The global context for President Xi’s visit was that China had shown signs of moving into the Middle East, as the US had indicated its desire to reduce its influence in it. Now, Beijing is expanding its footprint in the region. Also, Xi’s visit came against the backdrop of a period of geopolitical realignment and strained US-Saudi relations over energy supplies and human rights concerns. Another fundamental global context for the visit is that the newly confident China is asserting itself as a global power countering the overwhelming US influence. More specifically, China aimed at somehow weaning Saudi Arabia away from the formidable American embrace. Also, a new geostrategic reality in the Middle East was the growing role of Saudi Arabia in it. Therefore, the visit indicated that China was seeking to expand its ties with Saudi Arabia.

The summit was a milestone in cementing political ties and paving the way for a larger Chinese role in Arab economies and security. Saudi Crown Prince Mohammed bin Salman (MBS), the de facto leader of the kingdom, went out of his way to welcome Xi, giving the Chinese president a far better reception than the one he offered President Biden in July.

The trip was a remarkable success and will usher in a new phase for the advancement of relations between the two countries. It realized the China-Saudi bilateral agreement, participation in the first Arab Summit, and participation in the Gulf Summit. The first China-Arab States Summit was one of the most momentous events that have taken place in the recent past. The summit issued the Riyadh Declaration signed by heads of the state of 21 countries, announcing that China and the Arab states agreed to make all-out efforts to build a China-Arab community with a shared future in the new era of Saudi Arabi and China also symbolically inked a comprehensive strategic partnership agreement and a harmonization plan. Xi’s visit sent powerful signals that Sino-Saudi ties are entering a new period of rapid development. Saudi Arabia has emerged as one of Beijing’s leading strategic partners in the region in recent years.

Achievements

During Xi’s visit, Saudi Arabia and China released a nearly 4,000-word joint statement outlining more mutual understanding, and alignment on a swathe of political issues and promising deeper cooperation in many areas. Riyadh and Beijing were keen to show they agree on most key policies, including but not limited to, space research, digital economy, and infrastructure to Iran’s nuclear program, the Yemen war, and Russia’s war on Ukraine. Also, China and Saudi Arabia agreed to cooperate on peaceful uses of nuclear energy, to work together on developing modern technologies such as artificial intelligence, and innovate the energy sector.

A summit of 20 Arab leaders and President Xi, hosted by MBS, which Xi called a defining event in the history of Chinese-Arab relations, agreed on a 24-point declaration of commitment to intensify Arab-Chinese cooperation on each other’s core interests. These included committing to non-interference in internal affairs, supporting China’s policies in Hong Kong, strengthening cooperation to ensure the peaceful nature of Iran’s nuclear program, ensuring Tehran adheres to the principles of good neighborliness, and rejecting independence for Taiwan in all its forms from the Arab states.

In their summit statement, China and Arab states insisted on human rights based on equality and mutual respect and stressed their strong rejection of the politicization of human rights issues and their use as a tool to exercise pressure on countries and to interfere in their internal affairs. During a summit between China and the Gulf Cooperation Council (GCC) in Riyadh, Xi said China wants to build on the current GCC-China energy cooperation. The Chinese leader said it will continue to import crude oil in a consistent manner and in enormous quantities from the GCC, as well as increase its natural gas imports from the region. The summits stand out in the current international environment and create prospects of cooperation between China and Arab countries. They are pegged on joint action by Saudi Arabia and China to strengthen strategic partnership relations between the GCC and China, conclude a free trade agreement between the GCC and China, and institutionalize the GCC-China Meeting of Ministers of Economy and Trade in a “6 + 1” format between GCC and China.

Beijing’s green hydrogen and solar energy investments are expected to complement Riyadh’s clean energy push and together they will strengthen adaptive infrastructure in the Arab world. As Saudi Arabia synchronizes its priorities in the energy sector with China’s focus on bolstering supply chain resilience in the West Asian region, the kingdom is presenting itself as a regional center for Chinese factories. This is beneficial for both as stable energy supply chains are critical to the growth and recovery prospects of many regional Arab economies.

The two countries also decided on holding biennial Chinese-Saudi summits to implement their big plans for security and economic development.

The leaders also found common ground on an issue that divides Gulf states and the US – human rights. China is also keen to cooperate with Saudi Arabia on security and defense, an important field once reserved for the kingdom’s American ally. China has long been a close energy partner of Saudi Arabia, consuming a quarter of its crude exports last year. Given Saudi Arabia’s extraordinarily strong ties with the US, it is moving very cautiously in areas that are more concerning to Washington, notably defense, telecommunications, and nuclear energy.

Disturbed by what they see as growing threats from Iran and waning US security presence in the region, Saudi Arabia and its Gulf neighbors have recently looked eastward when purchasing arms. However, they do not have high hopes for Chinese weapons, which they view as being on a similar level to those from Russia.

The specific outcome of the trip

China and Saudi Arabia had signed 34 investment agreements covering several sectors in the fields of green energy, green hydrogen, photovoltaic energy, information technology, cloud services, transportation, logistics, medical industries, housing, and construction factories. The most significant agreement for China was the Huawei Technologies agreement worth $30 billion which will provide cloud computing services and help build high-tech complexes in Saudi cities. The China-Saudi deal came a little after the US recently imposed a ban on approvals of new telecommunications equipment from China's Huawei Technologies and ZTE, citing national security risks.

An alignment between Riyadh’s Vision 2030 and China’s Belt and Road Initiative (BRI) is now planned.

