As of this morning, we’ve seen that the opposition forces (HTS) have already taken the capital, Damascus. President Assad has reportedly fled by plane and the Prime Minister has called for calm and expressed willingness to transfer power to representatives elected by the people.

Several discussions in this forum are directly related to the developments in Syria. For instance, yesterday at 3:30 p.m., Russian Foreign Minister Sergey Lavrov engaged in a 45-minute dialogue with an Al Jazeera host, addressing numerous issues, many of which concerned Syria.

The host began by asking Mr. Lavrov about Russia’s view on the latest developments, including the fall of cities like Homs. Mr. Lavrov responded by stating that he will not join the guessing game about who is winning. He emphasized that Russia’s focus remains on a political resolution based on UN Security Council Resolution 2254, ensuring Syria’s territorial integrity, sovereignty, and independence from foreign interference, and seeking a political solution.

Upon hearing this, I felt that Russia may be giving up on the Assad regime, and his observation was made  yesterday afternoon (December 7th）and there could be various reasons for this. One important reason, as a Chinese saying goes, is that “Heaven helps those who help themselves.” It is only when one possesses the will, the strength, and determination to move on, that external support can really be useful.

The Assad’s situation stems from Syria being part of the Islamic world, where Assad and his Alawite sect, a minority within the Shia branch of Islam, align closely with Iran. Yet, 85% of Syria’s population is Sunni. During French colonial rule, the Alawites, known for their combat prowess, were often recruited as soldiers and even promoted to significant ranks. This tradition carried over into the Assad regime’s 50-year rule. When I visited Syria in the 90s, the country seemed to be on the same developmental level as China, with Damascus leaving me with the impression of a bustling Chinese town. It was the Arab Spring which triggered a civil war, and eventually turned into an “Arab Winter,” resulting in over 12 million displaced Syrians, countless deaths, and a society devolving from relative prosperity to a kind of hell on earth.

Without the help of Russia and Iran, Assad’s regime would not have stabilized. This is common knowledge among many Syrians, including some Sunni friends I’ve spoken to, who agree that external support was critical for the regime’s survival, and then things have changed now.

During the forum, the host asked Mr. Lavrov about the UNSC resolution 2254 which requires a free and fair election. Mr. Lavrov emphasized that there are other prerequisites, such as sovereignty, territorial integrity, and political solutions, which must first be met before election can be held. I consider his response powerful and thought-provoking.

Israel is certainly aiming to support anti-government forces as a means to curb Hezbollah’s growth, which is a key part of the “Shiite Crescent”, for one thing, Syria was viewed to serve as an important channel for supplying weapons to Hezbollah. Israel likely provides support to the rebels, including intelligence and other forms of assistance.

Turkey, on the other hand, is also widely regarded as a major backer of the opposition forces. This is largely due to Turkey’s Kurdish issue, as the Kurds are an ethnic group seeking independence and have a significant presence in neighboring countries from Iraq to Syria, controlling approximately 20% of Syrian territory. Turkey’s actual objective may well be to suppress the Kurdish force through its support of the opposition forces. Ultimately, Turkey may even harbor territorial ambitions, not ruling out the possibility of annexing this 20% of Syrian land.

As far as the U.S. is concerned, although HTS is on its terrorist organization list, American media like CNN recently interviewed its leader, which may indicate a shift in American stance. Stirring up a crisis in Syria could be the U.S.’s strategy to divert Russia’s attention from the war in Ukraine, where the U.S. is under tremendous pressure. Additionally, the Syrian crisis could help the U.S. weaken Iran’s influence, a major regional threat that has long annoyed the U.S.

Among powers outside Syria, Iran might suffer the greatest setback from the fall of the Assad regime, which has long been a staunch supporter of Shia factions. However, it’s crucial to note that HTS is defined as a terrorist organization by the UN, the U.S., and most countries. Although its may change in one way or another, its roots as an offshoot of al-Qaeda underscore its ideological belief. Europe, too, fears a lot that a HTS-led Syria could exacerbate issues like migration and terrorism in Europe.

While some might celebrate Assad’s downfall as a victory for democracy, the long-term threat posed by terrorism remains extremely high. History has shown how U.S. Counter-terrorism efforts often backfire, creating more extremism, as seen with al-Qaeda, ISIS, and now the HTS, all of which have complex ties to Western countries.

During the forum, I shared China’s counter-terrorism approach. I contrasted Xinjiang’s stability and prosperity with the chaos in the Middle East, and China’s model of peace, development, and stability played a major role in this regard. For example, the Taklamakan Desert with an area as large as 330,000 square kilometers, or roughly one and a half of the United Kingdom has been encircled by a vast green belt, and it will be transformed into a hub for abundant renewable energy development. Many found this case compelling. China’s counter-terrorism model addresses both symptoms and root causes, a critical factor for sustainable peace.

The post The Syrian Upheaval, a Dispatch from the Doha Forum first appeared on China Academy.

Han Hua (left) and Wu Bingbing (right)

HAN Hua: You have just returned from the Middle East, how do you evaluate the current situation in the Middle East on the whole? Is there a possibility of further escalation in the Palestinian-Israeli conflict? Can China play a more important role in the current situation?

