UAE and China Foreign Policy
This paper discusses details of the diplomatic relationship between United Arab Emirates (UAE) and People’s Republic of China. The two countries have a long historical relationship that was initiated in 1984 following the need for collaboration for the sake of their economic growth, national prosperity and trade. Following the establishment of bilateral relations, both China and United Arab Emirates embarked on developing their general consulates and embassies in Dubai and Abu Dhabi, and Hong Kong and Beijing respectively. Since then, they have maintained a peaceful bilateral relationship guided by their foreign policy relations. The relationship has yielded many positive benefits to both countries as seen in the improved migration laws and other new ventures among others.
After establishing a diplomatic relations in 1984, China and the United Arab Emirates formulated another agreement for strategic collaboration in 2012. Since that time, they have become crucial partners benefiting from each other greatly in terms of trade, technology and economic development. With the establishment of bilateral relations, about 60% of China’s total exports now pass through United Arab Emirates, a percentage of which is being re-exported to Europe and Africa. Currently, the UAE provides the largest market for Chinese products and consequently, since the establishment of the agreement in 1984, bilateral trade between them has shown exponential growth. The increment in foreign trade has also resulted in closer financial and economic ties. During the early stages of negotiation, China was the first country to sign the bilateral investment treaty (BIT) with United Arab Emirates; this materialised in 1993.
This paper is designed to introduce the diplomatic relationship between the countries and to discuss the historical background of both UAE and China with a keen interest regarding factors that led to the establishment of their respective foreign policies. In addition, the paper will discuss foreign relations between the two countries and the factors that led to their growth, success and stability.
The History of United Arab Emirates
The country is very small and is situated within the Arabian Peninsula at the Persian Gulf’s south eastern coast. The name, United Arab Emirates (UAE) was adopted on December 1971 when six states namely Umm al-Qaiwain, Fujairah, Dubai, Sharjah, Abu Dhabi, and Ajman agreed to form a constitutional federation that would enhance the desire of achieving independence as a single entity (sovereign state). Later in 1972, Ras Al Khaimah made a bold move to join the federation thereby becoming its seventh member.
Previously, the area that is now the UAE was a large track of desert that was mainly occupied by proud nomadic Bedouin tribes. Dubai was largely recognized as the traditional trading hub in the region; artefacts from the land show a long history of human habitation and regional trade in the desert despite its harsh environmental conditions. They lived in varied terrain in the region; their name, Bedouin, means desert dwellers.
Earlier on before they could come together to form the federation, several conflicts arose between the Trucial coast and maritime communities and during that time, the British were involved in creating peaceful cohesion in the region. However, in 1968, the British decided to withdraw from the affairs of the local states, a decision that initiated the first step towards the formation of the federation in 1971.
Before the federation was formed, Abu Dhabi was notably one of the poorest emirates while Sharjah was the most powerful and populated emirate. For some time after the formation of the federation, the region’s activities remained pearling, fishing, farming in the oasis and camel herding; these were the major economic activities in the region until 20th century. However, in 1939, the economic activity in the region suddenly changed when oil was discovered and mass production started. The oil money started influencing the economy significantly by steering rapid growth and developing.
In 1962, production and exportation of oil from Abu Dhabi started, which suddenly turned the little poor emirate into a rich one. In 1966, Dubai also started mining and exporting its oil to other countries, which led to massive growth and development of the emirate. In 1968, as the oil exploration continued in various states, the British government announced its intentions to leave the region and give them full autonomy. The idea was highly welcomed and the regional powers come up with an original plan of forming a single state that would consist of the Trucial Coast, Bahrain and Qatar, but this did not realize due to some vested interests and in 1971, the six Trucial coast States decided to form a single constitutional federation, today known as the United Arab Emirates.
Today, United Arab Emirates has grown to become one of the most significant business hubs and international tourist countries in the world. In addition, it has become one of the leading oil producing and exporting countries in the world and today, UAE is one of the most modern, safe and stable states not only the Middle East, but also throughout the world. The country is recognized for its highest income per capita in the world, which is about $25,000 US dollars per annum.
