China deepens ties with UAE with industrial Investment

East Hope Group, one of China’s largest companies, announced last May that it is considering a $10 billion investment in Khalifa Industrial Zone Abu Dhabi (KIZAD). This comes on the heels of several major Chinese investments in KIZAD over the last two years and underscores the deepening ties between China and the United Arab Emirates (UAE).

Emirate leaders have been looking in China’s direction as they diversify their relations with global powers, while from the Chinese side, its Middle East presence is growing through its ambitious Belt and Road Initiative (BRI). The UAE increasingly looks like the load-bearing pillar of China’s Middle East policy, and the expansion of China’s role in KIZAD indicates that Abu Dhabi is considered a pivot city in the BRI.

The proposed East Hope investment would be implemented in three stages over 15 years. It would begin with an alumina facility, then a red-mud research center and recycling project would follow. The final phase would be large upstream and downstream facilities to process non-ferrous metals. Both East Hope and Emirates Global Aluminum (EGA) are among the world’s largest aluminum producers. Abu Dhabi’s sovereign wealth fund Mubadala, which jointly owns EGA, has partnered with Chinese institutions in a joint investment fund with the aim of capitalizing projects in the UAE and China that support the BRI and Abu Dhabi 2030, the emirate’s development plan. East Hope’s chief executive officer Liu Yongxin explicitly linked the project with Beijing’s BRI ambitions, stating it “will become the benchmarking project along the BRI between China and the UAE.”

The BRI is China’s signature foreign policy initiative, a series of hard and soft infrastructure projects stretching across Eurasia and the Indian Ocean region. As a larger number of states agree to link their domestic infrastructure needs to China’s BRI, Beijing’s interests are expanding far beyond its traditional sphere of influence, and several states and regions are taking on a new significance in China’s foreign policy. The Middle East is one of these, and the UAE is among its more important partnering states.

The China-UAE relationship has deepened significantly in recent years. A state visit from President Xi Jinping last summer was used to upgrade the relationship to a comprehensive strategic partnership, China’s highest level of diplomatic relations. Shortly afterward, the UAE appointed Khaldoon bin Mubarak, CEO of Mubadala, as a presidential special envoy to China, the first such appointment the emirates has made. Economic relations have flourished, with bilateral trade growing from $17 billion in 2010 to nearly $60 billion in 2017. There is a substantial Chinese community in Dubai, between 200,000 to 300,000, with over 4,000 Chinese-owned businesses operating there. Chinese state-owned enterprises and multinationals have established a deep presence in Jebel Ali Free Zone (JAFZA), servicing contracts throughout the Arabian Peninsula and broader Middle East. And Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum recently represented the UAE at the recent Belt and Road Forum in Beijing, where $3.4 billion in deals were signed between Dubai and Chinese firms.