Muhammad Zulfikar Rakhmat

Opinion | Oil is just the start of China’s belt and road interest in the Gulf

Part of the reason for Beijing’s presence in the region is the pressing need to resolve its overcapacity problem, such as in the steel and concrete industries

More than this, the belt and road strategy is also seeking to facilitate the flow of trade and investment with the Gulf, writes Muhammad Zulfikar Rakhmat

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Sunrise in Qatar, a Gulf state, where Beijing’s Belt and Road Initiative is being actively realised. Photo: EPA

Muhammad Zulfikar Rakhmat

Published: 8:00am, 7 Jun 2019Updated: 9:20pm, 7 Jun 2019

The Gulf might not appear on the official map of China’s Belt and Road Initiative, but Beijing’s international infrastructure investment plan is being actively realised in the region. Since Chinese President Xi Jinping launched it in June 2014, various actors from China – including companies, banks, and financial institutions – have established a presence in the Gulf.

Securing oil and energy resources is an important component of the belt and road plan’s regional aims, as is the construction of a framework to boost trade and investments between China and the Gulf. But there is another motivation behind Beijing’s presence in the region – the pressing need to resolve its overcapacity problem.

China was not invulnerable to the 2008 financial crisis, and it was heavily exposed when exports to its major markets in the United States and Europe plummeted, leading to the largest stimulus package in history, equivalent to 14 per cent of its GDP.

This, nevertheless, only had a short-lived positive effect, and China has since been searching for an alternative solution to preserving its economic growth.

The US$570 billion stimulus package understated the real figure as China encouraged banks to raise loans to firms and local governments – resulting in overcapacity.

Only 20 per cent of the package was aimed at social spending, with most being directed to fixed asset investment in sectors already plagued by overcapacity, such as steel and concrete. And all this excess needed profitable and sound investment openings.