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Perspectives: China - Middle East connectivity
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The Middle East – China corridor is entering a new era of economic partnership, focused on capital, talent, technology and new energy. Simon Williams, Chief Economist, CEEMEA Economist, HSBC and Ben Simpfendorfer, Asia Pacific Lead, Oliver Wyman Forum and Partner Oliver Wyman delve into this transformation in the latest HSBC Perspectives episode.
This episode was recorded on the sidelines of HSBC’s 12th Annual China Conference in Shenzhen on 1 September 2025.
Disclaimer: Views of external guest speakers do not represent those of HSBC.
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Transcript
Introduction to HSBC Global Viewpoint Podcast
00:00:00
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:12
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now onto today's show.
Meet the Economists: Simon Williams and Ben Simpferdorfer
00:00:21
Speaker
Welcome to another episode of HSBC's Perspective series. My name is Simon Williams and I'm the Chief Economist for HSBC Middle East. And I'm delighted and to be talking to Ben Simpferdorfer, Chief Economist for Oliver Wyman.
00:00:35
Speaker
I'm covering the APEC region. Ben, You and I have known each other since we both lived in Damascus back in the day. You're still the only Westerner and I know is fluent in Arabic and in Mandarin.
Middle East-Asia Economic Evolution
00:00:47
Speaker
You wrote the first ever serious book I read about no growth in the new Silk Road, that relationship um between the Middle East and Asia.
00:00:57
Speaker
For those that haven't been following um that dynamic as closely or for as long, As you have, can you sketch out for us what's happening in that economic relationship, how you're seeing those ties between Asia and the Middle East develop?
00:01:09
Speaker
Well, it's a super exciting relationship, but it has 20-year roots. So China rediscovered the Middle East back in around about 2005, 2000. ah China entered the World Trade Organization, all of a sudden started to do it export huge amounts of consumer goods that the Middle East wanted.
00:01:25
Speaker
And the Middle East had cash to spend because oil prices hit record highs. And so that too, all of a sudden, rediscover each other, commercial ties grew closer. But it was mainly about consumer goods and oil. The last five years has seen a dramatic change. Call it phase two, if you like.
00:01:40
Speaker
We've moved beyond goods into the exchange of capital, talent, technology, um the non-oil diversification strategies of the the Middle East, but the the Gulf states in particular, have just opened up a whole new range of sectors for Chinese companies to to get involved.
00:01:57
Speaker
um And it's taken the relationship to a new level. Can you put some numbers around that? Perhaps just give a sense of, I'm very aware that the strong government to government backing for this economic relationship, it feels like a relationship that's kind of coming of age.
00:02:12
Speaker
It is. So look, trade has gone from 20 billion to 100 billion. ah It's um ah you know a powerful dynamic in its own right. But you look at private private market deals. Over the last 18 months, we've seen nearly 60 deals that's had either a China or Middle East ah partner on at least one side.
00:02:30
Speaker
you know Everything from capital injection and into cool-up. a UAE startup, you had Legend Capital, you had Bombardler involved. um but But equally, you know, just the number of flight connections between the two regions. You can fly ah direct from Dubai to any number of Chinese cities now. So a lot of change.
00:02:50
Speaker
it's people flows, trade flows, capital flows. And again, that that government framework as well feels really important. It does feel like there's strong buying from from both both sides for this relationship
Geopolitical Dynamics and Economic Strategies
00:03:02
Speaker
developing further. Yeah, it it does. And it's a piece of people often miss. So over the last three years, I'm meeting regularly with government officials, with with regulators, with association heads who aren't just traveling once a year to the region. They're there every quarter. Some of them are there every month.
00:03:17
Speaker
Hong Kong Exchange just signed a recent agreement ah with the Saudi Arabia's Tadawil, the local stock exchange market, to do to do more dual listing between the two markets. Hong Kong's HKMA signed an agreement with UAE's central bank around recognition of um sort of cross capital flows between um the ah debt markets.
00:03:39
Speaker
And it is that constant exchange is building the the infrastructure that allows the private sector to start to get involved. ah Something I'm very conscious of, I think, about the delegations that we receive and in Dubai, not just um the seniority those delegations that are visiting, but also the know the expertise um that I have.