WU Bingbing: The effect on the broader Middle East is actually limited in scope, it covers the Gaza Strip, Palestine, Lebanon, but not the entire Middle East region; so we see that the UAE, Saudi Arabia, including Egypt, these countries are still normal. In the early morning hours of October 26th, Israel struck Iran, around the same time my flight took off from the UAE, which was not affected in any way, the entire airport operated normally. This shows that although the local conflicts are very intense, the scale and scope of the conflicts are still limited in the broader Middle East. Many Chinese scholars say that the current situation in the Middle East is like a “storm in a teacup”, and that conflict in the warzone is very intense, the overall situation in the Middle East has not plunged the whole region into turmoil. This is very important. We can travel freely to many countries, including the Gulf States and North African countries, even Iran. With regard to the conflict in Gaza, from the Israeli point of view, although they have set high military goals, such as the elimination of Hamas, the rescue of all hostages and the neutralization of the threat to themselves, in practice the goals have begun to be more focused. Now, Israel is focusing mainly on two corridors, one is the Philadelphia Corridor, which is the area separating the Gaza Strip from Egypt; it used to be under the joint control of Egypt and the Palestinians, which Israel intends to regain control of because of its fear of the flow of supplies into Gaza through the Sinai Peninsula.

The other is the Nazarim Corridor, which divides Gaza into northern and southern sections, in order to respond to emergencies in a timely manner. Israel’s military focus has shifted to control of the two corridors rather than full control of Gaza.For Israel, it has entered a state of relatively low-intensity but sustained combat. Israel’s center of focus has shifted to Lebanon since September, and despite air strikes and targeted killing operations, progress on the ground has been relatively slow. From the Lebanese perspective, Israel’s goal is not to eliminate Hezbollah, but to ensure the safety of the population of northern Israel; threat of Hezbollah rockets has made it impossible for some 120,000 residents of northern Israel to live at home, leading to a massive population displacement. Therefore, the goal set by Israel in Lebanon was to protect security at home, not to achieve a complete military victory in Lebanon. Although Israel’s actions have escalated, they are constrained by a number of external factors, such as France’s and the United States’ concern over the situation in Lebanon; neither of them want the conflict to expand to the whole of Lebanon. While there is a tendency to escalate, its intensity and strength is limited because if the conflict were to spread, it would involve a wider range of issues, including those related to Syria and Iran.A long-term solution to the current Palestinian-Israeli conflict cannot be achieved by military means. All military actions ultimately require a political solution, and military means by themselves cannot deliver a permanent solution to the problem.

China advocates for a political solution, and since we want a political solution, we have to sit down and talk. We saw this work with the rapprochement between Saudi Arabia and Iran last year; China’s role as mediator in Middle East diplomacy is becoming more and more obvious.In our view, China’s position is clear: to reach a political settlement through mediation and to promote peace and stability in the Middle East. Conflicts in the Middle East are not limited to the Gaza Strip; there are also conflicts and challenges in Sudan, Yemen and other places. If these conflicts are not de-escalated and a political solution found, peace and stability will still be threatened. Therefore, China’s efforts in the Middle East were not just in response to the current Palestinian-Israeli conflict, but for the long-term stability of the entire region.From my visits in the Middle East, many locals are looking forward to China’s role. Last year’s rapprochement between Saudi Arabia and Iran not only eased tensions between them, but also reduced the number of active conflict throughout the region, giving locals hope that conflicts can be de-escalated. Without this rapprochement, people may have lower expectations for peace and less confidence in the future. China’s role is very important, especially in the current situation in the Middle East.

HAN Hua: What do you think will be the next opportunity for a political solution to the Palestinian-Israeli conflict?

WU Bingbing: I think the challenge now is that Israel has its domestic political agenda. Because even before October 7th of last year, the domestic political conflicts in Israel were already very acute, millions of people were marching every weekend to express their dissatisfaction with the Netanyahu government’s judicial reform measures. So from this perspective, the pressure of Israel’s domestic politics influences their policy choices in the region. In fact, while the conflict is going on, many domestic problems are temporarily downplayed. If the conflict subsides, the problems of domestic politics may bubble up again. Therefore, it is important to look not only at the United States and regional factors, but also to take note of the domestic factors in Israel. These factors have a great impact on the situation, and we haven’t reached the point in time for a resolution. The Israeli government has relieved domestic pressure through war, so for now it looks like the government still has a need (for war).

HAN Hua: What about the U.S. attitude toward this? Is Israel’s weapons orders a stimulant for the U.S. military-industrial complex? Do they maybe not want to push for a political settlement that quickly, is that a consideration?

WU Bingbing: U.S. aid to Israel is actually accomplished by allowing Israel to buy U.S. arms, but using U.S. military aid funds. This is one part. The other part is that the U.S. has front-loaded weapons stockpiles in Israel that Israel can use directly, or even mobilize weapons stockpiles in other areas. Therefore, Israel is consuming these supplies. And for the U.S., this becomes a domestic military program, which can increase output.

HAN Hua: That stimulates the U.S. military-industrial complex, right?

WU Bingbing: Yes. For the United States, it goes beyond that; they also benefit from the demand for its weapons from other Arab countries. Through foreign money buying U.S. arms, the U.S. domestic military industry is kept alive.

