The UAE's Natural RMB Progression

Mohamed Salama explains why the UAE is China’s ideal partner in the One Belt One Road initiative.

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Established trade-hub status, market infrastructure, and regulatory and government support give China multiple reasons to choose the UAE as a key player in its One Belt One Road initiative.

China’s global economic ambitions rest on numerous factors. Most pressingly, the Belt and Road (B&R) initiative requires the alignment of several core principles to deliver on its promised momentum. Consistent outbound investment from China is a given. But without the active participation of the more than 60 nations along this rebooted Silk Road, and steady adoption of the Chinese renminbi (RMB) currency, B&R will not be considered impactful or progressive.

Established financial, logistics and commerce friendly hubs to facilitate trade and investment flows are essential to this mix. Markets with existing infrastructure will serve many purposes, particularly those deemed strategic within the Chinese government’s broader RMB internationalisation goals. For a diverse region such as the Middle East, a core component of the B&R initiative, hub choice is of substantial strategic importance to the Chinese authorities.

Standard Chartered estimates China is planning to invest about $1 trillion in infrastructure along B&R trade routes over the next decade, much of it in the Middle East and North Africa. Current outbound investment by Chinese firms into the Gulf region – projected to be around 20 per cent of total volume by numerous sources – makes the maths surrounding the opportunity straightforward for both the Middle East and the hubs seeking to facilitate its business with China.

The United Arab Emirates has a solid claim to being the most logical partner for China in the Middle East and Gulf region.

Solid states