Irshad Salim — Saudi Arabia and China’s recently announced plan to launch a joint $20 billion investment fund comes as the Kingdom is eager to regain its former top spot as China’s biggest oil supplier – it was overtaken by Russia last year, analysts say. China is also the Arab nation’s biggest trading partner, with bilateral trade reaching US$42.36 billion last year. There’s also enough synergy to undertake bilateral investments, and Joint Ventures –both in dollars and in Yuan, while at the same time seeking assured-oil-demand-assured-oil-supply equation, they said.
Saudi Energy Minister Khalid Al-Falih said the two countries would evenly share the costs and profits of the fund, which would invest in infrastructure, energy, mining and materials in the Kingdom.
In addition to the investment fund, Saudi Arabia, and China have agreed to some $60 billion in other joint ventures in the two countries.
“Saudi Arabia aspires to be the biggest investor in the sector of refining petrochemicals in the Chinese market, and there will be a big development in this field,” al-Falih said, according to Arab News.
“There is a strategic partnership between the two countries,” he said.
These new ventures follow similar agreements made in March when King Salman traveled to China. At the time, $65 billion in business ventures were signed by both countries, in areas ranging from energy to space technology.
China has sought to expand its influence in the Middle East, including lobbying for support of its “Belt and Road Initiative” of infrastructure projects across Asia, the Middle East, and Europe. And the Kingdom has reportedly shown interest.
Timo Kivimäki, professor of international relations at the University of Bath, said China had tried to convince neighbours and energy-producing nations that economic cooperation would be useful.
“Oil producers and many neighboring countries see cooperation with China in a very positive light, and partly this is related to the failure of US soft power in the countries that China sees as a priority,” Kivimäki said.
“China has power within [the] sphere of economic influence, and to some extent Saudi Arabia is now entering this sphere.”
Riyadh is also eager to boost the profits of its main sovereign wealth fund, the Public Investment Fund, which is believed to have around $180 billion of assets. The PIF is looking at investment opportunities in China’s shipping and transport systems and other infrastructure.
The Kingdom’s Public Investment Fund is also investing $45 billion in Japan-based Soft Bank’s $100 billion Vision Fund which over the next five years will invest toward what the company calls the information revolution.
The Vision Fund has subsequently been writing enormous checks for startups, according to reports, helping the SoftBank Group and Saudi Arabia expand their influence in the tech world.