HAN Hua: Then among the Arab countries, Saudi Arabia, for example, who has been very low-key at this BRICS summit, that’s not quite consistent with their application to join BRICS. Is this related to Saudi Arabia’s need for U.S. weapons?

WU Bingbing: The situation in the Middle East is very complicated, and Saudi Arabia’s performance in Yemen shows the relative weakness of its national defense capabilities and its inability to maintain national security. They have to consider how to maintain their security in the face of Israel and Iran. And this is not just a question of how many arms to buy, but also the need to develop their own independent security capabilities. As of now, Saudi Arabia still needs external security support, and the country that can provide such comprehensive support is still the United States.The relationship between Saudi Arabia and the United States goes back a long way, so they have high expectations of the United States. Last year we saw that there have been discussions between Saudi Arabia and the United States about signing a defense agreement, and even a desire to elevate the relationship from a partnership to an alliance similar to that between South Korea and Japan. The Saudis want the U.S. to provide them with fuller security guarantees, even protection.

HAN Hua: The issue of national security is indeed critical. You mentioned the situation in the Middle East, where conflicts are more intense locally but relatively stable on a regional level. Does this reflect a tacit understanding?

WU Bingbing: With regard to the overall situation in the Middle East, we can see that Arab governments have taken a stand on the sidelines with regard to the conflict between Israel and Gaza, the conflict between Israel and Lebanon, and the conflict between Iran and Israel. Although they issued condemnations, such as on the Israeli strike on Iran, which was condemned by Saudi Arabia and the UAE, no real action has been taken. There is a consensus between the Gulf states and Iran that Israel should not be allowed to use their airspace for strikes, but this does not mean that they have chosen to take a stand in the conflict. The Gulf States and most of the Arab States governments have maintained an attitude of neutrality and happy to look on from the sidelines, an attitude that has determined that they are not deeply involved in the conflict.

HAN Hua: So the overall situation remains stable despite the intense localized conflicts?

WU Bingbing: Yes, from what we can see, these countries are still moving forward with their normal affairs in their own ways, and have not completely changed their diplomatic or security strategies because of the localized conflicts. This is also why the situation in the Middle East can maintain a “delicate balance” outside localized conflicts.

HAN Hua: What kind of strategy has Iran adopted in the current Palestinian-Israeli conflict? And what is its influence in the Middle East?

WU Bingbing: From Iran’s point of view, the relationship between it and Israel is one of long-term attributional confrontation, because it is not possible for Iran to annihilate Israel, and likewise it is not possible for Israel to annihilate Iran. Therefore, Iran’s attitude is clear, it is not trying to launch attacks on Israel without consideration for cost, but adopting a strategy of long-term resistance. As the head of its axis of resistance, Iran cooperates with non-state actors on the periphery, such as Hezbollah and Hamas, which are directly involved in the conflict, and Iraq and the Houthis, which raid or attack Israel through their respective means. However, Iran itself avoids large-scale direct military confrontation with Israel. Iran’s strategy has been to provide equipment and advisory support rather than to engage directly in the war.

Over the past decade or so, despite its military presence in Syria, Iran has exercised restraint and has not directly engaged in a full-scale war. Even when Israel attacked the Iranian consulate in Damascus on April 1, Iran responded with restraint, avoiding leading to further exacerbation and escalation of the situation. Overall, Iran’s strategy is to maintain a low-cost mode of attrition to avoid high war expenses. In contrast to Israel’s technological and intelligence superiority, Iran pushes up the cost of Israel’s defenses by engaging in attrition through low-cost drones and missile weapons. Thus, from Iran’s perspective, it wants to maintain this long-term stalemate without dragging the entire region into a large-scale conflict.

HAN Hua: Given this low-cost strategy of attrition, what do you think is Iran’s national strategy?

WU Bingbing: Iran’s strategy is mainly based on “resistance”, which is Iran’s brand in the region, representing its opposition to the hegemony of the United States and its opposition to the Israeli occupation of Palestine. These two objectives are very clear. At the same time, Iran has a clear strategy in its neighborhood and in the Global South, which consists mainly of maintaining good-neighborly relations with neighboring countries and cooperation in the Global South, such as attention towards Central Asian countries, easing tensions with the Gulf countries, and attention towards China and Russia. Iran’s rising partnerships in BRICS, SCO, Africa and Latin America are strategic objectives that complement each other to form an overall national strategy.

HAN Hua: These are all strategies that act in parallel, right?

WU BINGBING: That’s right. Iran insists on resistance on the one hand and seeks development on the other. Resistance does not mean pure conflict, it is also a strategy. For example, on the nuclear issue and sanctions, Iran will communicate and coordinate with the West as necessary. This highly flexible strategy helps Iran expand its influence in the region.

HAN Hua: Now Saudi Arabia and Iran are planning to hold joint military exercises in the Red Sea waters, Egypt has also expressed interest in joining. Can you confirm this news? How will the U.S. and the West respond to this?