The History of China
China is recognized as one of the most ancient civilizations in the world, which dates back more 10,000 years ago. During these times, China frequently alternated between periods of political unity and disunity and occasionally, some external groups could conquer the country.
The first dynasty was founded in China in the 21st century BC; it was an imperial era marked by a significant change from primate society into slavery. Both Shang and Western Zhou enhanced the slavery. In 221 BC, Ying Zheng became the first emperor in China and he worked towards establishing a centralized, unified, and multi-ethnic group in China. He also standardized currencies, scripts, as well as weight and measures and it was during his reign when China started building the Great Wall to protect its citizens from external attackers.
Later on, General Zhao Kuangyin founded the Song Dynasty that lasted between 960 and 1279. He also unified different tribes in Mongolia and later on in 1271, his grandson, Kublai Khan, founded the Yuan Dynasty, which lasted between 1271 and 1368 and furthermore established modern Beijing, which became the capital. During his dynasty, domestic and foreign trade boomed as well as the handicraft industry. Many merchants from abroad extensively travelled into China selling and buying goods (Guo & Hua, 2007).
In 1368, Zhu Yuanzhang rose to power and founded the Ming Dynasty, which lasted between 1368 and 1644 and later succeeded by his son, Zhu Di, who immediately started building temples, palaces, moats, and city walls in Beijing. The last dynasty, the Qing Dynasty, which lasted between 1644 and 1911, was marked by great economic prosperity; during that period, China was greatly reduced to semi-feudal and semi-colonial country. In 1911, Sun Yat-sen led a revolution that ended the Qing Dynasty and this was the first step towards the establishment of the modern China; the monarchical system of leadership was abandoned. In 1949, the people’s republic of China was formed and the country entered into a modern communist era; the modern communist era has been greatly associated with political stability and great economic growth. Modern China, commonly known as People’s Republic of China, is an important economic hub not only on the Asian continent, but also in the entire world.
The Foundation of UAE and China Foreign Policy
The foundation of the UAE-China foreign policy comprises of understanding, economic prosperity, good neighbourliness, amicable resolutions to disputes as well as lack of interference in one another’s internal affairs. As explained by Zhu (2010), this would be achieved by mutual openness between United Arab Emirates and China, which is considered the fruit of their foreign policy. A strategic partnership, especially on trade, economy, culture, politics, education, health, and science is another important pillar in this foreign policy; these have played important roles in helping the two countries achieve prominent positions within the international community.
Most other fundamental aspects of the UAE and China foreign relations lie in the establishment of an international and regional network, binding the countries and states in a regional bloc. Another significant aspect is the dire need to achieve economic prosperity at a national and regional level. Both UAE and China want their citizens to achieve greater economic prosperity and this can be easily enhanced by establishing bilateral relationships with other like-minded countries. As a result, both China and UAE have implemented an effective economic strategy that is based on diversification, investment and economic cooperation.
Another fundamental aspect of the UAE-China bilateral relations is foreign trade; when drafting the foreign policy, they were most interested in boosting foreign trade. For instance, China and UAE were interested in boosting their position on both a regional and an international level by enhancing trade with other countries. Before entering the agreement, China considered United Arab Emirates as the best country to help boost its trade in the region, which has significantly improved within the past two decades. In 2015, the volume of foreign trade in United Arab Emirates reached 1.65 trillion dirhams, of which 35% is contributed by national exports to China.
The Beginning of UAE and China Relations
The diplomatic relationship between United Arab Emirates and China were officially started in 1984 after the two countries reached a formal agreement that outlined partnership in trade, economy, migration, social welfare and regional leadership among other factors. Since 1984, they have established 36 agreements, which were all developed to enhance the bilateral foreign policy. Guo and Blanchard (2008) assert that the historical relationship between the two countries have been focused on high levels of trade and economic prosperity. Within a decade after the official launch of the relationship, the bilateral trade between China and UAE magnificently scaled to new highs indicating an overall growth rate of 42% as the bilateral trade value exceeded $19.4 billion in 2007.
