Tech

Saudi Arabia Rising: From Oil Giant to Tech Powerhouse and China’s New Ally?

On November 28, at the Palace of Conferences in Issy-les-Moulineaux, Paris, France, members of the Royal Commission for the City of Riyadh in Saudi Arabia excitedly celebrated that their country had won the right to host the 2030 World Expo.

In the field of football, the Saudi sovereign wealth fund (PIF) acquired 80% of the shares of the Premier League Newcastle United club and achieved fourth place in the first season after the acquisition; in the field of e-sports, which has always been unrelated to the Middle East , Saudi Arabia has held events in multiple projects and is known as the “Oil Cup” because of its generous prize money. It has announced that it will host the E-Sports World Cup in 2024.

In addition, Saudi Arabia is also eyeing China’s cutting-edge technology. Pony.ai and Zebra.com, which many Chinese people may not be able to distinguish clearly, have both received investment from Saudi capital. In the field of smart cars, Yitu Technology, BeyonCa, Gaohe Automobile and other companies have also received investment from Saudi capital. Huge investment.

Just in December, Saudi Minister of Investment Al-Falih visited China and participated in the Saudi Investment Conference co-sponsored by the Ministry of Commerce of China and the Ministry of Investment of Saudi Arabia. He met with Chinese Minister of Commerce Wang Wentao and Vice Minister Li Fei, and had intensive contacts with many Chinese companies. .

Obviously, whether you are doing business overseas or looking for investment, Saudi Arabia has become an option that cannot be ignored.

Saudi Arabia, a country that was once so mysterious that it affected its sense of existence, is using a lot of money to gather traffic from around the world and change the global business landscape.

Its story is as exciting as the collection of Arabic folk tales “One Thousand and One Nights”. And the crown prince of this mysterious world, Salman, is the beautiful and witty Scheherazade in the story. Every time he twists his golden finger to touch wealth, after a short period of calm, a hurricane of wealth will sweep across the entire country.
Today, the best parts of the story are still being told day and night.
The power of oil and money

Saudi Crown Prince Salman Jr. is nicknamed by Chinese netizens as the “most ruthless post-80s generation.”

Salman Jr. is the son of the current Saudi King Salman bin Abdulaziz (hereinafter referred to as Salman Sr.). Saudi Arabia is an autocratic monarchy. In the early days of the kingdom, in order to unite the tribes, the first king Ibn Saud frequently married various tribes. He married many wives and gave birth to 45 sons, 36 of whom lived to adulthood.

Before his death, in order to appease his many sons, he designated that the throne would be inherited among his sons. This has also led to the fact that in the more than 80 years since the founding of the Kingdom of Saudi Arabia, all kings have been his sons, including Salman Jr.’s father, the current Salman Sr.

By the time the elder Salman took over, he still had living brothers. Through political means, Salman Sr. overthrew two crown princes: his brother Muqrin and his nephew Nayef Jr. Later, he successfully promoted his son Salman Jr. to the position of crown prince.

After taking office, Salman Jr. began to implement a series of reform policies. The core measures include promoting the listing of the state-owned oil company Saudi Aramco, launching the “Vision 2030 Plan”, expanding non-oil revenue sources, and promoting economic privatization and sustainable development.

However, the abnormal succession order and drastic reforms have caused Salman Jr. to encounter great resistance.

In November 2017, an “anti-corruption storm” swept through the Saudi political arena with lightning speed. At Salman Jr.’s signal, 11 princes and more than 10 current (former) ministers were arrested within a few hours and placed under house arrest in a five-star hotel in the capital Riyadh.

Later, the Saudi Anti-Corruption Commission reported that 87 people under investigation had reached settlements with the government after pleading guilty to the charges, and they obtained personal freedom after handing over their illegal gains; another 56 people were detained because they had been subject to other criminal charges. Prosecutors refused to settle; eight others refused to settle and were charged with corruption. This anti-corruption operation recovered 400 billion riyals (approximately 107 billion U.S. dollars) in assets.

