11 November 2019

China’s Belt and Road Initiative beacons new trade in MENAT

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The ambitious project to connect China to countries along the Silk Road trading routes is gaining prominence and investment in the Middle East, North Africa and Turkey (MENAT) region.

In the Gulf Cooperation Council (GCC) alone, projects worth US$ 1.14 trillion are well underway, thanks to the Belt and Road Initiative (BRI).

 

The developments include around 1,069 road projects, with a combined value of US$ 122.6 billion as the region embarks on a massive transportation and logistics upgrade, according to Orient Planet Research.1

 

From 2005 to 2018, Chinese Investment has grown by 43% annually in MENA, the highest amount of capital landing in Saudi Arabia, UAE and Egypt.

The Future of Ports and Corridors

Imports from China into the region are growing faster than anywhere else in the world. The proof is in the mega-projects we are starting to see take flight.

In 2019, the UAE and China unveiled a US$ 3.4 billion shipping and food project in Dubai. Chinese wholesale company Yiwu aims to build a US$ 2.4 billion Traders Market2 close to the Expo 2020 Dubai site to store and ship Chinese goods from Jebel Ali port.

In Egypt, China has emerged as one of the biggest investors in the development of the Suez Canal Corridor. Egypt is the Chinese investors' gateway to 26 African countries, allowing them to go through zero trade barriers and zero customs, according to Egyptian officials3.

In Abu Dhabi, China’s COSCO Shipping Ports , inaugurated CSP Abu Dhabi Terminal at the nation’s Khalifa Port as part of BRI, doubling their container volumes to 2.5 million Twenty-Foot Equivalent Unit (TEU).

Chinese technology helped build the high-speed 453-kilometre rail links the Holy Cities of Makkah and Madinah to King Abdullah Economic City and Jeddah in Saudi Arabia. Chinese companies are also major contributors to a number of transportation, logistics and renewable energy projects in the kingdom.

Finally, the world's largest storage project being built in Turkey is a joint venture between China's CAMC Engineering4 and Turkish IC Ictas Construction, which will see the construction of a 5.4 billion-cubic-metre natural gas storage facility.

The rise of the renminbi

Turning to currency, we see the renminbi (RMB) is also making its presence felt in the region.

“Over the last year, we have seen RMB-related flows across Corporates in MENAT increase by 117%, and the RMB is now being traded in all of the MENAT countries following the Central Bank of Egypt approval for RMB use earlier this year,” according to HSBC, noting that payments in RMB has in some cases led to an almost 6% discount for importers.

HSBC, which was named “Best Overall International Bank for BRI” in the inaugural Asiamoney New Silk Road Finance Awards,5 is a major international bank for the RMB, offering a range of products, services and expertise across more than 50 markets.

China’s emergence as a strong investment player in MENAT will go a long way as the region looks to diversify into new growth sectors, such as healthcare, education, sustainability and logistics.

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