WU BINGBING: According to current reports, AFP mentioned that Saudi Arabia and Iran actually conducted joint exercises in the Gulf of Oman, not the Red Sea. The Red Sea is relatively more sensitive because of the presence of the Houthis. The exercises in the Gulf of Oman are more focused on the security of access to the Persian Gulf and the Strait of Hormuz. For Saudi Arabia and Iran, this is a mutual trust building step. By doing so, the two sides will not only increase mutual trust, but also reduce security conflicts along the Persian Gulf. It is also an important turning point in the rapprochement between the two sides.Despite the long-standing rivalry between Saudi Arabia and Iran, reaching mutual trust remains a goal for both sides. The Saudi side also recognizes the importance of a stable and peaceful regional geopolitical environment in the context of economic development and Vision 2030. Therefore, the Saudis must take some proactive diplomatic action on the Iranian issue without relying exclusively on U.S. guarantees.

HAN Hua: So, is this also a way to strengthen military power through military exercises?

WU Bingbing: That’s right. Saudi Arabia must take the initiative to improve its own security capabilities, not only through external dependence, but also by increasing its own strength.

HAN Hua: Does this Saudi attitude also represent the overall position of the Gulf countries? What about the UAE’s attitude towards these conflicts, for example?

WU BINGBING: The UAE publicly condemned Israel after it launched an attack on Iran on October 26th. This also reflects the consensus between the Gulf States and Iran that Israel should not be allowed to utilize their airspace. This is not only the position of a single country, but the demand of all Gulf States.

HAN Hua: So there’s a certain consensus among the Gulf states?

Wu Bingbing: Yes. A peaceful and stable Gulf region is good for both the Arab countries and Iran. As a result, interaction between the parties is likely to increase around these consensus. For example, we saw that after October 1, the Iranian foreign minister visited Qatar and met with the Saudi foreign minister. Qatar has been relatively more open and Saudi Arabia is making more diplomatic efforts. Although the pace varies from country to country, with some being more proactive and others following a little bit behind, there does seem to be a certain amount of tacit understanding between them overall.

HAN Hua: So what will be the impact of these interactions and balancing acts between the Gulf states, on the situation in Gaza?

WU Bingbing: The main Arab participants in the negotiations on a Gaza ceasefire right now are Qatar and Egypt. In Qatar, the negotiations are mainly led by the United States, Israel, Qatar and Egypt, while numerous Arab countries are not actually involved. The more countries there are, the more diplomatic weight they bring, but at the same time that would also introduce different voices, which can sometimes lead to resistance in solving the problem.

HAN Hua: Are the Arab countries divided on pushing for a ceasefire?

WU Bingbing: On the issue of Gaza, the goal is very clear: a ceasefire and humanitarian assistance. From this point of view, there are no major differences within the Arab countries. The main obstacle lies in the fact that the Israeli side keeps putting forward new demands, and the entry of Arab countries will strengthen the forces pushing for a ceasefire.

HAN Hua: Is there any role that the Arab countries can play in the political settlement?

WU Bingbing: The difficulty of a political solution lies in the fact that there is no post-war solution for Gaza. Israel’s openness to a two-state solution has become weaker during the past year of conflict. Changing Israel’s will now seems to be very difficult. As a result, the Arab countries do not have a clear operational plan either. In the absence of a clear statehood program on the part of Israel, especially with regard to the governance of Gaza, it is unlikely that the Arab countries will become deeply involved.

HAN Hua: So in practical terms, where should we start?

WU Bingbing: There is no clear Israeli operational plan for Palestinian statehood. For Israel, there is no realistic solution other than the two-state solution. However, the current emotional radicalization and domestic political problems make it very unlikely that a two-state solution will be advanced.

HAN Hua: How big is the impact of the Israeli-Palestinian conflict and spillover risks on global supply chains?

WU Bingbing: For now, the impact of this conflict on the global supply chain is limited. Although there may have been concerns about rising oil prices at the beginning, Israel did not strike Iran’s oil facilities as it claimed, and international oil prices have instead tended to fall. Therefore, the impact of this conflict on the global economy is relatively small.

HAN Hua: “Limited impact of the conflict” sounds good, but does it also diminish the sense of urgency of the parties to stop the military conflict and push for a political solution?

WU Bingbing: Indeed, if the continuation of the conflict does not have a significant impact on global economic interests, there may be less urgency for the parties to push for a political solution. While the impact on some Red Sea littoral states would be greater, major countries such as Saudi Arabia are not currently expressing a clear desire to become deeply involved.

HAN Hua: Does this attitude mean that deep political involvement is not necessarily conducive to protecting economic interests?

WU Bingbing: Yes. Countries like Saudi Arabia may face greater challenges if they become overly involved in political and security matters. For example, the collective efforts of the international community, including numerous attempts by the United Nations and the United States, have failed to push Israel to a ceasefire. This makes countries more cautious in assessments of the effectiveness for their own involvement.

HAN Hua: And how should the participation and impact of the parties be assessed?

WU Bingbing: The main problem now is a difference in mindset. For its part, Israel still has the elimination of Hamas as its goal and is trying to weaken Hezbollah. Therefore, it still chooses a military solution to the problem. We believe that a military solution in itself is not a long-term solution, and this difference in perception.

HAN Hua: Will the long-term impact on the global economy also be limited?

