China tech is seeking growth in the Middle East
China is the world’s largest importer of oil. For decades, countries in the Middle East, especially Saudi Arabia, have prioritised relations with China in order to safeguard a key customer. There has been less urgency on China’s side to reciprocate: its exports to the region have paled in comparison to its imports. That could now change.
A string of Chinese tech groups have started moving into Saudi Arabia as part of aggressive global expansion plans. The latest is food delivery giant Meituan, which is seeking to hire staff based in Riyadh. This is significant: Meituan would be choosing the Middle East as its first overseas expansion outside China.
Meanwhile, Chinese ecommerce giant Alibaba is working on partnering with local companies in Saudi Arabia and the United Arab Emirates for expansion in the region. Tencent is planning to expand its cloud business there and investing in data storage. Fast fashion and ecommerce giant Shein has been increase its presence by launching fashion shows and its first-ever reality show in Saudi Arabia.
While Chinese technology in areas such as cloud services and AI has been advancing rapidly, demand for its apps and technology in large markets like the US has been threatened by rising geopolitical tensions. The companies would face less political scrutiny in the Middle East, where ties are mainly centred around economic interests. China is the largest trading partner for most Middle Eastern nations.
Economic slowdown at home has added urgency for expansion overseas. Alibaba’s revenue in the December quarter missed expectations. Tencent’s sales in its core gaming business were hit by an unexpectedly sharp slowdown. Meituan’s core local-commerce margin has been falling; its stock is down a fifth in the past year.
The timing is good. As Saudi Arabia looks for growth beyond fossil fuels, it is getting serious about investing in emerging industries such as AI. It this year created a $100bn fund to invest in new technologies. It has a relatively nascent tech scene, with the local market for cloud services for example at just around $4bn, compared with more than $200bn in the US and around $100bn in China.
There is incentive for Saudi Arabia as well. Last year, Russia surpassed Saudi Arabia to become China’s largest oil supplier. Chinese exports to Saudi Arabia are just half that of imports for now. Getting into the good books of Beijing would help deepen ties and improve trade relations.
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