In 2013, China unveiled a Silk Road plan for the 21st century – a strategy that aims to boost trade and productivity between the country and others across East Africa and Europe.
The World Bank estimates the strategy, known as the Belt and Road Initiative (BRI) will encompass 30 per cent of the global GDP, 62 per cent of the world’s population and 75 per cent of known energy reserves.
“It’s clear that Beijing has a goal of redefining the global supply chain in the world with the strong centre being China ,” says Vikram Pradhan, Head of NBF’s Corporate & Institutional Banking division. “It’s a huge project, one that will change the flows of goods and services over the next years.”
The BRI was the main topic of the fourth annual NBF Knowledge Series that bought together more than 700 UAE business leaders and analysts in April. Experts delved into the opportunities that BRI brings to the Gulf region and what that means for the corporate world.
“The UAE is well-positioned to be a financial, trading and service hub for the globalisation of the Chinese economy,” says Pradhan. “Our aim with the Knowledge Series is to bring in new market insights to support our clients. At NBF, we have always approached our client relationships from a partnership lens that looks beyond just the transactional process.”
In a sign of things to come, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai on 26 April, confirmed the UAE’s role as a major player in China’s BRI megaproject after announcing that deals worth $3.4 billion have been agreed by the two countries.
China will invest $2.4 billion dollars to create a storage and shipping station in an area spanning 60 million square feet in Jebel Ali, Dubai, to export Chinese goods all over the world.
The NBF Knowledge Series highlighted how the UAE is well placed to become a hub for BRI, with the right air links, ports and infrastructure to facilitate trade.
Already hosting the largest Chinese trading hub outside of the mainland, Dragon Mart, which is in Dubai, the UAE is home to about 200,000 Chinese citizens and 4,000 businesses, while more than one million Chinese tourists visited the country in 2017.
China is the UAE’s second-largest trading partner, with bilateral trade expected to exceed $58 billion (Dh213 billion) this year.
“The China Silk Road initiative is a positive global development, particularly given there has not been a project of this magnitude in a number of years,” says Dr. Saeeda Jaffar, Managing Director with Alvarez & Marsal’s Dubai office.
“It will have a positive effect on GDP and trade and investment, and the UAE is also set to benefit and play a key role in the initiative, due to the sophisticated infrastructure available and its geographical location as a strategic gateway to other countries.”
According to the UAE’s Ministry of Economy in 2018, more than 22 per cent of Arab-Chinese trade goes through the UAE and 30 per cent of China’s exports to the Arab world goes through the UAE. Trade between China and the UAE is forecast to grow to $70 billion by 2020.
There are several reasons why the UAE is poised to benefit in particular from the BRI. The UAE not only has excellent transport links, but is also home to large ports that are well positioned to service trade between Asia, Africa and Europe. “One of the key factors is Dubai’s strategic location between the Far East and Europe – it is the economic nerve centre for Asia, Africa and Europe,” says Pradhan.