After the anti-corruption incident, Saudi journalist Khashoggi was forced to leave Turkey because he questioned the legality of Salman’s actions. He was killed and brutally dismembered while going to the Saudi consulate in Istanbul to go through formalities.

“The death of Khashoggi” caused an uproar around the world – Khashoggi was not an ordinary reporter. He had interviewed bin Laden many times. He was one of the most famous political commentators in the Arab world and was the editor of the “Washington Post” during his lifetime. columnist with nearly 2 million followers on Twitter.

However, Salman Jr. remained unmoved. Faced with accusations, he first silenced the Americans with a large arms order, and later launched an oil price war with Russia. Under the instruction of Salman Jr., Saudi Arabia put forward demands that were unacceptable to the other party in the oil production reduction negotiations with Russia, causing the negotiations to break down. Then Saudi Arabia started a price war. On the one hand, it processes crude oil at significantly lower prices and provides historic terminal discounts; on the other hand, it fully releases production capacity and expands exports to seize market share.

Affected by this, the Russian ruble exchange rate plummeted, and the US stock market set a record of four circuit breakers. In the face of major changes, the impact of Salman Jr.’s coup was almost ignored by the international community.

Perhaps it was this encounter with the world that made Salman understand how much influence money and oil have in this world.
2030 Vision Plan

Money and oil are Saudi Arabia’s most important resources.

The Saudi economy relies more than 50% on oil exports, which is why Salman Jr. is eager to carry out reforms. The reform blueprint he conceived is to promote the listing of Saudi Aramco, Saudi Arabia sells 5% of its shares, raises US$100 billion in funds, and then invests in non-oil industries through PIF. At the same time, listing could also turn Saudi Aramco into a public company, tying foreign investors to Saudi oil security.

Saudi Arabian National Oil Company, also known as Saudi Aramco. In order to provide funds for Saudi Arabia’s transformation, the originally nationalized Saudi Aramco carried out joint-stock reform and was listed on the Riyadh Stock Exchange at the end of 2019. It hit the daily limit on that day, and the company’s total market value Reaching $1.88 trillion. This IPO set a global record for the scale of new stock fundraising, successfully raising US$29.4 billion for just 1.5% of the shares.

By the way, the Stock Exchange, a subsidiary of the Hong Kong Stock Exchange, has announced that it has included the Saudi Arabian Exchange in its list of recognized stock exchanges. Companies listed on the main board of the Saudi Arabian Exchange in the future can apply for secondary listing in Hong Kong. The Hong Kong Stock Exchange has also been seeking to list Saudi Aramco in Hong Kong. CSOP Saudi ETF, Asia’s first ETF (exchange-traded fund) that tracks the stocks of large Middle Eastern companies such as Saudi Aramco, was also listed in Hong Kong at the end of November.

Is $29.4 billion too much? For most companies, this is an astronomical figure, but for a giant like Saudi Aramco, it is just a drop in the bucket.

It is understood that Saudi Aramco’s net profit increased by 46% year-on-year last year to US$161.1 billion. Both the funds raised from the IPO and the profits from Saudi Aramco have been used for Salman Jr.’s “Vision 2030 Plan.” This reform plan has established three major vision goals for Saudi Arabia: the heart of the Arab and Islamic world, a global investment power, and a hub in Asia, Europe, and Africa.

At this point, this conservative Islamic country has also moved towards opening up: movie theaters have reopened since 1979, women can freely apply for passports to travel and drive, and travel restrictions on foreign tourists have also been greatly weakened.

Most of the funds raised by Saudi Aramco are controlled by PIF. This Saudi Arabian sovereign fund established in 1971 has total assets of more than 500 billion US dollars and holds Boeing, Facebook, Citigroup, Disney, Bank of America, BP, Uber, etc. Shares in well-known companies, chaired by Salman Jr. himself.

