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Friday, January 15, 2016, 10:11

Building closer Saudi business ties


China and Saudi Arabia may witness closer economic cooperation and stronger trade ties in 2016, as their products are complementary and both sides have reached a consensus on the Belt and Road Initiative, which aims to improve infrastructure, according to Chinese exporters and commerce officials.

The initiative includes the Silk Road Economic Belt and the 21st Century Maritime Silk Road, and covers about 4.4 billion people in more than 60 countries and regions.

Zhi Luxun, deputy director-general of the department of foreign trade at China’s Ministry of Commerce, said oil trade lies at the heart of bilateral business ties.

However, Saudi Arabia’s surging demand for upgrading its infrastructure facilities such as oil refineries, roads, airports, and oil tanker and container ports have brought more opportunities for both Chinese project contractors and manufacturers.

China mainly ships construction machinery, manufacturing equipment, steel, electronic products, textiles, garments and household appliances to Saudi Arabia. Chinese-made passenger vehicles and trucks have also become popular in the region.

In addition to crude oil, petrochemicals, fertilizer and other products, Saudi Arabia’s exports to China include marble, olive oil and sesame seed products.

“State-owned enterprises, such as Sinochem, China Communications Construction and Wison Engineering Services — the country’s largest private petrochemical engineering, procurement and construction contractor — have already diversified their operation strategies in Saudi Arabia and other markets in the Middle East, as they transformed from goods and equipment suppliers to mature construction project providers and investors,” said Zhi.

Based in Jinan, the capital of Shandong province in eastern China, China National Heavy Duty Truck Group, the country’s largest truck manufacturer by revenue, will deliver 46 heavy tractors and multifunctional tractors to a Saudi oil company in March.

All these vehicles are specifically designed to work in desert areas, as well as under extremely hot weather condition.

The total value of this deal is 50 million yuan ($7.6 million) and the Chinese company expects to export more new-energy heavy-duty trucks, as well as trucks for military use to the Saudi market from a long-term perspective.

Meanwhile, Sinotruk has worked hard to strengthen its brand image in Saudi Arabia after delivering 50 heavy trucks in 2013 — this was the first batch of vehicles it shipped to the country.

The company initially shipped spare parts by high-cost air cargo and invested heavily to establish regional service points in major cities including Mecca, Dammam and Riyadh.

Cai Dong, general manager of Sinotruk, said as China has signed a number of big-ticket contracts with Saudi Arabia over the past three years to further ensure its crude oil supply, the company wishes to sell more tanker trucks to serve the country’s need to further develop the petroleum industry. It also hopes to help oil companies build more storage facilities.

Sinotruk plans to build an assembly plant in Saudi Arabia over the next three years as China will restart free trade agreement (FTA) talks with the Gulf Cooperation Council (GCC) this year.

Cai said the FTA “would be convenient (for Sinotruk) to ship its trucks from this location to other markets in both the Middle East and Africa”.

The GCC is an economic and political union of six Arab states: Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates, namely, some of the world’s top oil-exporting nations.

Gu Xuebin, vice-president of the Chinese Academy of International Trade and Economic Cooperation in Beijing, said GCC countries consider China a major market for petrochemical products, and a FTA would assist those nations in their industrial development.

“The two sides are expected to discuss key FTA issues such as trading conditions for goods, rules of origin, technical barriers to trade, and economic and technological cooperation,” said Gu.

China and the GCC first announced the launch of FTA negotiations in 2004. The two parties have since held five rounds of talks and reached agreements on the majority of issues concerning the movement of goods. Negotiations on the services industry are also underway.

China’s exports to countries along the Belt and Road Initiative — including Saudi Arabia, Egypt, Bangladesh and Pakistan — increased by double-digit percentages between January and September in 2015, according to the General Administration of Customs.

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