China’s Green Energy Wave enters the Middle East
London (Special to Informed Comment; Feature) – Facing rising trade barriers and diplomatic tensions with the US and the EU, Chinese renewable energy companies are turning to Middle Eastern states as an alternative market for goods including electric vehicles (EVs), lithium-ion batteries, and solar panels. The US, the EU and Canada have all imposed tariffs on Chinese EVs, amid accusations that Beijing is dumping excess Chinese production overseas and using unfair subsidies. “Global markets are now flooded with cheaper [Chinese] electric cars. And their price is kept artificially low by huge state subsidies,” European Commission President Ursula von der Leyen said in September last year.
The EU has begun a probe into Chinese wind turbine companies. Then-Commission Executive Vice-President for Competition Margarethe Vestager warned that a wave of subsidised Chinese wind turbine exports: “is not only dangerous for our competitiveness. It also jeopardises our economic security.” The EU remains scarred by its loss of a trade war to China over the bloc’s solar power industry a decade earlier. Western governments and activists have also expressed concerns that China’s green sector is tied to human rights abuses like forced labour in Xinjiang.
In the Middle East, however, many governments remain open to Chinese green sector exports and have struck commercial agreements to gain investment from its major firms. In July, Saudi Arabia’s Public Investment Fund struck joint investment deals with Chinese solar power companies Jinko Solar and TCL Zhonghuan. Meanwhile, Saudi investment business ALGIHAZ signed a contract to build an energy storage facility with Chinese company Sungrow. The Australian Griffith Asia Institute calculated that altogether Chinese firms worked on green energy projects across the Middle East worth about $9.5 billion over 2018-2023.
Middle Eastern States Piggyback Off China
China’s government and Chinese state-owned or state-linked companies have been able to offer commercial and political advantages to Middle Eastern governments seeking to decarbonize their economies. Western engineering and manufacturing firms’ projects are regulated by numerous rules intended to prevent corruption, environmental harm and other negative development outcomes. Chinese companies under the direction of the ruling Chinese Communist Party (CCP) face no such restraints, though the quality of the infrastructure they have produced under China’s signature Belt & Road Project (BRI) initiative has varied. For autocratic Middle Eastern governments like the Gulf monarchies, however, Chinese companies have the ability to build high-technology critical infrastructure without the need to appease external stakeholders like the human rights groups or independent media outlets found in Western countries.
“Xi of Arabia,”
Chinese companies are also generally happy to operate in a Middle Eastern business environment that still often relies on patronage to get deals done. The CCP has cultivated particularly close ties with Saudi Arabia, the UAE, Iran, Egypt, and Algeria, with whose governments Beijing has signed comprehensive strategic partnerships (the most elevated type of bilateral agreement with China). These relationships have borne increasing fruit as the BRI has matured and new technology has widened the appeal of clean energy and other green industries. Petrostates like Saudi Arabia have belatedly woken up to the threat of climate change and their own potential ability to take advantage of clean energy like solar power.
Doing Deals to Decarbonize
Chinese President Xi Jinping met with UAE President Sheikh Mohamed bin Zayed Al Nahyan in Beijing in June. Xi promised his government would cooperate more closely with the Arab country on a range of industries including “information technology, artificial intelligence, the digital economy, and new energy.” China was already the UAE’s biggest trading partner in 2022 while the Arab state was Beijing’s biggest Arab trading partner, the UAE’s economy ministry said in 2023. While renewable energy development is only one aspect of the burgeoning diplomatic and trading relationship between the two sides, it is an important consideration for the UAE and its Net Zero 2050 strategy to decarbonize the country’s economy. Given China’s private sector is subordinate to the political aims of the ruling CCP, further Chinese green investment is likely to flow to the UAE in 2025. The UAE is also investing in renewables in East Asia, with its green energy firm Masdar aiming to install 2 gigawatts of renewable power in ASEAN countries by 2025. The firm was invited by the Philippines government to invest in Manila’s green sector too.
In May, the UAE’s Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi, said “new energy” and “critical minerals” were among the areas the country was interested in engaging with Beijing. Chinese CEOs held meetings with UAE officials in July following the UAE president’s state visit to discuss bilateral cooperation in various areas, including solar power and renewable energy. The UAE’s example is being replicated by other Middle Eastern governments with whom China has cultivated close relations. At the Forum on China-Africa Cooperation in September, Egypt signed agreements worth more than $1.1 billion with Chinese companies, which included the country’s first green chemical plant. China’s Befar Group will build a $500 million facility powered energy sources including natural gas, wind and solar energy. A second deal involves the creation of a $100 million solar panel factory. Chinese companies are building solar power plants in Algeria and becoming investors and co-investors in Saudi and UAE solar and wind projects as these two countries decarbonise their power grids.
China Seeks to Refute Dumping Narratives
Meanwhile, Middle Eastern demand for Chinese clean energy infrastructure and products allows Beijing to claim it is not engaged in overproduction in sectors like EV manufacturing or renewable energy products and dumping the resulting excess on foreign markets. Much criticism of Chinese trade practices in the country’s green industries has come from the US and other Western governments. Treasury Secretary Janet Yellen said in April that excess Chinese manufacturing capacity in sectors like EVs and solar panels was intensifying. Chinese state media and CEOs like the head of vehicle manufacturer Great Wall Motor International have denied this, although non-Western countries like Turkey have also imposed tariffs on Chinese exports like EVs. China has taken Turkey to the World Trade Organization in response.
Trade tensions between China and governments under pressure to restrict Chinese green technology exports are likely to endure in many parts of the world. In the Middle East, however, Beijing and local regimes continue to discover synergies between their development needs. China’s sluggish economy and growing trade tensions with the Global North have left it in need of new markets for its goods. Meanwhile, Middle Eastern governments need the country’s know-how and deep pockets if they are to overhaul their own 20th-century fossil fuel infrastructure and create new jobs in the emerging green economies of the 21st century.
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