Why a China-GCC free trade agreement might be a game changer

Trade and investment relations between China and the six-member GCC economic bloc could soon receive a major boost, especially in the new energy sector, as the two sides edge closer to signing a free trade agreement, according to analysts.

While a Gulf-China FTA has been on the table for nearly two decades, the deal received fresh impetus after China’s new Foreign Minister Qin Gang this week called for it to be finalised “as soon as possible” during a telephone conversation with Saudi Arabia’s Foreign Minister Prince Faisal bin Farhan.

“It is important that the two sides further expand co-operation in such areas as economy and trade, energy, infrastructure, investment, finance and high-tech … strengthen the China-GCC strategic partnership, and build a China-GCC free trade zone as soon as possible,” he said.

Nasser Saidi, president of Nasser Saidi & Associates and former chief economist of the Dubai International Financial Centre, says an FTA could be signed as early as this year.

“The China-GCC FTA negotiations have been ongoing since 2004. While it has taken a long time, agreements have been reached on most trade-related issues,” says Mr Saidi, who also previously served as Lebanon’s minister of economy and industry and deputy governor of the country's central bank.

“This is the last mile for negotiations, and considering [the] GCC’s plans to increase economic diversification, the agreement is likely to focus beyond just oil, [and] into trade [and] services (including digital), tech sectors and both portfolio and direct investments.”

Chinese President Xi Jingping’s historic visit to Saudi Arabia in December heralds a “major shift” in the strategic relationship between China and the GCC.

“President Xi's visit will give a strong impetus and I anticipate an initial FTA could be signed in 2023,” says Mr Saidi.

Lombard Odier macro strategist Homin Lee says the deal could be signed soon.

“We can expect a quick wrap-up of the negotiations as soon as both sides have the resolve to move forward on key issues that have been holding them back,” he says.

Strong ties

Mr Saidi says trade between the GCC and China has been steadily rising and doubled between 2010 and 2021, with China accounting for about 16.7 per cent of the Gulf region’s total trade in 2021.

China, the world’s second-largest economy, is already the top trading partner of Saudi Arabia, with bilateral trade volumes hitting 295.6 billion Saudi riyals ($78.8 billion) in the first nine months of 2022, according to data from the General Authority for Statistics (Gastat).

Exports to China from the kingdom reached 189.5 billion riyals, accounting for 16 per cent of total exports during the period.

Meanwhile, imports from the Asian nation represented about 21 per cent of Saudi Arabia’s total imports at 106.1 billion riyals.

Trade between China and the Emirates is also growing rapidly.

Volumes reached a record high of $99.27 billion last year, marking an annual increase of 37.4 per cent, Zhang Yiming, China's Ambassador to the UAE, tweeted on Friday.

China's imports from the UAE stood at $45.41 billion, up about 59 per cent, while its exports to the Emirates also grew more than 23 per cent to $53.86 billion, he said.

The Asian nation has become the UAE’s largest non-oil trading partner, while the Emirates is China’s second-largest trading partner and the largest export market in the Arab region, Mr Yiming told state news agency Wam in November.

“An FTA will definitely boost trade connections. This was very much visible with the comprehensive economic agreement signed with India [by the UAE] and it should help in deepening trade ties further between the GCC and China,” says Abu Dhabi Commercial Bank's chief economist Monica Malik.

Mr Lee from Lombard Odier says China would have a chance to compete better on the supply of intermediate goods to the GCC if the FTA comes into effect.

“The region is ramping up its infrastructure investments amid a boom in energy markets, and China is in a good position to help with such efforts with its large industries capable of supplying capital goods and related commercial services for projects abroad.”

But the FTA will have a major impact on more than just trade.

“Generally, tariffs on good are fairly low, so while a FTA will benefit trade, it is probably investment linkages that will generate the greater returns,” says Scott Livermore, chief economist at Oxford Economics Middle East.

Focus areas

While oil is a major focus for trade between China and the GCC, the FTA will open up several opportunities outside that sector.

“The broader energy sector beyond crude oil is likely to be an important focus, especially natural gas and renewables,” says Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington.

The non-oil goods and services trade is also an important component of any FTA negotiations, he says.

Mr Saidi says an FTA would open new sectors such as services, technology, artificial intelligence and robotics, and strengthen linkages in infrastructure, transport and logistics, leading to a “potential doubling of non-oil trade in three years”.

Opportunities also exist in construction, manufacturing, tourism and space exploration, as well as the linking of financial markets, he says.

ADCB's Ms Malik says GCC sectors linked to petrochemicals will also be key areas since China is expected to be a main driver for petrochemicals demand globally going forward.

“In the longer term, as diversification programmes in the region deepen, we will see a broader range of exports going to China. In the near term, we expect much of the benefit of the non-oil trade will be cheaper imports from China,” she says.

Mr Lee says the Gulf region could look at adding “competitively priced” imports of machinery, transport equipment and manufacture products from China.

“China’s green sectors might also get a boost from the deal since the GCC region is trying to diversify its energy infrastructure and China has leading positions in many sub-sectors that are key to electrification and electric vehicles.”

Changing flows

Globally, geopolitical factors have shifted the nature of trade significantly. Last year's overall trade growth is projected at 3.5 per cent owing to a deceleration in the world economy, according to World Trade Organisation estimates.

The WTO has trimmed its forecast for trade growth to 1 per cent in 2023, citing increasing downside risks from high inflation, declining consumer spending and the continuing energy crisis.

However, countries such as the UAE significantly outpaced the global trade growth last year — at an estimated 15 per cent — and continue to seek new opportunities across continents.

