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China's strategic infrastructure diplomacy in the Middle East

October 14, 2024 at 12:16 pm

A General view showing the entrance to the Hong Kong Belt and Road Summit on August 31, 2022 in Hong Kong, China [Vernon Yuen/NurPhoto via Getty Images]

China has a growing geopolitical and economic footprint across all continents, and perhaps no region better exemplifies its strategic utility than the Middle East, under the Chinese Belt and Road Initiative (BRI). The BRI is regarded as a counter-strategy to those of the US and other Western countries.

Beijing’s infrastructural ambitions in the Middle East — a region characterised by geopolitical complexities, economic potential and varying degrees of infrastructural development — align seamlessly with its BRI objectives. The cooperation between China and Middle Eastern countries under this framework explains the symbiotic relationship between infrastructure development and geopolitical influence, all within the evolving contours of global power dynamics.

Infrastructure has long been recognised as a critical pillar of economic productivity and societal advancement. It forms the backbone of China’s outreach efforts in the Arab region, which has grappled historically with underdeveloped infrastructure, despite its immense natural resources. It presents China with an opportunity for Beijing to use its engineering expertise and financial muscle as leverage to engage with its partners economically, while deepening its political and diplomatic clout very subtly.

China’s cooperation with Middle Eastern states is not a recent phenomenon; in fact, the region was one of the first to establish infrastructural partnerships with China following the latter’s economic opening-up to the world. Over time, this cooperation evolved from simple subcontracting endeavours to far more complex modes of engagement, including Build-Operate-Transfer (BOT), Engineering Procurement Construction (EPC) and Public-Private Partnerships (PPP). The BRI has improved these dynamics, with infrastructure development now forming a cornerstone of the productivity cooperation between China and Middle Eastern nations.

What makes this relationship particularly compelling is the convergence of needs.

Middle Eastern states, especially those undergoing post-war reconstruction or economic diversification, desperately require infrastructure investment. Meanwhile, China is eager to project its influence and economic interests globally, and views the Middle East as an untapped market of strategic importance. This alignment has catalysed cooperation in key sectors such as transportation, power engineering and housing construction, with Chinese enterprises playing leading roles.

From a strategic perspective, China’s involvement in the Middle East under the BRI framework transcends mere economic collaboration. Infrastructure development serves as a soft-power tool, fostering goodwill and creating long-term dependencies that benefit Beijing in other realms, including political alliances and security partnerships. For Middle Eastern states — particularly those with limited resources or political stability — the influx of Chinese capital and expertise represents a lifeline, enabling them to pursue ambitious development goals without the stringent political conditions often imposed by Western nations or international institutions.

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However, this relationship is not without its challenges. The Middle East remains a volatile region, where political instability, sectarian violence and economic shocks frequently disrupt long-term projects. For Chinese enterprises, navigating this landscape requires a delicate balance of risk management and strategic foresight. In addition to the geopolitical risks, Chinese firms also face competition from other international players like the US and the West, particularly in sectors where profit margins are thin, such as housing and transportation infrastructure. Additionally, rising protectionism within some Middle Eastern states, coupled with stringent import controls, adds another layer of complexity to the operating environment for Chinese firms.

Despite these obstacles, China’s comparative advantages — ranging from financial resources to technological prowess — continue to give it a competitive edge. Notably, Chinese enterprises have transitioned successfully from being subcontractors to major players in the broader infrastructure ecosystem. This shift, exemplified by high-profile projects such as the Doha Metro in Qatar and various power plants in Saudi Arabia, reflects China’s growing expertise in managing large-scale projects that encompass planning, design, procurement and construction.

The Middle East’s infrastructural challenges are manifold.

Weak transportation networks, outdated energy grids and inadequate social infrastructure have hampered the region’s economic integration and global trade competitiveness. Chinese investment, through the BRI framework, seeks to address these bottlenecks, not only by building physical infrastructure, but also by fostering local capacity and improving governance frameworks. According to the World Bank, every $1 billion in infrastructure investment generates over 100,000 jobs in the Middle East. This underscores the socio-economic benefits of this cooperation, particularly in regions like the Gulf Cooperation Council (GCC) states, where job creation and economic diversification are top priorities.

One area where China has made significant strides is in energy infrastructure, a sector where the Middle East holds unparalleled importance as the world’s leading energy producer. Despite the downturn in oil prices and reduced capital investment in recent years, energy projects remain central to China’s strategy. Moreover, the advent of high-tech cooperation encompassing sectors like nuclear energy and satellite technology demonstrates that Sino-Middle Eastern relations are not limited to traditional industries, but are expanding into cutting-edge fields that will shape the future of global energy markets.

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Nevertheless, the road ahead is not without challenges. The decline in global oil prices, political unrest in key states like Iraq and Syria, and the broader uncertainties within the global economy have introduced new risks. For China, mitigating these risks requires not just financial and technical prowess, but also an acute understanding of the political dynamics at play. The rise of local infrastructure companies, bolstered by government protectionism, adds further competitive pressure, forcing Chinese firms to innovate continuously and adapt their business models.

Ultimately, the success of China’s infrastructure cooperation with the Middle East under the BRI will depend on its ability to navigate these complex and often contradictory forces. The economic potential is vast, but so are the risks. However, if China can maintain its strategic focus, prioritising long-term partnerships, diversifying its portfolio of projects and leveraging multilateral institutions like the Asian Infrastructure Investment Bank (AIIB), it stands to augment its influence in the region, while simultaneously fostering development and stability.

The China-Middle East infrastructure partnership, framed by the BRI, thus represents a critical juncture in the geopolitics of infrastructure. As of today, by focusing on tangible, high-impact projects that address the region’s most pressing needs, China has already positioned itself as a key player in the Middle East, albeit mainly in the economic landscape. This success is contingent on a careful balancing act, managing the region’s political volatility, staying ahead of international competition in light of the China-US conflict and the US-Russia conflict, US-Iran, the China-India crisis and the Russia-Ukraine war, and ensuring that its investments deliver long-term value. Under prudent leadership, if China can address or curb these challenges, the BRI’s legacy in the Middle East might very well become one of the 21st century’s defining geopolitical narratives.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.