00:03:58
Speaker
in what's going on, the number of calls that I now have with institutions in Asia looking to invest in Middle East financial markets as well as the as is is as the FDI. um The politics, um though, the that the surround this, now i don't want to get drawn into the the broad geopolitical and discussion, but obviously the Middle East has got close to security relations um with the US. Those tensions between the US and China are running deep. yet I've heard you I argued before that actually that that shift in the and the global backdrop was an accelerant rather than an impediment um to that deepening economic relationship.
00:04:31
Speaker
Well, is indeed. Look, US-China relations are clearly tense at the moment. It's harder than ever for Chinese entrepreneurs, companies to put money to work in the US. So they're looking for alternatives. the The Middle East is a natural alternative. The GCC at the moment, again, because of the amounts of money that are flowing into that non-oil diversification program,
00:04:49
Speaker
Saudi Arabia's Vision 2030 being an obvious example, opening up ah new opportunities for Chinese firms ah that may not have existed previously because those same firms would have been looking at deals in the U.S. instead. So it it has acted as an accelerant.
00:05:05
Speaker
But equally, China doesn't have military ambitions in the region, and not to the degree, say, that the U.S. does in terms of stationing troops and and similar. And so there's there's less opportunity, if you like, for conflict around that particular subject.
Energy Trade and Opportunities
00:05:18
Speaker
And a big part of the Middle East story, certainly the last my last year or so, has been its ability ah to navigate those political divides, to maintain good relations with the US and with China and with Russia and Europe too.
00:05:30
Speaker
If we could look at some of the you know the specifics, the sectors, where ah you've you've you've seen... um There's increase in trade flows and in capital flows um as as well.
00:05:41
Speaker
Energy is one that I've heard you you you talk about. she's and midday i China in particular like as the destination for so much of the region's hydrocarbon um x exports, but China also leading on renewables.
00:05:53
Speaker
um develop How do those two two dynamics fit together? It feels like they don't. yet they They do quite well. Look, China will remain a big buyer of energy from from the Middle East. um And that, in turn, is is driving deals. So you see ah Chinese players involved in ah the Jebel refineries in Saudi Arabia. Equally, their Kuwait ah petroleum company recently made an acquisition, released a share of a Chinese chemical company, Wanhua.
00:06:20
Speaker
ah So the the the conventional sector, at least, there is a lot of a lot of money that's still ah flowing between the two countries and deals that are being done. But as you say, both regions have ambitions to develop their renewables sector. China is a leader in clean energy ah production.
00:06:37
Speaker
It produces or accounts for between 40 to nearly 100 percent of man global manufacturing capacity of a range of clean energy ah products. These are products that Saudi Arabia wants.
00:06:49
Speaker
ah So if you ah if you are ah working at the Oxagon project in Saudi Arabia, this is the leading industrial project, part of the bigger Neon Giga project, you'd be seeing a delivery of enormous wind turbines, 100 meter longs, 250 of them arriving over a period of two years.
00:07:09
Speaker
They all come from China. ah So that, at the same time, is ah ah drawing them ah the two countries closer together ah in terms of where future energy sources lie. But ah don't despite the pace of that renewables development in China, China's got to stay a big market for Middle Eastern and oil exp exports.
00:07:28
Speaker
ah Absolutely. so China will remain fundamental.
Emerging Sectors: Advanced Materials and Biopharma
00:07:31
Speaker
So even as China transitions towards clean energy sources, ah it ah needs oil, not just as an energy source, but just in terms of its its manufacturing inputs. Don't forget, it's 40% of the world's manufacturing capacity.
00:07:45
Speaker
ah That's an enormous source of oil demand ah and will underpin the relationship. Obviously, a huge focus in the Middle East on technology, technological development. The Middle East determined and to be at the cutting edge, not just using cutting edge technology, but increasingly producing its owners as as as well.
00:08:01
Speaker
It has a more complex ah relationship because of the julie geopolitical backdrop. Can you talk us through what you're what you're seeing there? So ah there's lots of opportunities for them in in certain sectors.
