from China, and exported $66,182 billion, for an overall trade volume of $105 billion and change. China was the top import and export partner, as it is every year. And while the balance favours Saudi, is it good for Saudi? That year, like others before it, China sold industrial and construction equipment and services, consumer goods, textiles, electronics and food. Saudi sold fossile fuels. For a country trying to diversify its economy, this doesn’t help.
I’m reminded of a conversation I had on my podcast with Bilahari Kausikan from Singapore’s Middle East Institute. We were talking about US-China competition and I framed a question by comparing the US’s inability to sign a trade agreement with China’s enthusiasm for trade. He pushed back in a thoughtful way:
If you look at South East Asia, the stock of U.S. investment is larger than China, Japan, and South Korea combined. Very few people know that, but it is true. So bilaterally the US is a key economic partner to almost every Southeast Asian country. For example, Singapore, China is our largest partner in trade in goods, but the US far surpasses that in trades in services and the stock of US investment - and it’s high-quality investment, it’s investment at the high end of the value chain. And that's important I think, because the long term security, I think the Gulf has come to this conclusion, the long term security for me, in the Gulf is, I need the hard power, the friends and so on. The traditional security issue. And my long-term security rests on what Mohammad bin Salman is trying in Saudi Arabia, and what Mohammad bin Zayed is doing in the UAE and in fact all the Gulf countries are doing: Economic change. A more diversified economy, a more sustainable economy, not just in the green sense. And that requires, of course, other kinds of changes, like social, and cultural changes. And I think that is the long term. Now, if I was in the Gulf, I'd be looking at each economic partner, not just from the traditional security point of view, but where they can contribute to that much more fundamental foundation of security.
It’s a really good point that I bring up frequently in my conversations. For countries that are working incredibly hard to develop diversified sustainable economies, trade in services adds a value that may not show up quite so dramatically in the numbers, but long-term I think it is more transformational. And this gets lost in the binary of ‘China is the economic actor and the US is the security actor’. China does a whole lot less in trade in services for these high-impact sectors, and as such it’s value as a trade partner may not have the same kind of long-term impact.
The complexity of this got distilled in a tangible way last month with Alex Cornwell’s Reuters article on the stalled China-GCC free trade agreement. He reported that it was being delayed “over concerns by Saudi Arabia that cheap Chinese imports could undermine its ambitions to transform the kingdom into an industrial powerhouse… Saudi Arabia is worried that a wave of lower cost Chinese versions of products that it hopes to manufacture domestically would be damaging to its industrial agenda, the sources said.” So there is more to the story than ‘China’s our top trading partner and we don’t want to alienate it.’
This brings me to another episode of my podcast, this one with Julian Gewirtz and Chris Backemeyer, both senior officials at the State Department at the time. Chris made a point about the US’s economic role in the Middle East:
when you look at economic investment, which is really the biggest driver of economic growth around the world, the United States has invested three times more than the PRC in MENA over the last ten years. And our investment in the region grew faster than in any other region in the world. So this idea that, you know, we're sort of turning our attention elsewhere doesn't always hold up when it comes to our foreign assistance, to the to the Middle East and North Africa. We actually provide twice as much financial assistance in the form of economic aid and and foreign aid to the Middle East and North Africa than the PRC gave to the entire world in 2020.
I know it’s counter-intuitive because we all see stories about China’s significance as an economic actor and this is always paired with the idea that the US only thinks about geopolitical competition. And of course I think that’s a misperception that has taken root in so many of the narratives about China in the Middle East. But if I were a US official working in the region, I’d be pushing back on this every chance I got.
Re: the quote from the state department folks, isn’t there a big difference between “assistance” and “investment” — does the US really beat China both in investment and assistance in the region?