The Arab world and China share a history of commerce and have compatible attitudes to business. George Mitton asks if these regions are rediscovering an old friendship.
In his book The New Silk Road, economist Ben Simpfendorfer tells the story of Yiwu, a city in China that has become a remarkable hub for sellers of cheap consumer goods. Some of the most important buyers of the Chinese-made goods are small traders from the Arab world.
What’s interesting about Yiwu is the authorities’ pragmatic response to the large numbers of Muslim Arab traders in the city. The government donated a converted factory for a mosque and appointed an imam.
CULTURAL CONSISTENCY
The city, argues Simpfendorfer, reflects a wider trend: a gradual rebalancing of global trade relationships that is pushing the Arab world and the Far East closer together. These regions were once two poles of the pre-modern trade route that brought silk across Asia, hence Simpfendorfer’s name, the new silk road.
The shift could have big implications for business in the Arab world as well as for fund managers.
The countries of the Gulf Cooperation Council (GCC) have seen perhaps the fastest growth in trade with Asia. In 1980, just 10% of their trade was with Asia, but by 2009 the figure had leaped to 36%, according to the Economist Intelligence Unit.
By 2017, Asia will be the biggest trading partner to the GCC, predicts the research firm.
The main commodity is oil, which China needs in large quantities to support its growth.
“When China grows, its need of petrochemicals increases. There’s a lot of supply that makes this engine work,” says Fadi Al Said, head of investments at ING Investment Management.
But the idea embodied by the city of Yiwu is about more than just oil deals. The idea is that small traders, Arab and Chinese, are doing more business with one another.
Ironically, the tightening of US visa controls after the September 11, 2001 terrorist attacks may have been a catalyst for this trend because it made it harder for Arabs to visit the US, pushing some traders towards China.
Ted Chu, chief economist at the Abu Dhabi Investment Authority, believes there is a high degree of “cultural consistency” between the Arab world and China. Chu was born in China but spent 25 years in the US before moving to Abu Dhabi two years ago. He says there is a sharp contrast between the way Westerners and people from the East, both Arab and Chinese, think about business.
“Westerners tend to think about business purely as business. They want to know what is on offer and what’s the price. The Eastern way is to look at the other person and ask, ‘Can I trust this person? Is he reliable?’
“You can say one way looks at things more holistically – the Eastern way – and the other way is more focused.”
Neither way is better than the other, says Chu. The Eastern way relies heavily on personal connections and can degenerate into corruption, he says. The Western way, by focusing on maximising profits from each and every deal, can be short-sighted – less good at building long, fruitful relationships.
CLOSER TIES
The challenge, he thinks, is for the East is to absorb the best Western business practices and blend them with traditional values.
There are plenty of examples from the world of finance that point to closer ties between the Arab world and China.
In October, the Kuwait Investment Authority opened its first overseas office since setting up in London nearly 60 years ago – in Beijing. The authority’s managing director explained that its investments in mainland China have risen from zero five years ago to $5.6 billion.
Meanwhile, Chinese banks are having success in the Arab world. One example is the enormous Industrial & Commercial Bank of China, whose Middle East subsidiary made twice as much pre-tax profit in 2011 than the previous year.
Another example of closer ties is the China-Arab trade forum held every year in Yinshuan, the capital of Ningxia province, China. The forum promotes Islamic-related trade, be it halal food or finance. The Chinese government believes the forum may offer a development path for the fairly poor province, which is the official home of China’s Hui population, a Muslim minority group.
EVOLUTIONARY CHANGE
That said, it is a stretch to suggest the growing Arab-Chinese axis points to the cultural or economic decline of traditional Western powers such as the US.
Shadi Hamid, director of research at the Brookings Doha Center, a think tank based in Qatar, addressed the point recently on Twitter when he commented that he has, “Rarely met an Arab who wants to study in China, learn Chinese, or sees it as alternative ‘model.’ Worth remembering as we talk US ‘decline’.”
Despite waging a series of unpopular wars in the Middle East, the US still has huge cultural power in the Arab world, and this won’t simply be replaced by the influence of China.
The change documented in Simpfendorfer’s book is more subtle. It is, as he says, a “gradual rebalancing”; an evolutionary change, not a revolutionary one.
Simpfendorfer says he still stands by the thesis of his book, which was published in 2009 and updated last year. However, events have overtaken it. In the book, he examines Syria and questions whether China could offer the country an alternative model for economic development than the West. The uprising in Syria has rendered that a moot point.
Syria, he says, “is a lesson for the region’s new governments. It’s not enough to talk about economic reform, you have to deliver results, much like China has in recent decades”.
Likewise, the book was written before the Arab Spring and the revolution in Egypt. These events have had a huge economic cost, affected trade and perhaps distracted policymakers from reorientating towards Asia, he says.
But the increase of personal and business ties between the Arab world and China has continued, he says, something he notices from his travels in both regions.
Meanwhile, in the city of Yiwu, the local Muslim community, with the approval of the Chinese authorities, is planning to build a second mosque.
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