Is the UAE China's Gateway to the Gulf?

China’s Foreign Minister Wang Yi undertook a six-country Middle Eastern tour in late March with stops in Saudi Arabia, Turkey, Iran, the United Arab Emirates (UAE), Bahrain, and Oman. While announcements in Iran, namely the signing of a 25-year cooperation agreement supposedly  worth $400 billion, attracted more fanfare, Wang’s time in the UAE symbolized a steadily deepening link between Beijing and Abu Dhabi.

During Wang’s visit, the two countries announced that the UAE would start production of the coronavirus vaccine from China’s Sinopharm in April. This commercial manufacturing deal would make the UAE a hub for vaccine production and transportation in the Gulf region. It comes after the UAE’s Group 42 (G42), an artificial intelligence and cloud computing company, handled Phase 3 late-stage clinical trials of the Sinopharm vaccine. Wang said the trials set a record for multinational and large-scale clinical trials, with more than 50,000 volunteers from 120 countries participating. In response to discussions about a spring vaccine action plan aimed to inoculate overseas Chinese citizens and their anti-pandemic cooperation, the Chinese foreign minister said “this represents the UAE's friendliness towards the Chinese people and its readiness to assume its share of international responsibility.” Such partnerships in life sciences fit well with the UAE’s long-term interest to bolster its medical research industry, according to Guy Burton, adjunct professor at the Brussels School of Governance. As Burton, the author of “China and Middle East Conflicts,” noted, “forging ties with China can only help.”

Bilateral relations between Beijing and Abu Dhabi have been on the up and up in recent years. Chinese President Xi Jinping made a trip to the UAE in 2018 where the two sides elevated ties to a comprehensive strategic partnership. Two-way trade ballooned to more than $50 billion in 2020, with a target to exceed $200 billion by the next decade. Xi’s visit was the first to the country by a head of state in nearly three decades. In 2019, the two countries signed deals worth $3.4 billion to boost trade, investment, and connectivity – pinnacle goals of China’s Belt and Road Initiative (BRI). During the BRI’s first five years, the UAE was the largest recipient of Chinese investment in the greater region, followed by Egypt, Saudi Arabia, Iran, Algeria, and Iraq. Chinese companies have made high-profile investments in port development and expansion, propelling the bilateral relationship forward.

China’s Jiangsu province committed $300 million to develop manufacturing operations in a small chunk of a free trade zone near the Khalifa Port in Abu Dhabi. The presence of Chinese capital sought to kick off the zone’s development and attract other investors with the intention that by 2030, the Khalifa Industrial Zone of Abu Dhabi (KIZAD) would account for 15 percent of Abu Dhabi’s non-oil GDP. The CSP Abu Dhabi Terminal at Khalifa Port was inaugurated in late 2018, officially making Abu Dhabi part of China’s COSCO Shipping global network of free zone ports. The terminal began with a handling capacity of 1.5 million TEU (20-foot equivalent units, a standard shipping measurement) but has a designed capacity of 2.5 million TEU; an expansion plan could boost capacity to 9.1 million TEU by 2023. Dubai is also home to a “Traders Market” near the Jebel Ali free trade zone and port where Chinese partners are slated to invest billions to store and ship products before worldwide distribution.

With deals like these, it is clear that the UAE represents an important node in the execution of China’s BRI, a role that leaders in the Gulf country are embracing. The UAE will be “a vital station along the new Silk Road,” said Vice President and Prime Minister of the UAE Sheikh Mohammed bin Rashid Al Maktoum. The UAE aims to provide more than logistics and manufacturing along the Maritime Silk Road that connects China to Southeast Asia, the Indian subcontinent, the Gulf, and beyond to Europe.

