China pledges US$23 billion in loans and aid to Arab states as it boosts ties in Middle East

Chinese President Xi Jinping on Tuesday promised more than US$23 billion in loans and aid to Arab states, as Beijing steadily steps up engagement in the Middle East.

Beijing will also further explore the possibility of free-trade deals with each of the 22 states in the Arab League, as Xi reiterated commitments to globalisation at a time when China is locked in a trade battle with the US.

China and the Arab League – a regional bloc of states in and around North Africa, the Horn of Africa and Arabia – agreed to upgrade their bilateral ties to form a “strategic partnership of comprehensive cooperation, joint development and [that is] future oriented”, Xi told ministers and leaders at a meeting of the China-Arab States Cooperation Forum in Beijing.

“China would like to join the Arab countries … to become the keeper of peace and stability in the Middle East, the defender of equity and justice, promoter of joint development, and good friends that learn from each other,” Xi said.

Beijing’s latest pledge to the region includes US$20 billion in loans that will be used to promote projects and create jobs and profits in countries with reconstruction needs. Another 600 million yuan (US$90.6 million) in humanitarian and reconstruction aid will be extended to war-torn countries including Syria, Yemen, Jordan and Lebanon.

A further 1 billion yuan will be offered to support social stability efforts in the region, Xi said.

The Chinese president also said Beijing wanted to boost cooperation on hydrocarbons and renewable energy, as well as with the Arab states’ sovereign funds – pledging US$3 billion in special loans for the financial sector.

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It comes as Beijing tries to shore up its geostrategic footprint in the Middle East, a key part of its “Belt and Road Initiative” that aims to connect China to Africa and Europe through a network of ports, railways, roads and industrial parks.

Replacing the United States in 2010 as the largest trading partner to the bloc, Beijing has been boosting its economic ties with Arab countries, which remain largely defined by China’s energy demands – over half of its worldwide crude oil imports come from the Middle East.

But there have been growing concerns that Beijing’s economic ambitions there could be hijacked by volatility in the region, with fears that its national interests may be at risk from any sudden disruption to oil supplies or trade routes.

On Tuesday, Xi urged countries in the region to respect each other’s sovereignty, calling for dialogue to resolve the “complicated and deep-rooted situations in the Middle East”.

Ding Long, a professor at the University of International Business and Economics in Beijing, said China could take a larger role in the region.

“Compared with the traditional powers that have a long history in the Middle East, China can play a bigger role to support economic development – which could also benefit countries seeking to diversify or rebuild their industries,” Ding said.

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Beijing has long promoted the idea that economic development is vital to advance and bring peace to the troubled region. But there have been growing calls for China to go beyond financial support since former US president Barack Obama in 2014 accused Beijing of being a global “free rider” by avoiding the fight against terrorism in the Middle East.

Joost Hiltermann, programme director for the Middle East and North Africa with the International Crisis Group, said Beijing had gained from its economic role in the region and while it was reluctant to get involved in politics there, it would have to at some stage.

“Eventually, China will have little choice but to engage politically as well, especially if a security vacuum in the Middle East threatens its commercial interests and investments,” Hiltermann said. “It would find this very challenging … because it will force Beijing to make difficult political choices and make not just friends, but also enemies.”

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