The number of Chinese firms operating in United Arab Emirates also increased significantly following the establishment of the new bilateral foreign policy agreement; by the end of 2006, there were 2000 Chinese firms operating in UAE, which significantly increased to 3000 by the end of 2015. The number of Chinese communities living in UAE who are directly involved in the construction sector has also increased. China currently treats UAE as its largest trade partner in the gulf region, because the country buys many Chinese products. According to Guo and Hua (2007), over 180 000 Chinese people were living and working in United Arab Emirates by the end of 2015, which is largely seen as the aftermath of the two countries foreign relations policy.
The increasing dominance of the United Arab Emirates as the regional investment hub for trade, as well as huge energy diversification are the factors making the country prosperous in its long-term relationship with China. China’s insatiable demands for energy supply as well as the market for its domestic products are two obvious reasons that are pushing China towards building a stable diplomatic relationship with United Arab Emirates. The UAE and China foreign policy is based on seven important themes namely (1) joint investment, (2) currency cooperation, (3) sustainable energy partnership, (4) regional investment, (5) cooperation in transportation, (6) financial cooperation, and (7) economic prosperity and foreign investment
(a) Currency Cooperation
One of the primary themes of the China-UAE foreign policy is to encourage currency cooperation. China has achieved this through the establishment of Yuan swap agreement with United Arab Emirates; through this agreement, China is using their foreign policy with UAE to internationalize the Yuan currency. The country strategically chose United Arab Emirates as its currency partner due to her huge wealth, political stability and stable investment prospects. China sees this agreement as a huge step in expanding the scope and scale of her bilateral currency swap as well as well as settlement with not only UAE, but also other countries in the Middle East region.
The driving force behind the currency cooperation between China and United Arab Emirates is the dire need to build and enhance currency stability, credit information systems, investment and financial systems across the entire Asian continent. The first affirmative bilateral currency swap between China and UAE was signed in 2012 and has remained active to date. The purpose for this currency swap was not to alleviate crisis, like in most cases, but rather to promote direct investments and bilateral trade between China and UAE. In addition, they wanted to partner in local currency rather than the US dollar that has dominated the market for quite a long time (Al, 2015).
Because the UAE currency, the dirham, is still fixed on the US dollar, the swap agreement only helps the Chinese firms to conduct their businesses easily in the United Arab Emirates. However, in the long-term, it will certainly foster the ability of UAE to act as the regional trade hub, despite the currency being used by different firms. China is also using the agreement to push the Yuan to become the standard investment mechanism outside its borders, thereby creating a Yuan dominated market in the region.
(b) Sustainable Energy Partnership
The China-UAE foreign policy is furthermore aimed at establishing a sustainable energy partnership in the region. Both have begun developing numerous clean energy sources in their respective countries. They experience high demands for energy and believe that diversification of energy sources is an important step towards future energy security, since both countries are looking forward to a more sustainable, lean, clean and green energy supply. With the help of its robust technologies, the UAE sees a significant potential of China cementing their position as key player and architect in securing future sustainable energy (Guo & Hua, 2007).
The energy partnership between china and UAE has led to the development of Solar Parks and other free zones such as Jebel Ali Free Zone and Dubai Green Zone among others in United Arab Emirates: these free zones and solar parks have become the hub of sustainable energy in UAE and are continuously being developed.
The latest free zones in United Arab Emirates have greatly benefited from China’s emerging solar energy technology. For instance, the government has focused on directly engaging Chinese firms in establishing sustainable solar energy in Sharjah in northern Dubai. The agreement has led to the establishment of joint ventures in solar energy development; the two countries have noted that partnership is essential for successful diversification of energy sources in the region.
(c) Regional Investment
Another primary theme that is featured in the China-UAE foreign policy is regional investment. The first initiate was the establishment of OBOR (One Belt One Road) agreement, which has led to the development and improvement of many road networks in both China and UAE as a mechanism of enhancing private and public investment in the two countries: the initiative is designed to help reshape the region’s economic future and enhance development (Melissen, 2007).