“We expect the GCC countries to maintain a degree of strategic flexibility for the foreseeable future when it comes to trade, as they are fundamentally incentivised to get the best value for the commodities they export to other countries,” Mr Lee says.

According to Mr Livermore, while the Gulf states are looking to the East for growth opportunities, the bloc is seeking to broaden its economic sphere and the “West will remain important economically, as well as politically”.

Mr Mogielnicki from the Arab Gulf States Institute believes Asian economies clearly present a longer-term priority for GCC countries’ global economic engagement.

“Growth across the strongest Asian countries is likely to outplace global averages over the short and medium terms,” he says.

Combining strengths

Looking ahead, China-GCC relations are set to grow significantly in the longer term.

“China will remain one of the GCC’s main energy importers and the GCC will have the option to use China’s competitive cyclical industries for its efforts to expand and diversify domestic capacity, and prepare for the global climate transition,” says Mr Lee.

Ms Malik says China and GCC trade relations are already on a strong footing, but going forward, “broadening and strengthening trade will be key, it will be prioritised and it will be an area of mutual growth”.

While China is a big export market, Mr Saidi sees many opportunities beyond trade and investment.

“First and foremost, there could be significant benefits from the adoption of the PetroYuan,” he says.

“Oil could continue to be priced in USD, but payment and settlement would be in Yuan. The Yuan could be used for all bilateral trade with only the net balance settled in euro or USD.”

At the moment, the greenback still accounts for 60 per cent of the global reserve currency and the pricing and selling of crude is in US dollars.

Deeper economic ties mean that China and the Gulf region can benefit from increased co-operation on numerous fronts such as the integration of banking and payment systems, the expansion of central bank swap agreements, collaboration between special economic zones and state-owned enterprises becoming an instrument of economic and industrial policy.

“Sovereign wealth funds can also be used as an instrument for co-operation — for example GCC SWFs can focus more of their portfolios on Asian economies, especially China, and vice versa,” says Mr Saidi.

“In parallel, China will emerge as a geostrategic partner of the GCC in defence and security, given alignment on most political issues.”

Our family matters legal consultant

Name: Dr Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

'The worst thing you can eat'

Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.

Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines:

Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.

Snacks - Potato, corn and tortilla chips often contain trans fat. And while popcorn can be a healthy snack, many types of packaged or microwave popcorn use trans fat to help cook or flavour the popcorn.

Fried food - Foods that require deep frying — french fries, doughnuts and fried chicken — can contain trans fat from the oil used in the cooking process.

Refrigerator dough - Products such as canned biscuits and cinnamon rolls often contain trans fat, as do frozen pizza crusts.

Creamer and margarine - Nondairy coffee creamer and stick margarines also may contain partially hydrogenated vegetable oils.

The alternatives

• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.

• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.

• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.

• 2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.

• PayPal is probably the best-known online goods payment method - usually used for eBay purchases - but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.

EA Sports FC 26

Publisher: EA Sports

Consoles: PC, PlayStation 4/5, Xbox Series X/S

Rating: 3/5

What are NFTs?

Are non-fungible tokens a currency, asset, or a licensing instrument? Arnab Das, global market strategist EMEA at Invesco, says they are mix of all of three.

You can buy, hold and use NFTs just like US dollars and Bitcoins. “They can appreciate in value and even produce cash flows.”

However, while money is fungible, NFTs are not. “One Bitcoin, dollar, euro or dirham is largely indistinguishable from the next. Nothing ties a dollar bill to a particular owner, for example. Nor does it tie you to to any goods, services or assets you bought with that currency. In contrast, NFTs confer specific ownership,” Mr Das says.

This makes NFTs closer to a piece of intellectual property such as a work of art or licence, as you can claim royalties or profit by exchanging it at a higher value later, Mr Das says. “They could provide a sustainable income stream.”

This income will depend on future demand and use, which makes NFTs difficult to value. “However, there is a credible use case for many forms of intellectual property, notably art, songs, videos,” Mr Das says.

Living in...

This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

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The President's Cake

Director: Hasan Hadi

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Rating: 4/5

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%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E2.0-litre%20four-cyl%20turbo%20%2B%20mild%20hybrid%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E204hp%20at%205%2C800rpm%20%2B23hp%20hybrid%20boost%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E320Nm%20at%201%2C800rpm%20%2B205Nm%20hybrid%20boost%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3E9-speed%20auto%0D%3Cbr%3E%3Cstrong%3EFuel%20consumption%3A%20%3C%2Fstrong%3E7.3L%2F100km%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ENovember%2FDecember%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh205%2C000%20(estimate)%3C%2Fp%3E%0A

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Rugby World Cup (all times UAE)

Final: England v South Africa, Saturday, 1pm

Timeline

2012-2015

The company offers payments/bribes to win key contracts in the Middle East

May 2017

The UK SFO officially opens investigation into Petrofac’s use of agents, corruption, and potential bribery to secure contracts

September 2021

Petrofac pleads guilty to seven counts of failing to prevent bribery under the UK Bribery Act

October 2021

Court fines Petrofac £77 million for bribery. Former executive receives a two-year suspended sentence

December 2024

Petrofac enters into comprehensive restructuring to strengthen the financial position of the group

May 2025

The High Court of England and Wales approves the company’s restructuring plan

July 2025

The Court of Appeal issues a judgment challenging parts of the restructuring plan

August 2025

Petrofac issues a business update to execute the restructuring and confirms it will appeal the Court of Appeal decision

October 2025

Petrofac loses a major TenneT offshore wind contract worth €13 billion. Holding company files for administration in the UK. Petrofac delisted from the London Stock Exchange

November 2025

180 Petrofac employees laid off in the UAE