Record Chinese investment aids Saudi diversification

Chinese Companies Increase Direct Investments in Saudi Arabia

Chinese companies have made more direct investments in Saudi Arabia this year than ever before, amid the country’s ambitious diversification agenda and strengthening bilateral ties between Beijing and Riyadh.

Record Greenfield Projects

1. Between January and September, a record 21 greenfield projects were announced by Chinese businesses in Saudi Arabia worth an estimated $16.2bn, according to fDi Markets.
2. This was up from eight projects in 2022 and higher than any previous full-year period.

Opportunities Presented by Vision 2030

Analysts say a driving force for growing investment is opportunities presented by Saudi Arabia’s Vision 2030, a plan to diversify the country’s culture, society, and oil-dependent economy.

Arab–China Business Conference

The importance of China to Saudi Arabia’s ambitions was underlined during the Arab–China Business Conference held in Riyadh in June. 

• Investment minister Khalid al-Falih said at the event that the “time has come” for China to become the “principal investment partner in the Arab world’s development drive”.
• More than 30 agreements were signed by Chinese companies to invest in the country, according to Saudi’s press agency, including in sectors such as technology, renewable energy, agriculture, and tourism.

Chinese Electric Vehicle Investments

More than half of the $10bn of pledges came from a $5.6bn deal signed between Saudi’s ministry of investment and Chinese electric vehicle (EV) maker Human Horizons.

• Human Horizons will establish a research, development, manufacturing, and sales joint venture in the country, boosting Saudi’s plans to develop a domestic EV manufacturing industry.
• Other Chinese EV companies, such as Enovate, have also formed partnerships with local firms to enter the Saudi market.

Role of Saudi’s Sovereign Wealth Fund

Saudi’s sovereign wealth fund, the Public Investment Fund, has played a critical role in developing this ambition.

Strengthening Bilateral Ties

The growing investment trend follows a strengthening of bilateral diplomatic ties between China and Saudi Arabia.

Mega-Projects and Opportunities for Chinese Companies

Mega-projects such as Neom and King Abdulaziz Economic City present significant opportunities for Chinese companies to sell building materials, processed goods, and water treatment equipment.

Chinese Expertise in the Private Sector

“Private sector investors in Saudi Arabia hold Chinese companies in high regard for their know-how and technology, seeing cultural differences as an opportunity to learn and embrace new and more productive ways of working,” says Mr Hulak.

Chinese Investment in the Metals Sector

Metals also feature as a key sector for Chinese investment in the country, with three investments worth more than $1bn already recorded in 2023 by fDi Markets.

Key Events Indicative of Growing Relations

Besides the Arab–China Business Conference, several other key events have been held in Saudi Arabia during 2023 that are indicative of the growing relations with China.

Potential Impact of China’s Slowing Economy

Despite this growing interest and major investment pledges, Mr Hulak cautions that China’s slowing domestic economy could potentially lead to slightly lower future foreign investment flows into the country.

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