The rapidly expanding economic ties between China and the Gulf Cooperation Council (GCC) countries, particularly the UAE, are forging a new era of collaboration, driving mutual growth and diversification. At the heart of this partnership is a shared vision to position both regions as global hubs for trade, manufacturing, and advanced technology.
As China seeks to expand into emerging markets, the UAE, with its business-friendly environment and positioning as a Middle East financial centre, is actively attracting investment, businesses, and talent. These complementary ambitions are propelling China and the UAE to the forefront of global economic development, with cooperation extending across key sectors like advanced manufacturing, renewable energy, and logistics.
From 2015 to 2023, Dubai alone received over $5.4 billion in cumulative FDI from China
The ongoing infrastructure investment by both regions is rooted in a pragmatic approach to growth, innovation and sustainable development. This is particularly evident in increasing trade activities where Renminbi (RMB) denominated transactions and cross-border investments have grown. From 2015 to 2023, Dubai alone received over $5.4 billion in cumulative foreign direct investment (FDI) from China, a testament to the growing commercial links between the two markets. At Standard Chartered, we have felt the impact of this shift first-hand with a 67% increase in income from the China-Arica-Middle East corridor in the first half of 2023 compared to the previous year.
This evolving relationship was highlighted by the Dubai Chambers’ inaugural “Dubai Business Forum – China” held in Beijing earlier this year. Under the theme “China, Dubai and Beyond: Igniting Global Trade and Investment,” the forum solidified the foundation for deeper economic ties between China and the GCC.
One notable aspect of this collaboration is the increasing focus on RMB trade settlements and currency swaps between China and the UAE. Since the first currency swap agreement in 2012, both countries have engaged in multiple rounds of such agreements, with the most recent swap in November 2023 amounting to $4.9 billion. These arrangements not only facilitate trade but also signal the growing influence of the RMB in global finance, particularly in the Middle East. The settlement of UAE liquefied natural gas (LNG) in RMB last year is a prime example of how local currencies are playing a larger role in international commerce.
The international monetary system is becoming more diversified, and the RMB’s growing role in cross-border trade and investment is indicative of this trend. In recent years, China’s policies have significantly expanded the usage of the RMB, facilitating its rise as a global currency. The UAE, as an offshore RMB centre, plays a pivotal role in this expansion, and we are proud to be one of the key facilitators of RMB trade and settlement. Earlier this year, the UAE completed its first-ever cross-border Digital Dirham payment to China, a $13.6 million transaction that reinforces the UAE’s positioning as a leading financial hub in the region.
The UAE has firmly established itself as a critical player in China’s Belt and Road Initiative
The UAE is also an increasingly essential trade hub for Chinese goods. With over 60% of Chinese trade re-exported through UAE ports to more than 400 cities across the Middle East and North Africa, the UAE has firmly established itself as a critical player in China’s Belt and Road Initiative. This year alone, cross-border RMB payment volumes from the UAE grew by 127%, according to the SWIFT Global Trend Report. These figures highlight the growing importance of RMB-denominated trade and investment between China and the UAE, and Standard Chartered is well-positioned to facilitate and support these transactions.
The UAE’s recent accession to the BRICS group will further expand its role as a global economic bridge. As intra-BRICS trade expands, we can expect to see more local currency settlements, particularly between China and the UAE. Institutional frameworks such as the BRICS Interbank Cooperation Mechanism and the BRICS PAY digital platform are actively promoting local currency use in cross-border transactions. A notable example of this trend is the settlement of UAE LNG in Chinese yuan last year, underscoring the growing importance of local currencies in international trade.
The deepening ties between China and the UAE will be beneficial for both regions as Chinese companies and family offices look to the UAE as a strategic hub. The future of China-UAE collaboration is full of promise, and we are excited to play a central role in its evolution.