00:08:13
Speaker
ah So let's say advanced material development, where I know Saudi Aramco, for instance, is invested into R&D facilities here in China. ah Equally, biopharma is another opportunity ah for the two markets.
00:08:26
Speaker
I was recently in Riyadh at the um ah the garage, a hardware accelerator startup, probably well known to yourself, sitting next to ah a Chinese biopharma entrepreneur who has facilities here in China, is looking to build a second facility outside the country, not the US, s of course, because of geopolitics and is exploring Saudi Arabia as an opportunity.
00:08:47
Speaker
You can imagine a world where ah the R&D conducted in Saudi Arabia by the giant Chinese biopharmaceutical group could then export vaccines or other products into Africa or into regional markets. So that's exciting.
00:09:02
Speaker
Where it's challenging is around topics like artificial intelligence. And clearly that is a subject the U.S. sees as the national security issue. And we'll find it perhaps challenging to see Middle East players ah using, deploying Chinese ah AI and could cause tension.
00:09:19
Speaker
Particularly back to that point you made about yeah Middle East is ah as an export um point, d and the the idea of the economic diversification program, a lot of it is in its simplest form, and Middle East going from being a a consumer of got goods to being a producer of many of these items, both for domestic use and for um for exporters.
00:09:38
Speaker
as well. How successful is the Middle East being in drawing um Chinese firms, Asian firms as a whole into their diversification strategy? And yeah how much substance is the idea of the the Middle East as an export point um for but for Africa for um to to draw it more fully ah into global supply chains?
Middle East as a Strategic Export Hub
00:09:58
Speaker
So there's huge opportunity, but it's still very early days. So investments are going in, but more often they're targeting the local market. Where the Middle East could perhaps ah play a stronger hand is selling itself as a platform to the rest of the region.
00:10:13
Speaker
Selling itself as a platform for Chinese manufacturers that not only want to set up export ah manufacturing capacity, but also after-sales service. So putting engineers on hand so that when you do sell products ah into North Africa or other regions,
00:10:28
Speaker
and then you can follow up with your after-sales service. You can follow up with your your business development people ah using the region as a headquarter. mean, don't forget that a six-hour flight from the GCC lie 800 cities with a billion-person population and $8 trillion dollars worth of GDP. That is an enormous prize for Chinese companies that they're not yet fully capturing yet.
Special Economic Ties: UAE-India & Saudi-China
00:10:50
Speaker
Absolutely. In a time when you know certain areas of China's economy are are slowing to have market expanding in the way in which the the GCC is and offering the kind of ah new productive opportunities that it represents, that's clearly compelling. Can just touch on some of the country-specific issues? Always trying to that there are two ah quite special relationships between the Middle East and Asia, between the UAE and India, and between Saudi Arabia and and China. don't know if you agree and With that, um or if it could perhaps so sketch out the broader the portal landscape on on a country on a country level. Absolutely. So the the India's relationship with the Middle East is too often overlooked um because ah the China's relationship seems so overwhelming at this point.
00:11:35
Speaker
And yet the historical ties between the two countries are much stronger. u e UAE has a, you can correct me, an 8 million population. ah But the Indian Ministry for Foreign Affairs just the other day said there's three and a half million Indian nationals in the UAE.
00:11:50
Speaker
ah The UAE is one of India's biggest foreign investors. Where are many of those and investments coming from? Often from Indian-owned businesses. As supply chains shift and de-risk away from China, India is a natural destination for many manufacturers.
00:12:03
Speaker
and That creates opportunities for the big UEA players, whether it's DP World or ah some of the other developers of industrial parks, to look at opportunities ah in India. So those ties will only strengthen.
00:12:16
Speaker
And between China and Saudi, perhaps more broadly, and the ASEAN economies are ah very very much in your your focus when you're looking at the the Middle East. So ASEAN should be a natural destination.
00:12:28
Speaker
Many of them are Muslim economies. Many of them have a ah shared history with the Middle East, whether that's in terms of trade or even thinking about pilgrimage tourism. ah certainly. ah the The GCC, UAE and Saudi Arabia in particular have been exploring opportunities in Indonesia.