WU Bingbing: We have seen that commodity prices, especially for oil, have not been greatly affected. Although the Red Sea transportation route holds an important position for European and global oil supply, alternative options exist. Therefore, the overall impact is limited.

HAN Hua: How much does the negative media coverage of the conflict affect the regional and international reputation of Israel and the United States?

WU Bingbing: Emotionally speaking, we all have sympathy for the large number of civilian casualties, and anger for this kind of mass killing. In China, many ordinary people may not understand the Middle East issue, or even know exactly where Palestine is, but through social media and official media, they see the suffering of civilians, and this kind of emotional resonance is part of human nature. The same emotional resonance exists across the Global South.There are also demonstrations and opposition on college campuses in the U.S., and criticism directed at Western politicians can often be seen. So, these emotions and human experiences are a normal reaction.  

HAN Hua: Emotions seem to fade over time and even lead to cynicism. What has the international community done about this?

WU Bingbing: It is true that emotions may fade over time, but efforts are still being made by the international community, particularly in the Global South. For example, there is litigation in the International Court of Justice against the actions of Israel, and South Africa has been very active in that regard. There is also litigation and judicial advice against Germany’s support for Israel. So, as long as this issue exists, it will galvanize action and cannot be completely ignored.

HAN Hua: Can China play a role in driving change in the chronically unstable Middle East?

Wu Bingbing: We must act within our means and follow the trend. The Middle East problem cannot be solved in the short term, and since so many countries have spent so much time and thought of so many ways to try to solve it, we have to recognize the complexity of the problem. We should actively participate in it, but we should not expect to solve the problem with a one-off effort. There is a need to accumulate historical experience and knowledge, especially in new situations, and to make more investment in human resources, such as the training of a large number of diplomats.We need to grow talent and know-how not only for the Middle East, but also for potential conflicts in other regions. For example, the problems of Latin America, the Asia-Pacific region and Africa are all problems that we may face in the future. Therefore, in the long run, this reserve of talent and experience is very important.

The post The Global Impact of the Palestinian-Israeli Conflict Is Limited first appeared on China Academy.

According to Chinese media The Paper on September 16, the Egyptian Air Force will purchase Chinese fighter jets to replace America-made F-16s.

The Egyptian Air Force plans to purchase the J-10C fighter jet, produced by China’s Chengdu Aircraft Industry Group. The aircraft can carry 5,600 kg of either missiles or bombs and can fly at a maximum speed of 1.8 Mach. Its combat radius is 550 km, while the flight distance between Cairo and Tel Aviv is 402 km. This means that if Israel has an airshow, Egypt’s J-10C would only need 11 minutes to bring plenty of gifts to the party.

While Egypt’s specific procurement quantity has not been disclosed, Voice of America claimed that “China is expanding and targeting the Middle East regional market.” However, according to information disclosed by other American media, the Middle East regional market is evidently being messed up by America’s unreasonable pricing strategy.

Currently, Egypt operates 220 F-16s, making it the fourth-largest F-16 operator globally. Washington offered Cairo an upgraded version, the F-16V, but the cost was deemed excessively high. For instance, the U.S. sold 66 F-16Vs to Taiwan for $8 billion, equating to $121 million per jet. In contrast, Pakistan signed a $1.4 billion deal with China in 2009 to buy a reported 36 J-10Bs, with a unit price of only $39 million.

Compared to the products the U.S. is trying to sell to Egypt, Chinese fighter jets are not only half the price but also perform better. As BulgarianMilitary.com reported, “The J-10C offers superior combat capabilities compared to the enhanced F-16 model, all at a comparable cost.” Military Watch Magazine also noted that “The close to 200 F-16s that form the backbone of the fleet are considered among the least capable fourth-generation fighters in the world, and have been heavily downgraded and restricted to using obsolete Cold War era weaponry—and no beyond visual range air-to-surface weapons whatsoever.”

The F16 is an excellent fighter jet that has been tested in actual combat. However, due to relations with Israel, the U.S. has imposed varying degrees of air combat capability restrictions on the fighter jets sold to Egypt, preventing them from posing a significant threat to the Israeli Air Force. For example, the U.S. has refused to sell Egypt the AIM-120 missile that should originally paired with F16s, leaving Egyptian pilots with AIM-7 missiles with a range of less than 70 km, compared to Israeli pilots who have missiles with ranges of at least 105 km.

On the other hand, China’s J-10C fighter jet can carry the PL-15 missile, which would allow pilots to strike enemies 300 km away. And the relationship between China and Israel is obviously not as close as that between the U.S.

According to the report from Eurasian Times, China is also promoting its latest stealth fighter jet, the FC-31, to the global market, which has garnered attention in the Middle East. Through purchasing F-35 from the US, Israel is currently the only country in the Middle East with stealth fighter jets. However, this advantage may not last much longer.

China’s J35/FC-31 stealth fighter jet

The post Egypt Swaps U.S. F-16 for China’s J-10C Fighter Jets first appeared on China Academy.

Middle Eastern countries have long lacked building materials, equipment, skilled workers, and engineering capabilities. As the world’s leader in infrastructure construction, these are exactly what China is best at. In addition, the cooperation between China and the Arab world is now in a honeymoon period. China’s strong infrastructure capacity has begun to be continuously imported into Saudi Arabia.