Lately, they established a joint sovereign wealth fund, which is meant to enhance the regional investment starting with China and UAE and then proceeding to other countries in the region. The joint investment fund is treated as an important highlight of cooperation between the two countries.
(d) Cooperation in Transportation
Another important theme featured in the China-UAE foreign policy is development and cooperation in transportation. This has led to the development and improvement of transportation networks between the two countries and key targets for improvement include the air and road transport networks.
Following the signing of the agreement, six cities in China are currently connected to major cities in the United Arab Emirates through direct flights operating daily; they include Kunming, Shanghai, Guangzhou, Beijing, Urumqi and Hong Kong. Flights to these cities operate more than 20 times a day. The increased number of direct flights has conveniently connected every part of China to the United Arab Emirates, thus increasing the volume of business and offering other bountiful opportunities, these connections have not only facilitated business activities, but also favoured tourism. As a result, the number of Chinese tourists in United Arab Emirates has significantly increased to 2 344 000 people every year (Al, 2015).
To enhance transportation through roads, China has embraced the concept of “Silk Road Economic Belt,” which was adapted from the “New Silk Road Initiate” rolled by Hillary Clinton when she was the secretary of state in USA in 2011. The Silk Road Economic Belt is meant to put in place infrastructures that would connect China and its neighbours, but the primary focus was given to United Arab Emirates due to the longstanding foreign policy. United Arab Emirates also committed to play significant part in the development of the Silk Road project.
(e) Financial Cooperation
The China-UAE foreign policy has enabled extensive financial cooperation between them. Many Emirati banks started expanding their business into the Chinese market. In 2007, the Union National Bank became the first Emirati bank to open its branch in Shanghai China and other banks such as the National Bank of Abu Dhabi and Emirates NBD among others followed suit. Currently there are numerous Emirati banks operating in China, most of them having offices in the capital Beijing and other big cities in China. The presence of numerous Emirati banks in China has significantly boosted transactions using the Yuan.
On the other side, United Arab Emirates has also become a home to major Chinese banks such as the Bank of China Middle East Limited, Agricultural Bank of China, China Construction Bank, and Industrial & Commercial Bank of China among others. These banks have significantly increased the level of financial exchange between UAE and China as well as playing an important role in improving the financial exchange with other financial institutions in United Arab Emirates.
(f) Economic Prosperity and Foreign Investment
The UAE-China foreign policy has helped both countries to achieve greater economic prosperity within the past couple of years since their unification. Every country has used this policy to achieve economic prosperity for its citizens, which has subsequently strengthened their position in the global economy. Despite the economic turmoil, crises and fluctuations that have been experienced of late by other countries, both China and the UAE have remained stable mostly due to the support generated by their bilateral relations. They have in addition, used their foreign policy as a means of attracting investments in their various countries thereby achieving high economic growth and development rates. Between 1975 and 2015, the UAE’s GDP has bounced from 58 billion dirhams to 1.65 trillion dirhams, which represents a significant improvement in the economy (Olimat, 2016).
When reaching the agreement, China and UAE both aimed at promoting foreign investments in their home country in a move to achieve sustainable development. The foreign policy has therefore been used as tool in attracting quality and sustainable investments in both China and United Arab Emirates. On the other hand, United Arab Emirates have used this foreign policy to reduce their dependence on oil as they diversify their resources and attract alternative investments. In 2014, United Arab Emirates attracted more than 5 billion US dollar direct investment from China. Likewise, China also attracted more than 6.2 billion US dollar direct investment from United Arab Emirates between 2011 and 2013. Melissen (2007) asserted that the UAE-China foreign policy has enabled the two countries to improve their global competitiveness in terms of economic prosperity and foreign investments within the past 2-3 decades.