China wishes to replace the US dollar

The US dollar is a symbol of American status as the world’s sole superpower. Thus, it has been pushing for trading in the Chinese currency instead of the US dollar. To be accepted as the global currency, central banks must possess over US $700 billion worth of yuan in forex reserves. In 2015, 18 local financial institutions in China and 17 Russian institutions agreed to establish an efficient payment mechanism to assist the trade between the countries. In the same year, the yuan was awarded the status of a reserve currency by the IMF. China has since been pushing for contracts, which use the yuan as the trading currency. China once again pushed for an alternative payment system during the Shanghai Cooperation Organization’s summit in Uzbekistan in September 2022. As of September 2022, Russian businesses also opted to use the yuan to settle their payments, resulting in a boost in the yuan’s borrowing.

China would make full use of a Shanghai-based platform to process oil and gas transactions in the Chinese yuan, a potential threat to the global dominance of the US dollar. As things stand, 80% of global oil sales are done in dollars, and Saudi Arabia has inked deals exclusively in the greenback since 1974. Should a Saudi-yuan deal crystallize, it would bolster China's currency at the expense of the dollar, as well as the status of a critical player in global financial markets. The move would bring China closer to its goal of internationally strengthening its currency, and would weaken the US dollar, and potentially impact the American economy.

No announcements were made on the shift from the US dollar to the Chinese yuan concerning oil trading. While the Saudi Arabia-China oil trade in yuan is still to happen and Saudis show no enthusiasm for the idea. However, some progress has already happened as one of the agreements involves a top Saudi renewable energy company, Acwa Power, and the Industrial and Commercial Bank of China Ltd, China’s largest commercial bank, which is a direct participant in CIPS, the Chinese version of SWIFT, hinting at deep financial cooperation between the two authoritarian states. SWIFT is a global system based in Belgium that allows banks to transfer funds securely. The decision is a logical development in China and Saudi Arabia’s energy relationship but says it will take more time.

The Saudi and Chinese education ministries recently signed an agreement to provide Saudis with Chinese language learning material along with Chinese instructors to teach the language and literature in public educational institutions.

The Memorandum of Understanding (MOU) included the training of Saudi teachers in the Chinese language and teaching methods, as well as introducing them to Chinese culture in all educational institutions. The idea of introducing the Chinese language to the Saudi education curriculum was introduced by MBS in 2019. The Chinese language will soon become a language of significant impact in the future. Chinese is one of the six official languages at the UN and is spoken by 20 percent of the world population.

As expected, the visit had caused disquiet in Tehran. The web of regional alliances that Riyadh has woven for China’s participation is exclusive to Arab countries. And what riles Tehran most is that Saudi Arabia and the Arab alliance will be the most crucial template of China’s regional strategies in the West Asian and African regions.

Although China is a participant in the JCPOA negotiations, the joint statement states that the two sides “called on Iran to cooperate with the International Atomic Energy Agency, maintain the non-proliferation regime, and emphasize respect for the principles of good- neighborliness and non-interference in the internal affairs of states.” Meanwhile, the impasse in the nuclear negotiations in Vienna precludes Iran’s normalization vis-a-vis the West. President Xi Jinping also proposed to discuss the ownership dispute between Iran and UAE for the islands in the Persian Gulf. In the GCC meeting, Iran was accused of supporting terrorism and arms trafficking, to which President Xi Jinping did not show any objection.

The joint statement issued after the meeting between China and the GCC had referred to Iran as a supporter of regional terrorist groups and a proliferator of ballistic missiles and drones. The joint statement emphasized the importance of addressing the Iranian nuclear file and destabilizing regional activities and referred to the disputed islands in the Strait of Hormuz. The summit statement included three articles that were seen by Iran as hostile rhetoric against it.

Iran and Saudi Arabia have differences over the ownership of three islands - Greater Tunb, Lesser Tunb, and Abu Musa. The summit statement urged bilateral negotiations under the rules of international law, and to resolve this issue over the sovereignty of the islands following international legitimacy. In signing the statement, China crossed a red line in Iran’s eyes as Tehran’s standpoint remains that it will not countenance any talks on the islands. Iran maintains that the islands are an inseparable part of Iran.

The statement counterparts also referred to ensuring the peaceful and civilian nature of the Iranian nuclear program and called on Tehran to fully cooperate with the International Atomic Energy Agency (IAEA). The statement referred to the need for dialogue on Iran’s destabilizing regional activities and support for terrorist and sectarian groups and illegal armed organizations. In sum, the summit gained Saudis some support of China against rival Iran and therefore could be seen as a gain of the kingdom viz-a viz its arch-enemy. Saudi Arabia’s arch-rival. Undoubtedly, Xi Jinping has demonstrated his preference for Saudi Arabia over Iran.

The Summits were an extension of past developments. In 2014, Xi promised to double China’s engagement with Arab countries by 2023. In January 2022, China hosted the Arab Gulf Foreign Ministers in Beijing to discuss issues of common interest and deepen relations. as China has been cementing ties with Gulf states and investing heavily in their infrastructure deals. Compared to China’s involvement in other continents such as Africa and Southeast Asia, Beijing’s involvement in the Middle East has been slow to catch up. Relations with the Arab countries started picking up with the BRI and comparatively low-key deals signed between countries. However, China’s engagements with the Gulf states have attracted attention in the past few decades.

Today, Saudi Arabia is very keen to engage and partner with China because it wants to diversify its economy. China is also keen on partnerships with Saudi Arabia because of its sizeable economic potential. Saudi Arabia’s ability to fund its development plans is taken for granted as its economy is growing. The kingdom has now announced a preliminary budget surplus for 2022 of some $27 billion, its first surplus in a decade. Therefore, Saudi Arabia will cooperate with China to increase its footprint in the Middle East.