Currently, China’s real estate market is in a downturn cycle. Many real estate companies have frequently collapsed. Real estate investment has cooled. Related industries such as cement, steel, coatings, and residential decoration have experienced an oversupply due to weakened demand. The huge idle infrastructure capacity needs to be digested, and the Arab world with money and demand, has become an important destination for capacity export.

Mohammed bin Salman (MBS), Saudi Crown Prince is ambitious. He plans to lead the kingdom to improve its global economic ranking from 19th to 15th by 2030. He also plans to launch a number of grand projects to attract worldwide attention in the fields of housing, urban construction, ports, logistics, high-speed rail, cultural tourism, etc.

Crown Prince Mohammed bin Salman on the Great Wall during his official trip to China in 2019. | Source: Arab News

According to Knight Frank’s forecast, Saudi Arabia’s total construction output value is expected to reach $181.5 billion by 2028, an increase of nearly 30% compared to 2023. By then, it will become the world’s largest infrastructure market. Even now, it can be called one of the world’s largest infrastructure markets.

Shouldering the historic task of transformation and waving huge amounts of money, the opportunities brought about by Saudi Arabia’s infrastructure boom are very likely to help Chinese construction companies reach another peak.

Saudi Arabia’s Historic Turning Point

The Middle East, rich because of oil, is also trapped due to oil.

March 1, 1938, was a milestone in Saudi Arabia’s history. On that day, an exploration team discovered enough oil in the desert to be commercially exploitable, and the country’s destiny began to turn. In 1948, the world’s largest onshore oil field, Ghawar Oil Field, was discovered with proven reserves twice the total of all Chinese oil fields. In 1951, the world’s largest offshore oil field, Safaniya Oil Field, was discovered. In just a few decades, Saudi Arabia became the world’s largest oil exporter.

In the 1960s and 1970s, taking advantage of the Middle East wars, Saudi Arabia led OPEC to raise oil prices, and its economy started to boom. Relying on huge oil revenues, the kingdom created an economic miracle and established its status as a world-class rich country in one fell swoop.

World Oil Reserves by Country | Source: WorldAtlas

However, as a major energy commodity, oil prices fluctuate drastically. Oil revenue once accounted for 85% of Saudi Arabia’s fiscal revenue. Over-reliance on oil caused the kingdom to have eight consecutive years of fiscal deficits and negative economic growth during the last round of the oil price downturn. The government’s financial pressure is still considerable. Other Middle Eastern oil-producing countries share the same sentiment.

Change is imperative. In 2016, Saudi Arabia launched the “Vision 2030” and “National Transformation Program”, trying to promote economic diversification through reform, activate the private sector, increase non-oil industry income, accelerate the development of new energy, and ultimately achieve sustainable economic development. Especially after MBS was designated as the Crown Prince in 2017, under his leadership, the kingdom’s historic reform began.

Infrastructure and real estate are important units in Saudi Arabia’s economic reform. The “Vision 2030” plans to spend 4.13 trillion riyals (about $1.1 trillion) on these two units. Its goal is to achieve a 70% self-sufficiency rate in residential housing by 2030. At present, the Real Estate Development Fund has injected about $12 billion US into the Sakani Housing Program.

Riyadh has also unveiled real estate projects worth a total of $104 billion, with plans to build more than 555,000 dwellings, more than 275,000 hotel rooms, more than 4.3 million square meters of retail space, and more than 6.1 million square meters of office space.

Among all the projects, the most anticipated one is the Neom project. The core of the Neom project is the Line, with a length of 170 kilometers, a width of 200 meters, and a capacity of 9 million people. The Crown Prince plans to spend nearly $500 billion on it (currently undergoing certain scale and budget cuts), hoping that it can become an iconic and eternal architectural wonder like the Egyptian pyramids.

Rendering of the Line | Source: Neom.com

The Line will use clean energy such as wind and solar power to achieve 100% zero carbon emissions. Under the framework of Neom, several megaprojects will also be built, such as the tropical ice and snow kingdom Trojena, the floating port and trade hub Oxagon, etc. International airports and supporting green ecological, medical, gymnastic, leisure, cultural, and recreational facilities have all started.

Faisal Durrani, head of Middle East research at Knight Frank, said: “Vision 2030 has ignited the passion of the entire Kingdom of Saudi Arabia, and as Neom becomes the crown jewel of the National Transformation Program, people are eager to become part of history.”

Ambitious Middle Eastern tycoons have no shortage of capital, but it is basically impossible to finish such megaprojects without the participation of the “Infrastructure Maniac”. By far, with only about 6 years left, the construction of the projects has generally not been as fast as expected. Under great pressure, the cooperation between Saudi Arabia and Chinese companies will be closer.

Chinese Enterprises to Enter Saudi Arabia

Three months ago, NEOM CEO Nadhmi Al-Nasr led a delegation to China for a seven-day visit to Beijing, Shanghai, Hong Kong, and Shenzhen. The main purpose of this visit was to promote NEOM and seek potential partners. “NEOM is a complex and huge project. Such a project requires the participation of a large number of Chinese companies to achieve, and will bring huge opportunities to them,” said Nadhmi during the visit.

