With the continuous upgrading of China's manufacturing, photovoltaic, energy storage, electric vehicles and other ‘new three’ have also begun to go to the Middle East, and with the help of Dubai, the trade centre of the Middle East, radiating to the Middle East, Africa and the North Caucasus region.
The Middle East is becoming a new hotspot for Chinese enterprises going overseas:
Today, when the geopolitical situation is becoming more and more complicated and increasingly affecting the direction of international trade, some Middle Eastern countries, because of their relatively neutral stance, have become a favourable factor attracting Chinese enterprises going overseas. Middle Eastern countries are trying to get rid of their dependence on oil and gas resources and realize economic transformation, which brings Chinese enterprises a market that cannot be ignored.
‘Several Chinese people come every week to enquire about the Dubai market, and China is also our main member trading partner.’ Mohammad Al Kamali, Chief Operating Officer, Manufacturing & Export Development, Dubai Economic Tourism (DET), May 2024 .Dubai is the largest city in the United Arab Emirates and the capital of the Emirate of Dubai, one of the country's seven emirates. As a logistics and trade centre connecting East and West, Dubai covers markets in the Middle East, Africa, South Asia and even Europe, and it has become the first stop for many Chinese companies going to the Middle East.
Chinese companies going to Dubai were initially infrastructure and foreign trade central enterprises. After China's accession to the WTO, Dubai's Dragon Mart opened in 2004 on the outskirts of Dubai, and over the past 20 years it has become a distribution centre for Chinese commodities in the Middle East, driving a large number of private enterprises to go out to sea for trade, and the Chinatown in which the Dragon Mart is located is home to about 100,000 Chinese, accounting for about a quarter of the Chinese in the UAE. Energy storage, photovoltaic and electric vehicles are also starting to go to the Middle East, and with the help of Dubai, the trade centre of the Middle East, they are covering to the Middle East, Africa, Central Asia and the North Caucasus.
While product exports are being upgraded, capacity going overseas is the new focus of this round of Chinese companies going overseas, and Dubai is facing competition with Riyadh, the capital of the Kingdom of Saudi Arabia, which is the largest and most populous country on the Arabian Peninsula.In 2016, Saudi Arabia launched its Vision 2030 transformation plan, which sets out transformation targets for investment on a huge scale. Saudi Arabia is also using the market created by this plan to direct foreign investment to build factories in the country, which would otherwise struggle to secure government orders.
Dubai's open business environment, with an international logistics centre and relatively convenient visa policies, has led many multinational companies to use it as a regional decision-making and sales centre covering the Middle East, Africa and Central Asia. However, in terms of landing and building factories to create local production capacity, Saudi Arabia has a more comprehensive policy in conjunction with its own market, and Dubai and Riyadh have begun to form a competition.
Dubai or Riyadh as a base camp to develop the Middle East market, Chinese companies still need to choose carefully.
Upgrading from Small Commodities to Three New Types of Products
Chen Zhi hua, President of UAE China Digital Innovation Association, has been doing foreign trade business in the UAE for more than 20 years, and he is also developing Guangshen Wisdom Plaza in Longcheng Mall Phase II. He explained that before 2000, export trade was dominated by state-owned centralized enterprises. After China's accession to the World Trade Organization (WTO), private enterprises were encouraged to do foreign trade business, and a large number of enterprises went overseas to set up shops.
In 2004, Dubai Dragon City Mall opened, which not only has local wholesale and retail, but also re-export trade, gradually becoming a distribution centre for overseas Chinese goods. ‘Logistics and re-export trade are its core competitiveness.’ Chen Zhi hua said that Dubai has developed information, logistics, people and capital flows, and the local exhibition industry is also very developed, and dealers from neighbouring countries come here to make purchases.
Today, there are thousands of Chinese businesses in Dragon City Mall, a collection of small shop stalls selling electronic products, home appliances, lighting, building materials, clothing and other types of small goods. There are about 400 Chinese restaurants in the vicinity of Dragon City Mall alone, and with about 100,000 Chinese operating in the area, accounting for about a quarter of the total number of Chinese in the UAE, a sizeable Chinese community has formed there.It is not too easy to see Chinese people in the shops of Dragon City Mall, and the shopkeepers are mostly employees of Indian and Pakistani origin, who earn a basic monthly salary of about 2,000 to 3,000 dirhams (AED, about RMB 4,000 to 6,000), with a commission based on sales. ‘It's cheaper to employ people here than at home, and Chinese people are paid so well here that a Chinese person's salary can support three foreigners.’ Han Zhenli, who runs a two-wheeled electric car business in Dubai, said. He now has a number of shops in Dragon City Mall and relies on domestic factories for supplies. ‘I don't want to do business in China, the country is too rolled up and too hard.’ Han Zhenli lamented.
