Beijing, recently, has been increasing its investment into the Middle Eastern and Arab nations. China has been deepening their economic ties through billion-dollar contracts for construction projects and energy deals. Iraq has been a large part of China’s strong shift in engagement to the region, even if their overall foreign investment has been going down. An example of this was last year when China secured a $10.5 billion construction deal with Iraq.
A report by the Green Finance & Development Centre at Fudan University in Shanghai showed that the Chinese Ministry of Commerce’s five-year budget between 2021 to 2025 promised investment overseas, including non-BRI projects, of $550bn. However, this is down 25 per cent from $740bn in 2016-2021.
Interestingly, however, China’s engagement with Arab and Middle East states has increased enormously. The level of construction investments increased by around 360%, with this being mostly in energy and transport infrastructure. The director of the report, Christoph Nedopil Wang said that he was surprised by the fact that more investment was being shifted to the Middle East and in particular Iraq as he believed that China would be looking to expand its investments into south-east Asia.
It seems as though China is looking to improve its economic ties to the Middle East as the US is perceived to be more absent in dealing with matters to do with these states. Arab leaders’ feelings of disengagement from the US has possibly led China to fill a void in helping these states with their development. Memorably, in the summer of last year, the unilateral decision of the USA to remove its military forces in Afghanistan led to the Taliban re-emerging as the leaders of this troubled country, which is now facing one of the world’s worst humanitarian crises in history. In addition to this, the US had also announced their end of combat operations in Iraq last year. Although there still remain 2,500 US troops in the region, they are only there in a training and advisory capacity. These notable examples show how the US is possibly disengaging from the region, in which it has had troubles for decades and significant amounts of involvement and investment have led to frustrating results. Meanwhile, Arab states are expanding and strengthening their economic ties with the world’s second-largest economy. China’s largest supplier of energy is from the region, however, these states are now also getting more access to Chinese technology. This mutually beneficial relationship is showing an increased level of interdependence from both sides.
China has especially invested in Iraq. This is the second-largest oil-producing nation in the OPEC group and China’s third-largest supplier of oil. This shows the significance of this relationship to China, in terms of their energy security. Iraq is also very grateful for the investment as they try to upgrade their deteriorating infrastructure. Western firms have shown a reluctance to invest in the country due to the political instability as well as the presence of conflict.
Written by Florian Mihindukulasuriya Thiserage