Warmer-than-ever China-Saudi ties offer Hong Kong a golden opportunity – if the city does its homework

Fast-changing Saudi Arabia is eager for foreign capital, including from Hong Kong. But the city needs to do its homework to enter a crowded market
Hong Kong should reach out to its citizens in the Middle East who have the experience, connections and expertise to build trust and spur investments

Tammy Tam

Published: 10:30am, 20 May 2023

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For decades, mainland China, the United States, Europe and major Asean countries have been the preferred investment destinations for Hong Kong businesses. But amid escalating China-US rivalry and intensifying geopolitical complexity, traditional market wisdom is being challenged. Hong Kong has come to realise the investment potential in a vast, yet less-explored, new world: the Middle East, with especially the fast-changing kingdom of Saudi Arabia in focus.

That provided the backdrop for when I recently joined a local business delegation led by tycoon Ronnie Chan, chairman of the non-profit Better Hong Kong Foundation, on a fact-finding and exchange visit to the country.

It turned out to be an eye-opening and thought-provoking experience. The many first-hand insights from senior Saudi officials, business leaders and academics should provide plenty of food for thought if Hong Kong wants to catch up in this competitive market.

The “go Saudi” journey for Hong Kong investors is still in its infancy – “go see and explore” would be a better way of summing up the sentiment of the business elite. They have extensive overseas investment experience, but Saudi Arabia is still virtually unexplored territory to them.

An aerial view of Riyadh, the Saudi capital. The historically Washington-friendly Saudis impressed the world with their diplomatic skills. Photo: Shutterstock

Until this visit, none had set foot in that part of the world except Chan, who already has good connections there. But taking into account his last visit was more than 10 years ago, he reminded everyone that this was not a trip to “make deals” but to “learn”.

There are good reasons why Hong Kong businesses are becoming more interested in the Middle East.

By giving Chinese President Xi Jinping a grand welcome in December last year and signing a comprehensive strategic partnership agreement with Beijing, including a plan to allow market access to US- sanctioned Chinese telecoms giant Huawei, the historically Washington-friendly Saudis impressed the world with their diplomatic skills. They navigated the delicate Saudi-China-US triangle of relations by showcasing their warmer-than-ever bilateral ties with Beijing.

Hong Kong did not miss the opportunity. In February, the city’s leader, Chief Executive John Lee Ka-chiu, under US sanctions for his crackdown on the 2019 anti-government protests, made Saudi Arabia and the United Arab Emirates the stops on his first official overseas trip. He took along dozens of senior officials and business representatives, vowing to diversify Hong Kong’s post-Covid economy by embracing the Middle East.

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It was also a defiant gesture to Washington that its unilateral sanctions would not stop him from reaching out to other parts of the world.

Much of the media spotlight then was on Hong Kong’s wish to bring in Aramco to have the world’s biggest oil giant’s second listing in the city. However, it is understood that this is not going to happen any time soon due to complicated factors beyond Hong Kong’s control, despite the best intentions on both sides.

There is no denying Saudi Arabia’s quest for overseas capital, including from Hong Kong. However, major projects in the kingdom are basically government driven, and besides mainland China, the US, Japan, Singapore and South Korea are also major investors there. So what edge would the mostly privately owned Hong Kong business sector have?

Going and seeing for oneself is a must, as is avoiding stereotypical perceptions.

Pleasant surprises

Delegation members were given a list of “dos” and “don’ts” before the trip – for women, one of the “must take” items was a scarf. I took along three, having been advised to cover my head whenever out in public, not just when entering a mosque.

The scarf did help, but mainly for sheltering me from the scorching sun – not for meetings with officials or business leaders, or when walking outdoors. I saw no sign of those “religious police” either, at least not in the capital Riyadh.

Instead, one pleasant surprise was to find children on the streets speaking simple Mandarin, thanks to Crown Prince Mohammed bin Salman’s decision to introduce it as a “language of great impact”, as he put it, into the public school curriculum in 2019.

Saudi Arabia’s Minister of Investment Khalid bin Abdulaziz al-Falih (right) said investment from Hong Kong could be a good fit for the kingdom. Photo: Handout

Things are changing fast in the country, as we heard from many locals. It is “young” because two-thirds of its population are under the age of 35, and it is “ambitious” because it is well aware of the need to “save for rainy days”. This is where the US$100 billion “Vision 2030”, a mega project initiated by the Saudi leader, comes in, aiming to reduce overreliance on one single product in oil, as well as to build smart cities to create about 3 million quality jobs and improve people’s livelihoods.

To achieve these goals, the oil-rich country says it still needs more foreign direct investment in technology, advanced financial services, healthcare, recreation and tourism, to name just a few key areas. Hong Kong investment can be a good fit in this regard, Saudi Arabia’s Minister of Investment Khalid bin Abdulaziz al-Falih told the delegation.

One step can be taken immediately: tap into the brains of Hong Kong talent already in Saudi Arabia

Officials spoke fondly of Chief Executive Lee’s visit, and also encouraged group members on the trip, including well-known developer Ronnie Chan, to consider Saudi Arabia for investment.

This brings up a practical issue for Hong Kong’s government: what would be a timely approach to make it easier for local businesses to venture into this relatively less-known market?

Unlike mainland China’s investment in the Middle East, which is dominated by state-owned enterprises, the Hong Kong business sector will find itself largely on its own.

Tapping talent overseas

One can argue that the Hong Kong government set up a trade office in Dubai, in the neighbouring UAE, in 2021. Yet that country was a much more well-developed market compared with Saudi Arabia, which is now playing catch-up.

Should the Hong Kong government go the extra mile to open a branch in Riyadh, or Jeddah – the “Saudi Shanghai” – to provide better on-the-ground services? When Saudi schools are teaching Chinese, how much is known in Hong Kong about Arab law, regulations and culture – especially regarding Saudi investment policies and unique Islamic financial rules?

Even if there are no immediate satisfactory answers for the above questions, one step can be taken immediately: tap into the brains of Hong Kong talent already in Saudi Arabia.

One highlight of our trip was meeting Professor Tony Chan, president of King Abdullah University of Science and Technology (KAUST), who embarked on his Saudi journey five years ago, after completing his presidency at the Hong Kong University of Science and Technology.

‘Breathtaking’ plans for Hong Kong to help link Middle East, Greater Bay Area

Professor Chan proudly told us of another Hong Kong scientist joining his senior team. And riding on President Xi’s successful Saudi visit, he recently led a KAUST team to Shenzhen to discuss Saudi-Greater Bay Area scientific and educational cooperation. He is now expecting his counterparts’ return visit soon.

Hong Kong should proactively reach out to both parties to avoid being left out of this partnership. Chan and his faculty members, including those from the mainland and Hong Kong, are the best go-to people for help, and for enhancing Hong Kong’s role in connecting the Middle East with the Greater Bay Area.

Saudi authorities are serious about Hong Kong. Its investment minister is planning a visit to the city. As a relative latecomer to the Middle East, building mutual trust is crucial. Trust means confidence in, and honesty towards, each other.

The cordial China-Saudi relationship is a bonus, but not something Hong Kong should take for granted for a smooth entry into this already crowded market. This city has to do more serious homework of its own.

Tammy Tam is the editor-in-chief of the Post