NEOM delegation promoted the project in Shanghai. | Source: NEOM.com

In fact, since the release of Vision 2030, Chinese construction companies have shown their prowess in Saudi Arabia. For example, China State Construction participated in the pilot project of the Line – the Saudi Transportation Tunnel Project, which includes two parallel high-speed rail tunnels and heavy freight tunnels, with a single line length of 15.75 kilometers and a contract value of approximately $2.47 billion.

On July 12, China State Construction announced that it had successfully won the bid for the King Salman Neighborhood worth $2.08 billion. This is the second Saudi megaproject undertaken by it.

Signing ceremony for the cooperation between China State Construction and El Seif Engineering Contracting Company to build King Salman Neighborhood | Source: China State Construction

Other Chinese companies have also participated in other Saudi construction projects. In May this year, the pilot branch tunnel project of the Line in which China Railway Construction participated was officially completed. This is the first completed project undertaken by a Chinese company under the framework of NEOM.

In May, Saudi Housing Minister Majid Al-Hogail also visited China and reached a cooperation agreement with SINOMACH to build 20,000 residential units, and later reached an agreement with CITIC Construction Group to build a building materials logistics and industrial center. This center will consist of 12 factories. After completion, it will greatly enhance the kingdom’s self-sufficiency in building materials, in order to solve the project delays and cost problems caused by building materials supply shortages.

To promote economic diversification and get rid of dependence on traditional fossil energy, new energy is a top priority of Saudi Arabia. As early as 2014, SEPCO, a subsidiary of POWERCHINA, cooperated with Saudi Aramco to undertake the Jazan IGCC Complex (contract value of approximately $2 billion), which is China’s first high-end Saudi project, breaking the monopoly of European and American companies in the Middle East construction market.

To date, SEPCO and Saudi Arabia have cooperated seven times. The cumulative contract value of the two sides has exceeded US$10 billion, involving multiple EPC projects such as wind, solar, and energy storage.

Chinese and Saudi engineers were discussing at a tunnel construction site. | Source: China State Construction

In addition, state-owned enterprises such as Sinopec, China National Petroleum Corporation (CNPC), China Metallurgical Group Corporation (MCC Group), China National Chemical Engineering Group Corporation (CNCEC), China Communications Construction Company (CCCC) , State Grid Corporation of China (SGCC) and Energy China have also begun to play an important role in infrastructure projects in the Middle East.

Led by these state-owned enterprises, the upstream and downstream companies of China’s construction and engineering industry chain are collectively taking root in the Middle East and achieving common prosperity. For example, in the early days of SEPCO’s cooperation with Saudi Arabia, the Saudis highly praised European and American manufacturing and were skeptical of Chinese manufacturing. However, SEPCO finally persuaded them with its leading technology to include a series of Chinese companies in its supplier list. According to incomplete statistics, SEPCP has promoted the export of a total of $650 million worth of Chinese equipment and materials since it cooperated with Saudi Aramco.

Complementary Interests Between China and Saudi Arabia

The economies of China and Middle Eastern countries are highly complementary, which is the foundation for cooperation between the two sides.

China is the world’s largest industrial producer and oil importer, and the Middle East’s huge oil reserves just meet China’s energy demands. China’s steel, cement, photovoltaic, wind power, and other production capacities are all the greatest in the world, and in the context of insufficient domestic demand in China, they need to be sold to overseas markets.

Therefore, the transaction between the two sides is mutually beneficial. In 2022, imports from Saudi Arabia accounted for 18% of China’s total crude oil imports, making it China’s largest oil supplier. On the other hand, the kingdom imports machinery, electronic products, and other goods from China.

Since 2001, Saudi Arabia has been China’s largest trading partner in the Middle East, and since 2013, China has become its largest trading partner. By 2022, China was not only its largest export market but also its largest import market.

In 2023, mainland China’s crude steel production reached 1.019 billion tons, accounting for 53.9% of the global total, with consumption at 50.8%, both ranking first in the world. In 2023, global cement production was 4.072 billion tons, with that of China accounting for nearly half. Since 1985, China has maintained its position as the world’s largest cement producer for 38 consecutive years.

China has remained the largest crude steel producer for five consecutive years. | Source: World Steel Association

However, with the transformation of China’s economic structure, real estate investment has entered a downward cycle, leading to a deep adjustment in the construction industry. In 2023, due to the decline in demand, sectors such as steel, cement, waterproof materials, and concrete are all being forced to transform.

Oriental Yuhong, a leading enterprise in waterproof materials, has established an “overseas priority” strategy. China National Materials Group Corporation (CNBM), the world’s largest cement technology equipment engineering integration company, has long begun expanding overseas. Its project for Union Cement Company in the UAE is the first overseas cement production line built by a Chinese company with a daily production capacity of 10,000 tons. In 2023, CNBM signed new overseas contracts worth nearly $4.6 billion, a significant increase of 55% year-on-year, far surpassing its domestic contracts.

