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China is the world's largest oil importer. For decades, Middle Eastern countries, especially Saudi Arabia, have prioritized relations with China to protect their major customers. On the Chinese side, there is less urgency to retaliate, and exports to the region pale in comparison to imports. That may change now.
As part of aggressive global expansion plans, a series of Chinese high-tech groups have begun expanding into Saudi Arabia. The latest is food delivery giant Meituan, which is looking to hire Riyadh-based staff. This is important. Meituan will choose the Middle East as its first overseas expansion outside of China.
Meanwhile, Chinese e-commerce giant Alibaba is working on partnerships with local companies in Saudi Arabia and the United Arab Emirates in an effort to expand regionally. Tencent plans to expand its cloud business there and invest in data storage. Fast fashion and e-commerce giant Shine is expanding its presence in Saudi Arabia with the launch of a fashion show and its first reality show.
China's technology in areas such as cloud services and AI is advancing rapidly, but the demand for Chinese apps and technology in large markets like the United States is threatened by rising geopolitical tensions. The two companies will face less political scrutiny in the Middle East, where their relationship is primarily based on economic interests. China is the largest trading partner for most Middle Eastern countries.
The slowdown in the domestic economy has increased the urgency of overseas expansion. Alibaba's December quarter earnings were lower than expected. Tencent suffered an unexpected sharp slowdown in sales from its core gaming business. Meituan's core local commerce profit margin is declining. Its stock price has fallen by a fifth in the past year.
Good timing. Saudi Arabia is aiming to grow beyond fossil fuels and is making serious investments in emerging industries such as AI. This year, the company created a $100 billion fund to invest in new technologies. The country's technology scene is in a relatively nascent stage, for example, the domestic cloud services market is only about $4 billion, while in the United States it is more than $200 billion and in China it is about $100 billion.
There are also incentives for Saudi Arabia. Last year, Russia overtook Saudi Arabia to become China's biggest oil supplier. So far, China's exports to Saudi Arabia account for only half of its imports. Knowing Beijing's good books will help deepen ties and improve trade relations.
june.yoon@ft.com
