Eastern promises

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As trade between emerging markets hits a record high, China and Dubai are set to ramp up their relationship.

As China shapes up to take over America as the world’s largest economy, its relationship with Dubai is strengthening across all sectors.

The UAE’s expanding and affluent population is snapping up China’s consumer products with aplomb. In turn, Dubai’s marketing forces have successfully targeted Chinese tourists: the emirate was the third-most popular tourist destination for wealthy Chinese travellers behind Australia and France last year, up from eighth place in 2012.

Total trade between Dubai and China rose to $36.7 billion last year. There are now 200,000 Chinese nationals resident in Dubai and some 2,500 companies represented in the emirate.

The growing Chinese presence is illustrated in Nakheel’s development of the 1.2 kilometres long Dragon Mart in Dubai, one of the world’s largest retailing centres focused on Chinese goods.

Building ties

The Dubai International Financial Centre (DIFC), sent a delegation to Beijing this year to reinforce and build upon its ties with China.

The delegation highlighted DIFC’s role as a business and financial hub for the Middle East, Africa, and South Asia region. It also set out to raise the DIFC’s profile as offering a stable and transparent business environment that operates within its own jurisdiction with an internationally recognised regulatory and legislative framework.

Essa Kazim, DIFC governor and leader of the delegation, said: “The DIFC’s unique geographical position and its world-class regulatory framework have enabled us to provide Chinese companies with a safe and stable gateway to markets in the West and to the rapidly emerging African markets.”

With the DIFC already home to four of China’s national banks, the growing levels of trade between emerging markets suggests that more Chinese financial institutions will join the free zone in the near future.

The big transition

According to HSBC’s ‘The Global Economy/World 2050’ report, China maintained an average annual growth rate of 9.25 per cent during the period from 1989 to 2012, building up a pivotal position in the global economy. In recent years China has accounted for roughly a third of the world’s economic expansion.

Today China is undergoing a significant transition as it attempts to rebalance its economy after several years of heated growth.

“Although rebalancing is the main medium-term objective, China will be keen to ensure that the economic slowdown remains controlled, especially for the labour market and income growth. The official growth target for this year is 7.5 per cent, with our own growth forecast at 7.4 per cent,” said Marios Maratheftis, head of macro research at Standard Chartered bank in a report.

Zin Bekkali, CEO of emerging markets investment company Silk Invest, agrees that the next few months will represent a testing period for China ¬– and its global commodities’ suppliers – as its economic plan is put into action.

He says: “The ongoing transition in China will be a key make or break for global growth prospects in the coming years.”

Bekkali adds that China’s new internal focus will drive domestic consumption, which will spell good news for Western companies such as L’Oréal and Apple, as well as global tourism, healthcare and education companies.

The Silk Invest CEO also believes that homegrown Chinese products will increasingly compete for international markets.

“We have seen some good companies in the telecoms sector, but we believe this will eventually touch other sectors. Collaboration between the UAE and China is accelerating with sectors like tourism, real estate, trade and construction at the forefront of this.

Mohsin Nathani, CEO, Standard Chartered UAE, believes that the ongoing need for infrastructure will be the main driver of the economic relationship between the GCC and China.

“Chinese construction and infrastructure materials companies will continue to drive flow growth in the near term given the rising infrastructure demands from a burgeoning population.”

Nathani adds that China’s growing automobile sector could be of particular interest to the GCC in the coming years.

“The vast support the [auto] sector receives in China and the rapid technological advancement and quality and value of automobiles from China will see this sector lead growth in the medium and long-term. Middle East consumers will begin to recognise the value in automobiles from China and see them as an affordable complement to the lifestyle in the Middle East.”

However, Nathani is keen to stress that China/GCC trade will not be simply one-sided.

“The GCC will be looking to increase the export of Halal products to China, as well as increase tourism flow between GCC and China. “

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