Energy projects dominate Sino-Arab economic forum

Oil and gas deals comprise over a third of the value of 124 agreements worth HK$268 billion despite Beijing's push to diversify trade

PUBLISHED : Sunday, 16 September, 2012, 12:00am
UPDATED : Sunday, 16 September, 2012, 4:06am

Despite Beijing's push to diversify trade between China and Arab nations, energy projects dominated the Sino-Arab economic forum in Ningxia, which concludes today.

Agreements for 124 projects, worth about 218.7 billion yuan (HK$268 billion), were signed during the five-day event, Xinhua said. Forty-four projects worth 77.1 billion yuan relate to the oil and petrochemical business. They comprise more than a third of the value of all the deals.

Fifteen new energy projects, worth 52.1 billion yuan, were agreed, Xinhua said. The remainder involved logistics, machinery production and agricultural businesses.

The forum, now in its third year, has been increasingly fruitful. In 2010, projects worth 203.6 billion yuan were signed, and last year projects worth 208.7 billion yuan were inked.

Amid weak demand from developed countries, Beijing is trying to further open up Arab markets. But that may be difficult, analysts say.

The Arab market is seen as a critical step in improving the economies of China's vast western regions.

Beijing has designated Ningxia as a national platform for promoting trade and economic ties with Arab nations, as Ningxia is a trade hub on the historical Silk Road and home to more than two million Muslims.

At the forum's opening ceremony, Vice-Premier Li Keqiang said: "China aims to further open its economy westward. We attach equal importance to opening up to developed and emerging countries."

Trade between China and Arab nations reached US$195.9 billion last year, up 34.7 per cent from 2010, according to the Ministry of Commerce. The nations involved want the figure to top US$300 billion in 2014.

For its part, China also seeks to attract businesses other than the oil and gas industry.

Assistant Commerce Minister Qiu Hong told the forum that China would encourage its firms to collaborate with Arab nations in areas such as manufacturing, logistics, maritime, metallurgy, agriculture, and new forms of energy.

"We aim to increase the total trade volume, but we also want to optimise trade structure, boosting growth in sectors other than fossil fuels," Qiu said.

Analysts say the goal may prove difficult given the dominance of oil and gas in Arab economies and China's growing appetite for energy.

Nazha Aschenbrenner, a senior adviser to a trade-assistance body under the United Arab Emirates' Ministry of Foreign Trade, said China needed to enact structural changes to its economic growth model, which relies heavily on exports.

She noted that China would also need a large supply of natural resources and energy for years to come.

"Of course China needs to change. So far it has bet its development on the so-called export-led model: you buy raw materials, manufacture in China and then export," she said. "China has experienced phenomenal growth through that model, but it is reaching its limit."

She said China needed to address its trade imbalances, noting, for instance, its efforts to boost domestic consumption among the growing middle-class.

Likewise, the economic structures of oil-rich Arab states were equally difficult to change in the short term, said Guan Qingyou, a deputy research director at Minsheng Securities.

He said America had reduced its imports of crude oil and natural gas from the Middle East in recent years, which gave China a better chance of ensuring its energy security.

But that also made it hard to change the existing trade pattern between China and Arab nations, Guan said.