The UAE was the most attractive target in the Middle East and Africa for Chinese policy lenders in the last two years, with a total of $2.3 billion worth of loans, according to new research from Baker McKenzie.
According to the research, overall loans from Chinese lenders to energy and infrastructure projects in the Middle East and Africa have risen from $300 million in 2014 to $8.8 billion in 2017. Chinese policy lending in the region also increased nearly tenfold from 2015 to 2016, from $368 million to $3.5 billion.
The second most attractive target for Chinese policy lending in the Middle East was found to be Jordan, with a total lending valued at $1.7 billion, followed by Saudi Arabia ($977 million) and Egypt ($890 million).
“The rising impact of Chinese policy lending in the Middle East and Africa is remarkable,” said Sandeep Puri, partner and UAE head of banking and finance at Baker McKenzie Habib Al Mulla.
“The total value of loans to energy and infrastructure projects in the MEA region more than doubled between 2016 and 2017, and there have been a couple of very sizeable UAE deals backed by Chinese policy lenders in this period.
“Although the total lending in 2016 is higher than in 2017, a more diverse range of sectors benefited from Chinese lending last year,” he added.
Additionally, China recently pledged $20 billion in loans and $106 million in financial aid to nations in the Middle East over the next few years, and announced that a new financial consortium will be established by Arab and Chinese banks with a $3 billion fund to promote cooperation on oil and gas as well as nuclear and clean energy.
“What we are witnessing is just the beginning of long-term collaboration between China and Middle East nations in a bid to shore up China’s geostrategic footprint in the region,” said Puri.
“China's pledge to revive economic growth in the Middle East underlines its commitment to a strategic partnership in the region.”
Over the next five years, China also plans to import goods over $8 trillion and has begun negotiations to establish a free-trade agreement between China and the region.