The Brookings Doha Center (BDC) and the Shanghai Academy of Social Sciences (SASS) held a joint workshop in Shanghai, China on January 13-14, 2018. The workshop brought together academics and policymakers from China and the Middle East and North Africa (MENA) to discuss China’s Belt and Road Initiative (BRI) and its implications for cooperation with the MENA region.
The workshop began with a keynote address from Yang Fuchang, the former vice minister of foreign affairs. Yang stressed that relations between China and the region have been marked by cooperation, mutual support, and the absence of conflict. Economically, China and MENA are highly complementary, which explains the increase in bilateral trade despite the recent conflicts in MENA. The BRI has emerged to further those friendly relations.
The address was followed by opening remarks from the Chancellor of SASS, Yu Xinhui and BDC Director, Tarik Yousef. Yu noted that implementation of the BRI will have to deal with important challenges, including regional conflicts, international intervention in the region, low oil prices, and uncertainties accompanying the rise of Trump.
Building on that point, Yousef emphasized the need for developing wholesome cooperation in economics, as well as research institutions to identify the challenges that may arise with the initiative. He observed that cooperation, open dialogue, and cultural exchanges are the soft power that would allow BRI to be better understood, better assessed, and to better serve the interests of MENA and China.
The workshop was organized into six sessions, corresponding to six principal thematic areas derived from themes outlined in the 2015 BRI action plan.
Session One: BRI and MENA in a Changing Global Landscape
Enseng Ho, director of the Middle East Institute at the National University of Singapore, emphasized the importance of developing a common legal infrastructure of arbitration—extending into finance and infrastructure—in order to harmonize procedures across China and the Islamic world.
Yahia Zubair, director of research in geopolitics at the KEDGE Business School, France, noted that U.S. hegemony over the international system, which was costly to MENA, is deteriorating. He encouraged China to be bolder in stepping in to fill the ensuing gap in global leadership and leveraging its positive regional perceptions.
Regarding MENA, Yang Guang, director of CAMES, identified four areas where China’s ties with MENA could be promising: petroleum, reindustrialization, infrastructure development, and finance.
Liu Zhongmin, director of the Middle East Studies Institute (MESI) at the Shanghai International Studies University (SISU) argued for a continuation of China’s noninterventionist approach to the region, while urging it to help increase MENA’s security capacity and advance its military presence in the region to protect trade routes—particularly against pirating.
Session Two: The BRI and Infrastructure Development in MENA
Nader Kabbani, BDC director of research, noted that the success of BRI depends on structuring successful projects. China must look beyond its need to deploy its excess capacity abroad. It must also mitigate against governance deficits in MENA by scrutinizing the technical merits of projects from both sides, and not simply relying on the stated interest of its counterparts.
Zhu Wenbin, representative from the China Development Bank, discussed the role of the Bank, which has up to $2.3 trillion in assets under management and runs 42 projects (in mining, transportation, energy, industrial parks, etc.) across the BRI. He stressed the importance of developing the financial sector in MENA to further facilitate the financing of infrastructure development projects.
Wang Zhen, SASS director of the Information Center for the Belt and Road, dismissed the idea of a Chinese “neocolonialism,” stressing the economic motivations behind China’s infrastructure investments, which were key in its own economic and social development and can prove to be essential for MENA.
Session Three: Economic and Trade Cooperation Between China and MENA
Raed Safadi, executive director of the Department of Economic Development in Dubai emphasized the importance of developing mutual trade facilitation agreements that would standardize trade practices across the BRI. He highlighted that trade between China and MENA should not be defined by oil and gas, and should facilitate the development of digital technology and renewable energy industries.
Sheng Yuliang, SASS professor of the Institute of World Economy (IWE), expanded on the kinds of agreements that have been pursued with countries in the region. He concluded that China should seek bilateral trade agreements with individual countries, starting with smaller economies and cross border e-commerce.
Yuang Bo, deputy director of the Institute of Asia Studies in China’s Ministry of Commerce, posed questions about the possible impact of those agreements, particularly on the Chinese petrochemical and energy industries where Gulf Cooperation Council (GCC) countries have a comparative advantage. She noted that any FTAs with the GCC would have to be carefully crafted to avoid hurting those domestic industries.
Session Four: Production Capacity Cooperation and Industrialization in MENA
Mustapha Nabli, former governor of the Central Bank and minister of planning and regional development of Tunisia noted that MENA currently suffers from hindrances to its production capacity, which put it at a disadvantage with China, including low investments in manufacturing, lack of open trade, high transportation costs, and competition from advanced economies. He laid out scenarios where production capacity cooperation would be useful for both China and the Middle East.
Zhang Youwen, former SASS director of the IWE, noted that China’s surplus production capacity is not necessarily harmful, because it can be leveraged through trade, investment, and engineering contracts that can help build the production capacity of MENA countries.
Sun Degang, SISU deputy director of MESI, highlighted the development model in China, which emphasizes feeding people first. He noted that the world power center is moving to Asia and MENA, which have several domains for cooperation, including sea port and railway construction, artificial intelligence, space technologies, and traditional medicine.
Session Five: Banking and Financial Cooperation between China and MENA
Nasser Saidi, former vice governor of the Central Bank and former minister of economy and industry in Lebanon, noted that China should extend more Chinese banks into MENA, establish further cooperation with the region’s sovereign wealth funds, and internationalize the Renminbi, while setting up structures to support e-commerce, digital free-trade agreements, and renewable energy.
Ding Yifan, professor at the Institute of Development Strategic Studies at Tsinghua University, criticized the fact that both China and MENA’s capital exports are conducted in other currencies. Such transactions can be costly due to mismatches in debt management and losses in assets. He proposed that MENA countries participate in future markets in China and that China open its capital market.
Xu Mingqi, former SASS deputy director of the IWE, emphasized that the Arab world does not lack funds, but that most money is being recycled in the U.S. and EU financial systems. The region—and China—should promote local financial institutions and investment funds, and extend them internationally.
Session Six: Energy and Resource Cooperation between China and MENA
Ibrahim Saif, former minister of energy and former minister of planning and international cooperation in Jordan, noted that advances in renewable energy are transforming the market, allowing a far larger number of producers to enter. He encouraged the BRI to take those developments into consideration and avoid overemphasizing conventional modes of import and export.
Pan Guang, CAMES vice president, noted that energy cooperation between China and MENA is key, as trade between them is dominated by energy and the export of small products.
Sun Xia, SASS associate professor at the Institute of International Relations, added that energy will only increase in importance. He noted that the United States will soon become an energy exporter, while China remains hesitant about tapping its shale reserves. This will increase the importance of China as an energy importer for MENA in the future.
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