00:12:44
Speaker
ah There are some some real viable opportunities there. DP World is is very active across the region, has nearly 18 ports across Southeast Asia. ah But but there's there's more work to be done.
Egypt's Strategic Role in Middle East-Asia Relations
00:12:56
Speaker
i think ah perhaps there's been a degree of um perhaps over-indexing on China and perhaps there needs to be a little bit more rebalancing back into ASEAN and given its large domestic markets but also to be fair some quite exciting technology technology startups and and egypt i mean all the focus is about you know the relationship relationships developing with the with with the gulf but the potential that egypt represents given its economic like given its geographical location and points at its economic development cycle suez uh canal where does egypt uh fit in um to that that new silk road of yours Egypt is super exciting for a number of reasons. Chinese construction companies have had a long presence there, still very active, of course, as ah you would certainly know better than I, building out the new administrative capital that I know you've visited on a number of occasions.
00:13:45
Speaker
ah But equally, Chinese manufacturers have a strong presence. I was chatting with the regional managing director for one of ah China's biggest appliance manufacturers the other day, ah they've just opened up a factory in Egypt.
00:13:57
Speaker
ah Why? Because of the country's FTA with ah the rest of of Africa. The ability to export product into neighboring markets, ah but also and the fact the engineering talent is readily readily accept accessible.
00:14:11
Speaker
ah Some of the big ah Chinese social media companies many of us use every day, buy products from every day, ah they have ah software engineers based in Cairo, again, because the talent is is readily accessible.
00:14:23
Speaker
So ah the China-Egypt relationship, again, ah super exciting, often overlooked because it's a little bit less
Navigating Complex Middle East-Asia Markets
00:14:30
Speaker
flashy. There are perhaps fewer conferences, but there's a lot happening on the ground. Absolutely.
00:14:34
Speaker
you've been following this story for but for for a long time and you're talking about the potential and and what lies i ahead. But that does make it clear that it hasn't already already happened. It hasn't been realised. Why is it taking time for this potential to be to be fulfilled? What the challenges that still need to be to be overcome um for this relationship to become? all that it it should be for that integration to to really deepen?
00:14:58
Speaker
So as there is a long way to go um for a number of reasons. so The first is that um it is um it is a ah complex ah complex relationship. We're talking about multiple countries ah rather than a single market such as the US s or the the EU. right So it means...
00:15:15
Speaker
For a company, Chinese company, moving into ah the region for the first time, opening up a headquarter in Dubai, they're then having to develop business across two, three, four, five markets ah within multiple time zones. so it it does take time.
00:15:29
Speaker
But the real opportunity is in the partnerships and the platform. So it's, for instance, I meant talking about BioPharma earlier. It's a Chinese biopharmaceutical ah player tying up with ah a Saudi Arabian maybe venture capital fund or other, setting up facilities in the kingdom and then exporting that product into third markets.
00:15:51
Speaker
could be Algeria. it could be It could be Nigeria. ah That is an exciting proposition, but it's also a complex proposition. It's not straightforward to build those sorts of structures, ah but they will come.
00:16:04
Speaker
And they are super exciting. In many respects, they up ah best echo the old school Silk Road trading format. Maybe that's the world we're moving towards. Perhaps so as a closing thought, what's the the the key advice um that you would give and to to new entrants to these these markets on um ah both sides.
00:16:24
Speaker
So it's all about building relationships, finding the right partners. ah So we co-host with the World Economic Forum a series of China GCC roundtables. We've held them in Davos, in Riyadh, in Tianjin.
00:16:38
Speaker
the the The CEOs, many of them who'd be familiar names to you, ah emphasize that again and again and again. It will take time. It's all about building bridges. It's all about building trust. ah But we may also be surprised how quickly we move on from that.
00:16:53
Speaker
These conversations have pivoted surprisingly quickly towards let's get deals done. Now we've got the right partner. Let's move forward. ah So hopefully over the next ah few years, we're going to see rapid change. But if that was the one message I'd leave you with, it's you've got to be on the ground.
Conclusion and Listener Invitation
00:17:08
Speaker
You've got to be building relationships. Ben, thank you very much indeed. Pleasure. Thank you for joining us at HSBC Global Viewpoint. We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.