Among the top 10 largest cement producers, 6 of them are Chinese companies. | Source: World Cement Association

Due to the impact of international relations, the export performance of Chinese building materials varies across different regions. Exports of steel to the European Union and the United States have significantly declined, while exports to Africa, Latin America, and other Asian countries have been increasing. Notably, in 2023, China’s steel exports to the Middle East and North Africa reached 18.095 million tons, a substantial year-on-year increase of 60.4%.

The diverse economic endowments of different regions lay the foundation for cooperation, making the Belt and Road Initiative highly compatible with Saudi Vision 2030. The Middle East, as a critical juncture connecting Asia, Africa, and Europe, holds an indispensable strategic position in the Belt and Road Initiative. Meanwhile, China’s strong, efficient, and leading manufacturing and infrastructure capabilities, along with its advanced innovation capacity, can empower Middle Eastern countries to achieve economic diversification and reduce their reliance on the energy sector.

Conclusion

It is evident that both China and Saudi Arabia are undergoing profound economic transformations. Although directions of transition differ, their economic complementarities will ultimately bring them together, enabling them to achieve grand strategic visions.

The post Saudi Arabia and China: A Perfect Match first appeared on China Academy.

Forbes: “Clients more and more are asking for CNY” – shorthand for the Chinese yuan, says BTA Finance’s Humberto Coelho.

The 2024 Forbes China Middle East Fireside Chat & Drinks was held in Shanghai earlier this month, aiming to connect the commercial resources of both China and the Middle East and talk about the new opportunities brought by UAE’s accession to the BRICS cooperation mechanism.

An article from Forbes titled “Middle East Investors Eye Chinese Currency Assets As Ties Deepen” mentioned how Humberto Coelho, a co-founder of BTA Finance, expressed the growing need he saw from his clients to hold CNY assets at the event. BTA Finance is a corporation based in Dubai that mainly provides wealth management services and manages over 2 billion dollars of wealth. By investing more in assets denominated in CNY, investors may diversify their investments that traditionally focus on assets denominated in US dollars or Euros. Recently, Asia has become a common focus of Middle East investors. The huge size of the Chinese economy and market has provided BTA Finance’s investors with a rich diversity in investment portfolios.

As observed by the CEO of BTA Finance, Middle East clients tend to avoid assets denominated in currencies related to the Group of Seven and wish to invest in the Middle East, China, Brazil, and India and obtain assets evaluated in their local currencies. As we say macroscopically that a multi-polar world is forming, changes have already come to the doorsteps. Within less than 100 days, from the 22nd to the 24th of October, the 16th BRICS Summit will be held in Kazan, Russia. “40 countries have now applied to join BRICS in 2024” according to BRICS News.

The U.S. Department of Commerce Launching Anti-subsidy and Anti-dumping Investigation Towards LSPTVs Made in China

On June 20, 2024, the U.S. Department of Commerce received a countervailing duty petition and an antidumping duty petition concerning certain low-speed personal transportation vehicles (LSPTV) imported from China. The petitioner is the American Personal Transportation Vehicle Manufacturers Coalition, which alleges that the Chinese government is providing subsidies to LSPTV manufacturers resulting in illicit competition with the local industry. During 2023, 135.8 thousand of the investigated vehicles were imported from China to the US, and according to Commerce, the value sold reached 440 million dollars. This number is growing fast, by 2022, it was 330 million dollars, and by 2021 it was 170.

It is not surprising how much American consumers love Chinese LSPTVs, given how long-lasting and useful they are. These vehicles commonly seen in China speed up to 30 miles an hour, some have hydraulic rods to lift cargo, and some have rearview cameras, yet all of them can be bought at a price ranging from 1000 to 4000 dollars.

Although not as fast as a car, large storage spaces, and low prices made these vehicles perfect for American families that don’t live close enough to cities or local supermarkets and professionals who need to carry and deliver a lot. Being a large country with low population density, the United States has long been called “a nation on wheels”. The need for low-speed vehicles like these to go around local neighborhoods is huge yet largely overlooked.

Although suspected by the Commerse to be dumped goods, LSPTVs are only sold for 200 to 1500 dollars in China. Transporting them to the US usually cost much more than buying them, yet when they reach the shore they are still much cheaper than similar products locally produced in the US. How are Chinese manufacturers able to reduce primal costs? The secret lies in more than one aspect. A fully developed supply chain and large production scale have always been some unwavering advantages of many Chinese factories. In recent years, investments and growth in electric cars have led advanced technologies into peripheral industries, which might also play a role in reducing costs and implementing the production of LSPTVs.

If the US government continues to add to the punitive tariff to try to change the current situation, it would not only make them suspects of controlling market prices but also wouldn’t harm Chinese manufacturers who rely mostly on domestic markets. With the vast market in China, the overseas market has never been their priority. Ultimately, American consumers have paid and would have to pay over 90 percent of the increased tariffs imposed on Chinese imports.

The post Middle East Investors Are Seeking to Include Chinese Currency Assets in Their Investment Portfolio first appeared on China Academy.

The post China Mediates: Hamas and Fatah Unite to End Conflict in Gaza first appeared on China Academy.

The post China or US: Who is Arab countries backing in the high tech race? first appeared on China Academy.

The post China Hosts CASCF: Strengthening Influence in the Middle East? first appeared on China Academy.