From delivery services to financial products, a growing number of Chinese and Hong Kong businesses have stepped up operations in the Middle East amid growing geopolitical tensions with the West.
The region’s growing population and favorable industrial policy are among the pull factors as Western markets, in particular the US, appear challenging after Washington began imposing sanctions on Chinese entities under national security laws.
Chinese and Hong Kong business executives who have been visiting the Middle East the past two years are beginning to see some results, thanks to policy support from Chinese authorities.
A growing number of Chinese technology and electric vehicle companies have gained a foothold in the Middle East under China’s Global South strategy aimed at forging closer ties with developing economies, according to Bill Qian, chief investment officer of Abu Dhabi-listed crypto mining and blockchain company Phoenix Group.
“The US is the hardest,” said Qian, summing up the freedom of Chinese companies to operate abroad. “As for Europe, since it’s not a single market, it depends on how you navigate” each country, added the CIO, who relocated from China to the United Arab Emirates in 2021 when he was in charge of mergers and acquisitions for blockchain company Binance.
Qian and other Chinese founder-backed crypto exchange platforms have established footholds in the Middle East, enticed by investor-friendly regulatory frameworks. The footholds give them an option other than Hong Kong, the only Chinese city that allows crypto trading.
AIFT, a Hong Kong-licensed virtual insurer formerly known as OneDegree, announced in September that it had obtained approval through a Dubai entity to provide an insurance product for licensed Web3 platforms or blockchain technology-enabled internet services. Dubai Insurance, AIFT’s partner in the emirate and one of its four shareholders, is also keen to work with other Chinese companies looking to expand in the Middle East, Abdellatif Abuqurah, the insurer’s CEO told Nikkei Asia in Hong Kong recently.
“There are certainly many interactions among politicians and businessmen,” said Alvin Kwock, CEO of AIFT who commended the increase in flight frequency between Hong Kong and the Middle East compared to a year ago.
Hong Kong regulators are actively facilitating closer ties with the Middle East. In his policy address in mid-October, Chief Executive John Lee vowed to enhance hospitality services such as providing information in Arabic and halal food to visitors from the Middle East and Southeast Asian countries. Securities officials have begun closer communications with their Middle East counterparts with the aim of tapping opportunities in each other’s market.
China’s outbound direct investment rose 13.2% from the previous year to USD 85.3 billion in the first half of 2024, according to consultancy Ernst & Young (EY). Greenfield investments in electric vehicles and digital infrastructure are among the projects Chinese companies are pursuing in Southeast Asia and Middle East regions under China’s Belt and Road Initiative (BRI), EY said, citing large market potential and open attitudes toward foreign investors.
For Middle Eastern investors looking for opportunities in Hong Kong and the mainland, the primary goal is to attract technology, talent and capital to their home markets, businesses executives say.
“We are building the gateway, and it would be a near-future thing to attract more investments from the Middle East into the mainland,” Ding Chen, CEO of CSOP Asset Management in Hong Kong told Nikkei Asia in an interview late last year. The company manages the Hong Kong-listed CSOP Saudi Arabia exchange-traded fund, which tracks the country’s equities. Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, is an anchor investor in the ETF.
Chinese businesses remain committed to the Middle East despite rising competition. This month, a leading Chinese tech company, Meituan, launched the Keeta delivery service in Riyadh, Saudi Arabia. Hong Kong’s CSOP is preparing to list an ETF in the Middle East that tracks equities listed in the Chinese city.
The Executive Centre, a flexible workspace provider headquartered in Hong Kong that invested USD 30 million to open its first center in Riyadh, said demand has been “piling in” for offices in the region as Chinese companies expand operations to mitigate downturn pressure even as they remain cautious about geopolitical risks.
“They are dedicated to China but they’re using The Executive Centre as a hedge against costs and future uncertainty,” Paul Salnikow, the group’s founder and CEO, told Nikkei Asia.
For SenseTime Group, a Chinese artificial intelligence company blacklisted by the US, competition is coming from Western peers rather than Chinese companies, said George Huang, head of SenseTime’s Middle East joint venture with a unit of the Public Investment Fund.
SenseTime has focused on expanding in Saudi Arabia and the UAE since 2018, aiming to double its headcount in Saudi Arabia to 150 people in 2025.
“It’s just competition, it does not matter where you are from,” Huang told Nikkei Asia.