From strength to strength: new boost for UAE – China relations

A lucrative trade deal agreed during the Chinese Premier’s recent visit to Abu Dhabi heralds a new era of commercial cooperation between China and the UAE

When Chinese Premier Wen Jiabao visited the UAE for the first time this week as part of a regional tour, bilateral trade was a high priority on the agenda.

A UAE agreement made during the Premier's visit is being viewed by analysts as a clear signal that the world’s second biggest economy intends to boost its business ties with the region. The two countries signed a pact signalling closer ties and a commitment to establish a long-term and comprehensive energy policy.

Significantly, the two nations also announced a currency swap worth 35bn yuan, or US$5.5bn, which will remain in place for three years with a view to boost Sino-Arab trade.

This is the latest in a series of currency swaps from China, which last year inked deals with Pakistan, Thailand, Kazakhstan, New Zealand, Uzbekistan and Mongolia.

The currency swaps signify favour and encourage business while also facilitating China’s goal to promote the use of the yuan in international trade.

China is already the second on the list of countries exporting to the UAE, with India at number one. Trade between China and the UAE in 2011 increased to US$32bn dollars in the first 11 months of the year, up from US$25bn the previous year. Some experts predict that this figure will grow to US$100bn by 2015.

The increasingly close relationship between the two countries should be viewed in the context of the Red Dragon’s energy requirements. According to the International Energy Agency (IEA), China is expected to become the world’s biggest oil importer by 2020 and while only a small amount currently comes from the UAE, this is set to rise. As oil prices top US$100 per barrel and energy security becomes an increasing global concern, it is highly likely that China will seek to boost its ties with its oil-producing trading partners.