Saudi Arabia is strategically important to China’s “Silk Road” initiative, which aligns with the Kingdom’s ambitious “Vision 2030” as outlined by Crown Prince His Royal Highness Mohammed bin Salman. The Kingdom intends to diversify its financial sources and implement extensive economic reforms.
The goal of the “Silk Road” programme, which was introduced by Chinese President Xi Jinping in 2013, is to build a maritime route that connects Asia, Africa, and Europe, as well as a land network of roads and railroads that travel through Central Asia and Russia. It is estimated that the project will cost over a quadrillion dollars.
China depends on Saudi Arabia’s essential contribution to the project. Saudi Arabia is one of the key components of the “Chinese initiative” due to the Kingdom’s unique geographic location and size, which include coasts that overlook the Red Sea and strong commercial ties with Beijing, besides the importance of the Kingdomin Islam and the Arab world.
Eight of the top 20 economies in the world are located along the modern-day Silk Road, which is a network of historical trade connections that runs from the Middle East to Asia. A thriving centre for the transfer of knowledge, skills, and technology, trade in the area is dynamic, multifaceted, and marked by two-way flows.
The programme serves as the cornerstone of the region’s aspirational rebirth, which is bringing about significant changes to the fields of economic diversification, infrastructural development, job creation, and sustainable development. More than 60 nations are part of the programme. These nations’ combined GDPs exceed USD 1 trillion, or roughly one-third of the world economy.
The region already contributes 40% of the world’s gross domestic product, but by 2040, this percentage will likely rise to 48%. Unsurprisingly, North Asian businesses with an eye toward expansion are increasingly turning their focus to the Middle East.
Understanding Saudi’s Gain
The Kingdom has the chance to take advantage of this promising trajectory but to do so, it will need to make calculated decisions that link to the rapidly changing value chain in Asia and offer a strong regional platform for the continent’s businesses. First-mover advantage is important because Saudi Arabia may be able to solidify its position in the area thanks to this innovative approach.
Trade along the Silk Road used to be mostly concentrated on consumer items and oil, but three significant changes have recently caused something of a metamorphosis in the region.
These include the Gulf’s recent emphasis on investing in non-oil sectors to ensure a diversified post-oil future, as well as the rifts in international politics, which, ironically, has increased rather than decreased connectivity along the Silk Road.
Lastly, supply chain disruptions have prompted nations all over the world to expand their manufacturing hubs throughout Asia.
This latter development is good news for Saudi Arabia and the broader Gulf region. Businesses are searching for reliable suppliers, and the Gulf has its first genuine chance to secure a share of the global supply chain as a result of the rapid advancements in technology.
Saudi Arabia, being the largest domestic market in the area, is vital to the development of the region as a whole and to guaranteeing that the Gulf has the industrial depth necessary to draw significant international investment.
How can Saudi Arabia make sure it is prepared for this chance? Integrating with the industrial environment and supply chains of North Asia will be the first stage. Taken as a whole, North Asia is responsible for 25% of world exports, comprising 42% of telecom and office equipment and 32% of general manufactured items. Saudi Arabia’s industrial base stands to gain a great deal if it is successful in creating its networks with these players.
Opportunities are expected to increase even more because the region’s industrial innovation is significantly influencing a variety of industries.
In exchange, Saudi Arabia provides a useful position as a launching pad into the Middle East and Africa, an area that, because of its rapid growth and youthful population, is drawing the interest of North Asian businesses.
This means that businesses engaged in manufacturing and related support services like marketing, finance, and after-sales have a lot of exciting opportunities to expand their portfolios.
Sovereign wealth funds have the potential to enhance relationships and streamline supply chains. Investments can be made to promote a partner nation’s long-term strategic plan, bolster its competitiveness, and focus on its top growth priorities. Whether it is electrical vehicles or mobile games, investing in North Asia’s top players will support growth domestically and strengthen value chains connecting Saudi Arabia, the wider Gulf, and North Asia.
Naturally, the development of an industrial environment takes time. Such an ecosystem starts with fundamental services and infrastructure, but free trade agreements and well-timed investments to assist emerging industries like electric vehicles are necessary to make it a reality.
Trade restrictions must be lifted, and venues for companies and entrepreneurs must be established.
Through trade and investment organisations, the Saudi government should keep helping the private sector find opportunities and make important connections. Taking into account that the region’s connection is extending beyond trade in products, it should work diligently to guarantee that the flow of talent, capital, technology, and data is all backed by well-crafted accords. This frequently calls for going over and amending agreements that were negotiated ten years or more ago.
Conclusion
The Gulf region will appreciate the prospect of closer economic ties at a time when worries about deglobalization are mounting.
“Vision 2030” is in line with the serious Chinese efforts to rebuild the Silk Road, which centres on the Middle East and connects the East and West of the globe, according to Minister of Trade and Investment Dr. Majid Al-Qasabi.
“The vision is based on transforming the Kingdom’s unique strategic location between the main global waterways into a global logistical centre and taking advantage of that to make the kingdom a point of contact between Asia, Europe, and Africa, a trade centre, and a gateway to global markets,” he said during the 2023 Saudi-Chinese Investment Forum.
A memorandum of understanding (MoU) on strengthening collaboration in the areas of the Silk Road Initiative, the Economic Belt Initiative, and manufacturing capacity was previously signed by Beijing and Riyadh.
The Kingdom has already formed “Saudi Silk Road Company”, a new economic arm that will help draw in foreign investment as part of its efforts to revive the Silk Road project.