The UAE also has its own ambitions to become the region’s hub for artificial intelligence. Partnerships with Chinese firms have proved to be a fruitful path toward meeting this goal. Emirati telecommunications company Etisalat announced in 2019 that it would use equipment from Chinese tech giant Huawei to build its 5G high-speed wireless network. In April 2021, Huawei and Dubai-based Mondia Pay unveiled a partnership to roll out contactless payment services for mobile network operators, a move that would facilitate online payments throughout the Middle East and Gulf region. Other Chinese tech firms, such as Alibaba and SenseTime, have poured capital into basing regional headquarters out of the UAE.

On the energy front, the UAE’s energy chief shared efforts in early 2020 to cooperate on renewable energy development, with Chinese investment in the country’s energy grid and flagship projects via the BRI. Funding from Chinese banks and China’s Silk Road Fund was allocated to develop a 950-megawatt solar farm near Dubai, whose main manufacturing is unsurprisingly contracted out to a Chinese firm. While around 30 percent of the UAE’s GDP is generated from gas and oil output, the country is increasingly turning to solar and other forms of renewable energy to both meet sustainability goals and reduce its dependence on finite fossil fuel resources.

For China, energy security has long been a source of concern. Oil accounts for more than 20 percent of China’s energy consumption and the country became the world’s top importer of crude oil in 2017. While much of China’s oil imports come from the Middle East and Gulf region, the UAE ranks seventh, supplying China with just 3 percent of its imported crude (compared to top ranking Saudi Arabia, which supplies nearly 17 percent of Chinese imported oil). Still, UAE-sourced oil imports to China grew nearly 10 percent from 2018 to 2019, making it one of China’s fastest growing suppliers (behind the United Kingdom, Saudi Arabia, Brazil, and Malaysia).

Although economic exchanges may anchor the China-UAE relationship, ties continue to diversify. Despite the UAE’s security and arms deals with the United States, China has swiftly invested in arms technology for export. In 2020, an LSE Ideas think tank report highlighted export patterns of Chinese unmanned combat aerial vehicles (UCAVs) trending toward the Middle East and Africa. The UAE has received 40 Chinese UCAVs, compared to Saudi Arabia’s 70 and Egypt’s 50. More recently, a new Chinese micro drone called the Fengniao was unveiled at the Abu Dhabi weapons show in March 2021. Longer term, the two countries have laid out a new joint strategy of cooperating on research and development projects, notably via the UAE’s International Golden Group and China North Industries Group Corporation Limited (Norinco), a state-owned defense firm.

Unmanned aerial vehicles can be used for both military and security purposes. Chinese combat drones were allegedly being operated by the UAE military to carry out strikes in Libya several years ago. The new micro drone developer has pitched its ability to be used for public security surveillance and the inspection of dangerous chemical warehouses and pipelines. UAVs are only one facet of emerging China-UAE technology cooperation.

More than 4,000 Chinese companies have established regional headquarters in the UAE. The country has also increasingly become a top tourism destination, attracting more than 1 million Chinese visitors in 2018. Before the pandemic, research suggested that Chinese tourist numbers were forecast to grow to 1.9 million by 2023. The UAE has also become home to the region’s largest community of diaspora Chinese, with an estimated 200,000 to 300,000 people living in the Emirates.

The deepening China-UAE relationship extends beyond bilateral initiatives. The UAE became the first state to use the Chinese-built Gwadar port in Pakistan to facilitate transit trade to Afghanistan in July 2020. The UAE consignment elevates the utility of Gwadar port, a prominent node on the China-Pakistan Economic Corridor.

Shared priorities and complementary governance conceptualizations that emphasize high levels of security and monitoring reinforce a deepening of exchanges. Nevertheless, the UAE’s important and strategic location and its ability to provide China access to maritime chokepoints along busy transit routes remain the foundation upon which these amicable ties have been forged. As Jonathan Fulton, senior nonresident fellow at the Atlantic Council, writes, “China’s MENA interests are met by working with stable, networked, status quo countries, which is why UAE is the MENA country that has the most well-rounded relationship with China.”