Recently, Saudi Public Investment** (PIF) announced an important announcement at the FII Priority Asia Summit in Hong Kong: plans to open an office in Chinese mainland in the near future. As Saudi Arabia's greatest sovereign wealth**, PIF's influence should not be underestimated. The chairman of the board of directors of Saudi Arabia is Saudi Crown Prince Salman Jr., showing his strong background and strength.
According to the annual report released by PIF in August 2022, the AUM of this ** has exceeded 223 trillion Saudi riyals, equivalent to 5,9455.6 billion US dollars, equivalent to about 4 yuan27 trillion yuan. This sheer size demonstrates the economic strength of PIF.
This year, the cooperation between China and Saudi Arabia has been frequent and deep. Taking PIF as an example, in January, the company cooperated with Futian District, Shenzhen, to establish the first private equity investment team of Blue Ocean Techcode (Shenzhen) with a scale of more than 1 billion US dollars. In addition, on December 8, China's ** Yida Capital announced that its $1 billion phase II ** received investment from PIF. These moves suggest that Saudi Arabia is strengthening its economic ties with China, a shift in its eastward strategy that portends a potentially significant shift in the global economic landscape.
Although Saudi Arabia is known for its abundant oil resources, it also faces problems of over-dependence on oil and a homogeneous economic structure. Oil, as the "black gold" and "industrial blood", occupies an indispensable position in modern industrial society. However, even though Saudi Arabia has a unique advantage in this area, it has faced challenges in recent years.
The global trend of new energy transformation is gradually rising, and in the long run, the strategic position of oil will inevitably decline. At the same time, the major breakthrough in shale oil development technology in the United States has gradually threatened Saudi Arabia's position with the upgrading of technology and the reduction of costs. It is against this backdrop that Saudi Crown Prince Salman Jr. has proposed Saudi Vision 2030, an ambitious plan for economic transformation that aims to increase non-oil revenues to 70% of total revenues by 2030. This plan demonstrates not only Saudi Arabia's vision for the future, but also its determination to adjust and diversify its economic structure.
Saudi Arabia is facing a complex set of challenges on the international stage. In addition to its status as a traditional oil producer, which is affected by the new energy transition, it must also contend with the instability of its relationship with its long-time ally, the United States. In the Saudi-U.S. relationship, there was a pattern of interdependence: Saudi Arabia relied on oil deals to support the dollar, while the United States provided security for the Saudis. However, the relationship appears to be loosening, with Saudi Arabia seen by the United States as an exporter of economic resources rather than an equal partner.
Especially during the two terms of Trump and Biden, the US-Saudi relationship has experienced obvious twists and turns. Relations with Saudi Arabia have been tense during the Trump era, and the change in attitude after Biden took office has caused dissatisfaction in Saudi Arabia. This change has seriously tested Saudi Arabia's trust in the United States.
Faced with the instability of the United States as a long-time ally, wealthy Saudi Arabia began to look for new international partners to balance and expand its diplomatic and economic ties. China, as a rising global power, has naturally become an important choice for Saudi Arabia.
When it comes to establishing ties with China, Middle Eastern countries usually take a direct and explicit approach – investment. For example, in March 2023, Saudi Aramco spent 24.6 billion yuan to buy a 10% stake in China Rongsheng Petrochemical, even though it was nearly half the market price. This generous investment strategy is not only based on financial benefits, but also as a means of deepening friendship and trust between the two parties.
This strategic shift in Saudi Arabia is not limited to a single investment. Immediately after, Saudi Arabia also announced plans to invest $12.2 billion in northeast China to build a large-scale refinery with a capacity of 300,000 barrels per day. These moves demonstrate the importance and long-term commitment of Saudi Arabia to the Chinese market.
In addition, PIF's plan to open an office in Chinese mainland is also a reflection of this shift. Hong Kong Stock Exchange Chief Executive Officer Nicolas Aguzin has said that by 2030, the investment capital of Middle Eastern sovereigns** could increase to $10 trillion, of which more than 10-20% could go to China. This ** reflects the confidence of Middle Eastern countries, especially Saudi Arabia, in China's economy, and the deepening economic ties between the two countries.
In the current international political and economic landscape, Saudi Arabia is gradually shifting its diplomatic and economic strategy, shifting its focus from the West to the East. It is estimated that as much as $1 trillion to $2 trillion is expected to be invested in Middle East sovereignty** to China. In addition, Saudi Arabia is actively expanding cooperation with Russia in the field of gas and defense. These moves suggest that Saudi Arabia is trying to reduce its dependence on the United States and seek more diversified international partners.
Why is Saudi Arabia eager to seek a deeper cooperative relationship with China?The fundamental reason is that China has provided Saudi Arabia with the multifaceted support it needs in its Vision 2030. This ambitious development plan covers three core directions, each of which is closely linked to China's support.
First, Saudi Arabia is committed to increasing its industrial output. Traditionally, Saudi Arabia has relied on its abundant oil resources to easily make high profits. However, in order to reduce its dependence on exports, Saudi Arabia plans to carry out in-depth oil processing to transform it into diversified petrochemical products. In this regard, China, with its experience and technology in processing large quantities of oil, is an ideal partner for Saudi Arabia to achieve its industrialization goals.
Secondly, Saudi Arabia focuses on the development of the new energy industry. Saudi Arabia is strategically located and has abundant sunlight, so it is committed to the development of the solar industry. By 2030, 50% of electricity will come from solar energy, and by 2050, 100% solar and wind will be powered. China is a global leader in PV production capacity, making it an indispensable partner for Saudi Arabia in the solar sector.
Finally, Saudi Arabia plans to develop tourism. Due to the limitations of the natural environment, Saudi Arabia plans to attract tourists by investing heavily in the construction of a futuristic city on the Red Sea coast. China's extensive experience and technical prowess in infrastructure construction make it an ideal partner for Saudi Arabia in this field.
To sum up, Saudi Arabia's strategic decision to move east is to wean itself off dependence on the United States while seeking cooperation with emerging economies such as China to achieve its ambitious Saudi Vision 2030. This shift has far-reaching implications not only for Saudi Arabia itself, but also for the global economic and political landscape.
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