Gulf States Go Digital With China – Analysis


By Mordechai Chaziza*

The US–China strategic rivalry extends to the struggle for control over the digital economy — particularly digital infrastructure and technological innovation. China’s digital economy is among the most vibrant in the world, ranking second globally in 2021 at US$7.1 trillion. It has become a crucial part of the relations between China and Gulf states including Bahrain, Kuwait, Iraq, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

The energy sector is still the largest recipient of Chinese investment in most Gulf countries. China’s crude oil imports originate from just nine Middle Eastern nations. Beijing’s oil and gas imports, infrastructure investment and arms sales give it regional influence that runs counter to the United States. The Gulf state economies have historically depended on energy exports for economic prosperity.

But the rise of digital technologies over the past decade has seen Gulf states diversify their economies by developing financial sectors and knowledge-based industries. That means digital cooperation between China and Gulf states could be a game changer for Beijing in its competition with the United States to achieve strategic superiority in the region.

The joint development of telecommunications, smart cities, artificial intelligence and technology-oriented businesses is a complementary endeavour for China and Gulf states. The young population of the Gulf are exposed to the growing presence of Chinese technology, ranging from social networking applications to digital payment platforms.

The Digital Silk Road (DSR) is the technological arm of the Belt and Road Initiative. The DSR Initiative has the potential to add US$255 billion to regional GDP and create 600,000 technology-related jobs in Gulf Cooperation Council countries by 2030. Still, DSR-related projects remain unevenly distributed among the Gulf states.

Tech giants have a role in delivering China’s DSR initiative and continuing the digital development of the region. Huawei is working with Saudi Arabia to develop digital infrastructure for religious pilgrimages. The firm has also partnered with Dubai officials to help update its airport and cooperated with the Dubai Electricity and Water Authority to build fibre optics and video surveillance.

In 2022, the UAE telecommunications company, Du, signed a Memorandum of Understanding (MoU) with Huawei to research, verify and replicate multi-access edge computing applications in the region. That includes leveraging 5G multi-access edge computing applications to live broadcast the Presidential Cycling Cup.

Huawei received permission to offer cloud computing services in Kuwait in July 2022. Alibaba has since pledged to build a ‘Tech Town’ with Meraas Holding, a Dubai-based developer, housing over 3000 high-tech companies. Alibaba has also inked deals to store cloud data in Oman and has a vast e-commerce footprint in Saudi Arabia.

Chinese artificial intelligence company SenseTime opened a regional headquarters in Abu Dhabi in 2019. Abu Dhabi Global Market and the Hong Kong Securities and Exchange have recently worked together to foster financial services innovation in Hong Kong and the United Arab Emirates.

Saudi firm M/s Aramco Asia is in negotiations to sign an MoU with Chinese firm Avic International on drone services and technology development. Chinese telecom firm Huawei is also trying to bid for the expansion of data processing centres in Dammam and Riyadh.

Chinese tech giants have notably participated in developing 5G networks in Gulf states. The United Arab Emirates and Kuwait were the first Gulf states to construct 5G networks. By 2019, the UAE 5G network covered 80 per cent of its cities, and Huawei had deployed more than 1000 5G sites across Kuwait.

China’s growing regional presence has led Washington to pressure Gulf states into picking sides. The United States perceives certain aspects of their digital cooperation with China as damaging to its national security. The Gulf states are aware of US concerns about China’s regional presence and they want to avoid getting caught in a great power conflict.

Despite doubts about Washington’s commitment to their security, Gulf states recognise that there is no substitute for the US military presence to block Iranian aggression. Gulf states are trying to diversify their economic and military support to avoid absolute dependence on Washington or Beijing. Picking sides risks the Gulf states losing their security partnership with the United States or their technological partnership with China.

The US military presence in the Gulf suggests a degree of military interdependence between the United States and Gulf states. China does not have the same ability to project global military power as it lacks global reach, foreign defence treaties and overseas military bases.

Nor does China have the money to replace Washington as the security guarantor of the Persian Gulf despite the United States proving itself to be an increasingly unreliable partner. That adds to the impossible situation facing the Gulf states as they balance their vital security partnership with the United States alongside burgeoning digital ties with China.

But the extent to which Gulf states can engage in economic or technological collaboration with China is a function of US pressure. Washington’s calls to slow the proliferation of Chinese technologies complicate the commercial environment for Chinese firms. China might, in response, use diplomatic and economic pressure to promote itself at the expense of the United States — making it hard for the Gulf States to maintain parallel partnerships.

In an era of geostrategic rivalry, Washington expects its Gulf allies to make stark and brutal choices. Gulf states must manage their digital ties with China while understanding that Washington’s concerns place limitations on their new technological partnerships.

*About the author: Mordechai Chaziza is senior lecturer in the Department of Politics and Governance at Ashkelon Academic College, Israel.

Source: This article was published by East Asia Forum

East Asia Forum

East Asia Forum is a platform for analysis and research on politics, economics, business, law, security, international relations and society relevant to public policy, centred on the Asia Pacific region. It consists of an online publication and a quarterly magazine, East Asia Forum Quarterly, which aim to provide clear and original analysis from the leading minds in the region and beyond.

Leave a Reply

Your email address will not be published. Required fields are marked *