Dragon City Mall is typical of Chinese traders going overseas in the past, and new companies going overseas are already deep in Dubai.Established in 1965, the Dubai Chamber of Commerce now has more than 5,000 Chinese companies as members, and the President and CEO (Chief Executive Officer) of the Dubai Chamber of CommerceMohammad Ali Rashed Lootah, President and CEO (CEO) of the Dubai Chamber, said that many Chinese investors are involved in trade, and that recently there has been an increase in enquiries from Chinese digital companies, with e-commerce growing rapidly and companies like Shein, Temu have a significant local market share. He also explained that the Chamber is also receiving more and more enquiries from financial technology companies (Fintech) and more and more enquiries from asset management funds.
More representative new changes come from emerging industries such as photovoltaics and electric vehicles.PV leader LONGi Green Energy 2022 has set up an office in Dubai, and now has more than 30 employees, including both Chinese expatriates in the fields of sales, products, delivery, business, legal, finance, marketing and other areas, and also locally recruited employees from Pakistan, Lebanon, Jordan, Africa and other countries and regions. Liu Xiaoxi, head of strategic marketing department of LONGi Green Energy's Middle East and Africa region department, introduced that the Dubai office covers the whole Middle East, Africa, Asia, Pakistan and the three countries of North Caucasus. Dubai is politically stable, with an open economic and cultural environment, perfect port logistics facilities and free trade. Most of the Middle Eastern countries have set the goal of green transformation, and with excellent light resources, the development of large dissipation power, and most of the Chinese-funded engineering turnkey companies (EPC) are also located in Dubai. Taking all these factors into consideration, LONGi decided to locate its regional decision centre in Dubai to be more accessible to its customers.
China's automotive industry has been growing rapidly in the last two years and has also gained a stronger presence in the Middle East. Traders have gone from parallel importing Middle Eastern cars to sell in China in the past to parallel exporting domestically produced cars to sell in the Middle East today. Parallel import and export is a trade method where traders buy cars in the car market on their own for import and export without the authorization of the brand owner.
Behind the change in trade trends is an increase in China's automotive manufacturing capacity. These include both foreign brands manufactured in China and an increasing number of local Chinese brands. Legend Cars is the largest Chinese car trader in Dubai, and the Legend Holdings Group, to which it belongs, has been engaged in trade in the UAE for more than a decade. Legend shares group commercial head Ma Qian said, the company Before 2019 is mainly to do parallel imports. 2020, Legend began to contact with domestic car companies to talk about export trade, with the outbreak of China's new energy vehicles, the business has also achieved explosive growth. Ma Qian said, ‘Caught up with the momentum of the rise of China's auto industry.’ Today, Legend sells more than 10,000 cars a year, of which Chinese brands account for about 90 per cent, parallel exports to Dubai and re-exports to neighbouring markets, of which oil cars and trams basically account for half, and the remaining 10 per cent will be Toyota and other foreign brands parallel imported to the country.
The car companies themselves are also strengthening their presence in the region. Festival City Plaza, in the heart of Dubai's business district, where BYD has opened a flagship shop. BYD's local dealer is the UAE family-owned AI-Futtaim Group, which is also the distributor for Dubai's favourite car brand, Toyota, and was ranked second in Forbes' list of the 100 most influential Middle Eastern family-owned companies released in March this year.
Going to Dubai or Riyadh?
Whether to go to Dubai or Riyadh is a question that every business going to the Middle East needs to consider.
Lin Wei, Director of Overseas Strategic Investment of a manufacturing group responsible for local manufacturing and joint venture projects in the Middle East, analysed that if the company's main source of business is the government or government-related projects, it needs to move to Saudi Arabia. If the company's main focus is on the consumer market, Dubai is more advantageous, and work visas in Dubai are better than those in Saudi Arabia. There is also the option of setting up a regional headquarters in Saudi Arabia and placing the decision centre in Dubai. The group's decision-making centre for the Middle East and Africa is in Dubai. Lin Wei said that the manufacturing industry to land in the Middle East, in addition to considering whether the customer is the government, but also a comprehensive consideration of whether the labour force is easy to obtain, port logistics and transport convenience, the market is incense large enough. If it is oriented towards a single market, Saudi Arabia's economic volume than the United Arab Emirates has a clear advantage, which even if the United Arab Emirates Pu introduced and Saudi Arabia similar preferential policies can not make up for, in addition, although the United Arab Emirates foreign worker visa is easier to obtain, but for the manufacturing industry to go to sea, to the Middle East, the factory is unlikely to be a labour-intensive factories.
Dubai was also endeavouring to develop its industries. The Dubai Industrial Strategy 2030 has drawn up six major directions for development: aviation, maritime, pharmaceuticals, aluminium and metals, FMCG, machinery and equipment, with the aim of establishing Dubai as an international industrial hub supported by knowledge, innovation and sustainability.In 2021, Dubai's industrial GDP was Dh41 billion, and the strategy plans to add an additional industrial GDP of Dh18 billion by 2030.3 The strategy also aims to develop Dubai into an international industrial centre supported by knowledge, innovation and sustainability.
Overall, Saudi Arabia has a larger government procurement market, stronger government guidance and support for manufacturing capacity, and a larger local market. Dubai, on the other hand, has a more mature business environment, a longer history of openness, a more convenient labour market and a more developed logistics and financial system. Chinese companies going to the Middle East need to combine their own business characteristics and target markets to choose the right landing place.
