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Sep 10 2019
The Three Characteristics and Challenges of China – Arab industrial capacity cooperation
By Zhu Ming

Under the Belt and Road Initiative (BRI), China – Arab cooperation has made much more and newer progress than before. Among varieties of cooperation partnerships, the industrial capacity cooperation has been one of the most important ones. The author believes that the ongoing industrial capacity cooperation has three main characteristics and challenges.

The first characteristic is a good combination of China’s clear strategy plus a specific action plan. The overall strategy is China’s BRI, 18 Arabic countries have signed BRI agreements with Beijing meanwhile the specific action plan is so-called "1 2 3" cooperation pattern. At the Ministerial Conference of China-Arab Countries Cooperation Forum in Beijing in June 2014, Chinese President XI Jinping called for joint Chinese and Arab efforts to build the Belt and Road Initiative. President XI suggested that we take energy cooperation as one priority, infrastructure development and trade and investment facilitation as two key areas, and nuclear energy, aviation satellite and new energy as the three high-tech areas for breakthrough. The "1 2 3" cooperation pattern was warmly received by Arab friends, and now we have seen early harvest. For instance, in 2017, China launched Algeria's first communication satellite, Alcomsat-1, into a preset orbit from the Xichang Satellite Launch Center. The satellite was the first cooperative project in aerospace industry between the two countries. It will be used by Algeria for broadcast and television, emergency communication, distance education, e-governance, enterprise communication, broadband access and satellite-based navigation.

The second characteristic is of huge potentials. Different from China’s case that most made-in-China basic consumer goods are already over-supply to Chinese domestic market, most Middle Eastern countries are facing the challenge of not sufficient basic consumer goods. For example, around 20% of Egyptian families have no TV sets yet, 56% needs to replace their out-of-dated TV sets. Besides huge demands, Middle Eastern countries have their geographic advantage, which locate between Europe, Africa and Asia. And some countries have also signed favorable trade agreements with some advanced economies.

The last one is promising progress. Beijing has made remarkable industrial capacity cooperation in Saudi Arabia, UAE and Egypt etc. Compared with ten years ago, China's non-financial investment in and trade volume with Arabic countries increased by 122 times and 9 times, respectively, in 2017.

But it is worth mentioning that besides progress, there have been some challenges arising. The first one is about the risks in Middle Eastern countries came from security threats including wars and terrorism. Afghanistan, Tunisia, Lebanon, Iran and other countries are in the midst of repeated terrorist attacks, political unrest and domestic protests, signaling high security risks that severely have jeopardized their attractiveness to foreign investors.

The second one is Chinese enterprises are facing direct tough competitions from the counterparts of other countries. Most those competitors are either from the advanced economies or Arabic countries’ former colonizer countries. At present, Chinese enterprises mostly “Go out” rather than “Go up” (successful localization and brand-building), are far from deep-rooted local growth period yet.

Lastly, most bilateral cooperation is limited to their single specific sector, not in more comprehensive aspects. In other words, the multi-sector cooperation is still quite rare, but such kind is quite essential since it would provide not only more opportunities to the local partner, but more comprehensive and complimentary cooperation approaches. For instance, when Beijing is invited to open more manufacture plants, Beijing could also plan to go out together with some environment protection enterprises, in order to control the possible environmental damage as early as possible.

Source of documents:chinatradenews,10th Sep