China and Saudi Arabia seek free trade deals to resolve Chinese goods crisis
Saudi Arabia's Crown Prince Mohammed bin Salman and Premier of the State Council of the People's Republic of China Li Qiang in Riyadh discussed cooperation in various fields, including energy, investment and trade in Chinese goods, state news agency SPA reported.
Li Qiang earlier called on Beijing and the Gulf Cooperation Council (GCC), which includes Saudi Arabia and the United Arab Emirates, to speed up free trade negotiations, he announced during a meeting in Riyadh with GCC Secretary General Jassem Al-Budaiwi.
Saudi Arabia is concerned that the influx of cheaper Chinese goods it hopes to produce domestically could hurt its industrial programme.
Jassem emphasised that ‘it is of vital importance to keep moving together in the same direction to complete the negotiations in the short term’. He noted that the nearly 20 years of free trade between the Gulf countries (Qatar, Kuwait, Oman and Bahrain) was established due to the export concerns of both sides.
According to the Chinese Foreign Ministry statement, Li Qiang confirmed that both sides should continue bilateral trade, strengthening cooperation in energy, petrochemicals, oil and gas, to infrastructure in renewable energy sectors, where China is at the forefront as the largest producer of green energy (in terms of volume). The communiqué ends with Li Qiang's appointment in Abu Dhabi to discuss the same issues with his Emirati counterparts.
Talks at a standstill
For both, the negotiating tasks are at a stalemate. The ‘distrust’ is mutual. Gulf Arabs believe that China is trying to stop the Gulf's industrial commodity recovery before it happens.
This issue concerns not only the Gulf countries. In the West and in some countries that copy Western models, important industries have been destroyed because of low prices for Chinese products. The paradox faced by some countries is that the Chinese can sell them a factory and make a profit, and then compete with them and prevent them from making a profit.
Even if a country like Saudi Arabia opens factories and attracts foreign expertise and cheap Asian labour, while financing construction and operations, it ends up losing out. It is a loss because Chinese products flood the market at cheaper prices. Meanwhile, the Chinese are rushing to accelerate negotiations leading to a trade agreement with the Gulf states.
By sharing similar views and taking common responsibility for international and regional affairs, both sides adhere to the principles of mutual respect for sovereignty and non-interference in internal affairs. Li Qiang said Saudi Arabia appreciates China's honest stance on the Palestinian issue and is willing to cooperate closely with China on international multilateral issues to help maintain peace, security and stability in the region and around the world.
Saudi oil power
Saudi Arabia, the world's largest oil exporter, has been a close ally of the United States for decades, but has recently struggled to strike a balance in international relations with other major world powers such as Russia and China. Chinese oil producers have long imported oil from the Middle East, buying nearly a quarter of their supplies from Saudi Arabia.
The sources said Saudi Arabia is concerned that Chinese imitations, which are cheaper than the products the kingdom hopes to produce domestically, could damage its industrial programme. The kingdom wants to attract Chinese investors to its giant projects, particularly the future NEOM city it is building in the desert overlooking the Red Sea at a cost of more than 500 billion dollars.
China sees the Middle East as a key part of its Belt and Road Initiative, a large-scale infrastructure project and a key pillar of its efforts to consolidate China's influence abroad. Li Qiang's visit comes almost two years after Xi Jinping's visit to the Arab kingdom, aimed at promoting economic and diplomatic cooperation between the Asian giant and Arab countries.
Despite the mistrust, during the visit, the two sides signed bilateral cooperation documents on technical and vocational training, meteorology and other areas. One of the main agreements signed is to increase to 46 million barrels of oil in October, due to the country's high energy demand. The refineries that will receive these goods will be PetroChina and Sinopec.