How UAE Money is Spent in China
In China, the UAE money is spent in various developments projects such as housing, hospitality services, health care and education among others. The Chinese government put majority of foreign direct investment from United Arab Emirates in enhancing its various housing projects across the country. Billions of dirham is spent in putting up new residential as well as commercial properties in China. These properties have facilitated rapid economic growth in China over the past two decades. Residential properties promoted this way by the government include villas, dormitories and apartments. Several shopping malls, business centres, factories, storerooms, public infrastructures, and other commercial properties have also been built using the UAE money (Field & Markaz, 2008).
The UAE money is also used to enhance the hospitality industry in China, which has resulted in rapid growth of the industry as demonstrated by the increased number of new hotels, accommodation facilities and restaurants in the country. China’s primary aim in expanding the hospitality industry is to improve tourism and make it a major source of income for the country. In addition to hotels, the UAE money is used in the development of new theme parks, amusement parks, cruise lines, as well as an improved transportation system, which has greatly boosted the tourism industry of China.
Part of UAE’s money is also spent in financing education sector in China. With understanding that education is one of the China’s leading expenditures, the country often seeks additional sources of financing and a good percentage of that comes from the UAE’s foreign investment initiatives. In 2014, the Chinese government spent well above 2.8 trillion Yuan on education part of which was financed by the UAE’s money. Over the past decades, the country has greatly increased its expenditure on educational services such as the cost of running public schools and universities and the development of new educational facilities and centres amongst others (Olimat, 2016).
The Future of UAE-China Relations
Since the beginning of their partnership, United Arab Emirates and China have enjoyed thriving bilateral foreign policy relations. The main influencing factor that has helped achieve this is the commitment of the two countries in building an inclusive, open and moderate foreign policy. In addition, both countries have been committed to pursuing a foreign policy vision that respects diversity, seeks proper leadership and encourages technological advancement.
The future prospect of UAE-China foreign policy is anticipated to soar to greater heights. Many factors will ensure that they continue enjoying robust foreign policy relations in future. First, the foreign policy relations between China and United Arab Emirates is underpinned by political moderation, tolerance, free trade, innovation, technological advancement and economic development. In addition, both countries are committed in finding solutions that actively seek to bring people together and enhance economic development (Zhao, Malouche, & Newfarmer, 2008).
The spirit of openness, equality and respect, which continues to thrive between China and United Arab Emirates, will ensure that the two countries continue enjoying stable foreign relations in future. China and UAE have a wide range of shared goals and interests that will ensure that they remain together and are committed to each other even as they continue seeking answers to even more complex challenges. The two countries are in a better position now to use the present opportunities in seeking new pathways for ample economic prosperity and political stability, which is an important factor in enhancing future foreign policy.
The bilateral relation between China and United Arab Emirates was officially initiated in 1984 with the primary goal of boosting economic growth in the two countries and enhancing regional trade. Since then, they have remained committed to the realization of the aims and objectives stipulated in their foreign policy agreements. Between 1984 and 2014, they signed agreements totalling to 36 in number, each aimed at improving different aspects of the economy.
The geostrategic location of United Arab Emirates including its distinctive global trading system and diversified economic profile has made it an attractive gateway for achieving sustainable economic growth and development. These factors have also played significant roles in attracting China to establish bilateral relations with UAE. In addition, the growing desire by China to source energy is another factor that has significantly triggered fundamental changes in the structure of its relations with United Arab Emirates. Nonetheless, the growing financial and social needs between China and United Arab Emirates have allowed them to establish a stable bilateral relation aimed at boosting trade and improving economic and social developments (Almezaini, 2012).
Even though China and United Arab Emirates differ from each other in terms of geographic location, population structure and political systems, they have created numerous avenues for achieving cooperation and economic growth. The foreign policy relations agreed by China and UAE have provided economic benefits to both countries and will continue doing so in future if the current position is maintained. Despite its small size, UAE has great potential for remaining an ally of China due to its huge oil potential and geostrategic location. The flow of oil and gas from United Arab Emirates into China and other Asian countries has significantly rejuvenated China-UAE international relations as well as reviving the ancient “Silk Road”. Bilateral relations between China and the UAE provided a strong foundation for increased financial diversification, robust trade partnership and improved economic development (Bilgin, 2009).
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