Chinese Companies Not Showing Sufficient Presence In FII – Analysis

By Zhou Chao

On October 29, the 8th Future Investment Initiative (FII) officially opened in Riyadh, the capital of Saudi Arabia. This event is considered one of the kingdom’s most important economic activities and is often touted as the “Davos in the Desert”. The conference brought together prominent figures from global business, finance, and technology sectors, and during the FII meetings, transactions worth billions of dollars were announced.

Initially, Saudi Arabia designed the FII to support and align with the implementation of the “Vision 2030”, aiming to promote the diversification and transformation of the national economy. The goal was to establish FII as a gateway for the outside world to enter Saudi Arabia, attracting intellectual and production support to offer advice and guidance for the kingdom’s development. However, as the FII has evolved, this institutional event has shifted from focusing solely on Saudi Arabia to addressing global issues, seeking solutions to tackle worldwide challenges.

The theme of the 2018 FII was “A Blueprint for the 22nd Century”, under which three parallel sub-themes were established. In addition to topics related to Saudi Arabia itself, two global themes were added: “Technology as Opportunity” and “Advancing Human Potential”. The theme for 2019 was “What is Next for Global Business”, while in 2021, it was “The Neo-Renaissance”, followed by “Enabling a New Global Order” in 2022, and “New Compass” in 2023. The theme for this year is “Infinite Horizons: Investing Today, Shaping Tomorrow”. The sub-themes under each year’s main theme have gradually expanded from climate change to healthcare, finance, education, and other areas, covering various aspects of global development and governance.

In addition to the themes, the organization of the FII has increasingly incorporated elements from Davos. In 2020, the hosting rights of FII became independent, managed by the newly established FII Institute, a global nonprofit foundation. The FII Institute has been advancing its “go global” strategy, holding priority summits in locations such as Hong Kong, Miami, and Rio de Janeiro. The composition of the board of directors of the FII Institute further reflects its global trend. In addition to the chairman, Yasir al-Rumayyan, other members include the CEO of the FII Institute, Richard Attias from Morocco, former Italian Prime Minister Matteo Renzi, Saudi Ambassador to the United States Princess Reema bint Bandar al-Saud, and Mohammed al-Abbar, founder and chairman of EMMAR Properties in the UAE. However, industry professionals have noted that as the FII increasingly adopts the characteristics of Davos, the presence of China at FII has gradually diminished.

Industry professionals have pointed out that in the early years of FII, Chinese companies had high levels of participation and enthusiasm, to the point where some even made a living off attending FII. However, this year, the participation of Chinese companies at the FII conference has noticeably declined. After consulting industry experts with years of experience attending the event, three main reasons were identified.

Firstly, there is the rising costs of attending the conference. In addition to adopting a Davos-like format in terms of its agenda and organizational structure, FII introduced a membership model in 2023. This model selectively invites elite thinkers, investors, and business leaders handpicked by the FII Institute, with the aim of enhancing the quality of both the participants and the event itself, thus strengthening the international influence of FII. Members not only gain access to the annual flagship FII conference in Riyadh each October, but also to four international summits held throughout the year, exclusive research reports from the FII Institute, and unique investment opportunities available on the FII platform. However, becoming an FII member requires an annual fee, with basic attendance costs for both companies and individuals set at USD 15,000. It is worth noting that while Chinese investment in Saudi Arabia reached a new peak in 2023, the overall pace of business cooperation between Chinese companies and Saudi Arabia has been relatively slow this year. For these companies, the high cost of attending FII may make it difficult to justify spending tens of thousands of dollars to participate.

Secondly, there are differences in management systems. In terms of annual fees, for top Chinese financial institutions and large construction companies, this would not be an astronomical figure. However, due to existing financial regulations, it is challenging to find a suitable expense category for allocating these funds. In contrast, Western investment banks and consulting firms are keen to explore opportunities within public investment fund (PIF) offices to grow their businesses, while the approach of Chinese companies is notably different. Experts say that these leading Chinese institutions, whether financial organizations or large construction companies, are mostly state-owned entities, and the approval process for overseas business trips follows public management procedures. Specifically, at least one month or 45 days in advance, approval is required before departure. If there are any changes in the itinerary, a letter of clarification may need to be written, and the approval process might even need to be restarted. Even if the trip proceeds as planned, for example, in the Gulf Arab countries, according to current regulations, the maximum duration of a visit to one country is 5 days (including international travel time), and to two countries is 7 days. Under such a management system, it would be difficult for Chinese companies to replicate the operational models of Western institutions.

Furthermore, there is a deep divergence in cooperation philosophies. Saudi Arabia’s international economic and trade cooperation philosophy is largely a continuation and development of the ideas from Western countries like the U.S. and Europe. This can be seen from the development of the FII, which has been deeply influenced by Davos. This reflects the widening, rather than narrowing, gap in the cooperation philosophies between China and Saudi Arabia, as well as other Gulf Arab countries. FII does not directly generate cooperative projects, hence when approval is sought for Chinese companies’ participation, the approval departments often question its tangible outcomes.

Similarly, when hosting forums and exhibitions in China, there is always a requirement to arrange project matchmaking and outline the results achieved. This results-oriented approach has its clear limitations. Looking back at the evolution of FII’s topic selection, it is clear that FII, as a high-end showcase promoted by Saudi Arabia, is not focused on specific projects but rather aims to lead trends or create concepts and standards. Whether it is trends, waves, or ideas and standards, they are not converted into concrete projects at the present moment, but instead lay the conceptual foundation for future projects or categories of projects to emerge. The biggest difference between Chinese companies and Western firms in exploring the Gulf market is that Chinese companies tend to focus on “projects”, while Western companies focus on “markets”, leaving the former to lag behind even at the earlier conceptual design stage.

The information from FII shows that during this conference, Saudi Arabia’s renowned energy developer ACWA Power announced on October 29, 2024, that it would invest USD 54 million to jointly establish a new energy technology research and development center in Lujiazui, Shanghai, in partnership with the Lujiazui Administration. Additionally, it will invest USD 800 million to co-develop Morocco’s wind power market with Gotion High-Tech. Private enterprises have demonstrated significant advantages in their efforts to attract Saudi capital, showing great flexibility and strength, and their vitality and practical impact should not be underestimated.

Final analysis conclusion:

In the past two years, cooperation between China and Saudi Arabia, as well as other Middle Eastern countries and capital, has been continuously strengthened. Recently, Saudi Arabia announced its agreement to establish a Saudi-China Special Economic Zone, which is seen as a sign of deepening cooperation. However, at Saudi Arabia’s most prestigious economic forum, the presence of Chinese enterprises has been shrinking, which is not a positive sign for China’s future influence and interests in the broader Middle East-Gulf region. Meanwhile, private enterprises have shown clear vitality in expanding cooperation with Gulf capital, and this is something that should be recognized.

• Zhou Chao is a Research Fellow for Geopolitical Strategy programme at ANBOUND, an independent think tank.