As the appointed successor of King Salman, Salman Jr. now holds important positions such as Prime Minister, Minister of Defense, Chairman of the Supreme Anti-Corruption Committee, and Chairman of the Economic and Development Affairs Committee. He is the true ruler of Saudi Arabia.

The “Vision 2030 Plan” currently has remarkable results – in 2022, Saudi Arabia will be the fastest-growing G20 economy, with a GDP growth rate of 8.7%. It is worth noting that the non-oil economic sector drove a growth of 4.8% .

According to foreign media reports, the growth and economic contribution rate of Saudi Arabia’s non-oil economic sectors will continue to increase this year.
Saudi capital prefers Chinese companies

In order to get rid of its dependence on oil, Saudi Arabia has focused on emerging industries that do not rely on industrial bases, such as tourism, e-sports, football, medical care, etc. According to Goldman Sachs analysis, Saudi Arabia will invest US$1 trillion in six key areas by 2030, including clean energy, metals and mining industries, transportation and logistics services, digital transformation, upstream energy, and downstream energy (petrochemical industry).

Many of these industries are the strengths of Chinese companies. With the continuous development of the “One Belt, One Road” initiative, the relationship between Saudi Arabia and China is becoming increasingly close.

In 2023, specific companies and projects involved in Saudi Arabian capital’s investment in China include: Saudi Aramco and Sinopec signed a cooperation memorandum to jointly develop an integrated refining and chemical joint venture project in China. The project is expected to invest more than 80 billion yuan and will build a refinery with an annual production capacity of 40 million tons and an ethylene unit with an annual production capacity of 2.6 million tons.

Saudi Arabia’s sovereign wealth fund cooperates with Chinese companies to jointly build the China-UAE (Ningxia) Production Capacity Cooperation Demonstration Park in Ningxia. The project plans to introduce companies from Saudi Arabia and other Arab countries to jointly carry out cooperation in clean energy, new materials, digital economy and other fields.

Saudi Basic Industries Corporation and China’s Wanhua Chemical Group have signed an agreement to jointly build a world-scale MDI plant in Jiangsu Province, China. The project is expected to invest more than 20 billion yuan and will become one of the world’s largest MDI production bases.

This is only one of the relatively large projects, and there are countless other investments in the field of science and technology.

According to the Financial Times, King Abdullah University of Science and Technology in Saudi Arabia recently purchased at least 3,000 NVIDIA H100 chips for the development of the supercomputer Shaheen III, which uses 700 NVIDIA Grace Hopper super chips.

At this year’s Global Artificial Intelligence Conference held in Saudi Arabia, the Saudi National Artificial Intelligence Center signed a cooperation with Huawei to address artificial intelligence-related capabilities in Arabic. Information shows that Huawei Cloud recently released the first commercial Albanian Pangu model 3.0 with 100 billion parameters in Saudi Arabia.

In the field of new energy vehicles, many companies that are lagging behind in the Chinese market have attracted the attention of Saudi capital.

Gaohe, which claims to be the “champion of luxury pure electric sales above 500,000 yuan,” actually sells less than 400 units per month. On June 11, the Saudi Ministry of Investment and Gaohe Automobile parent company Human Horizons signed an agreement worth up to US$5.6 billion. The two parties will cooperate in vehicle development, manufacturing and marketing.

At the end of last year, Tianji Automobile established a joint venture with Sumou Holding, a Saudi company, and plans to invest approximately US$500 million in two phases in Saudi Arabia to establish a new energy vehicle production and R&D base with an annual output of approximately 100,000 new energy vehicles.

In addition, Saudi Aramco has invested in a joint venture between Geely and Renault to develop next-generation synthetic fuel and hydrogen technology. Chinese companies such as Pony.ai, Zebra.com, Yitu Technology, BeyonCa, and Gaohe Automobile mentioned above have also received investment from Saudi capital.

On the other hand, traditional car companies have already established a foothold in Saudi Arabia. According to statistics, the annual sales of SAIC, Great Wall, Changan, Geely and other brands in Saudi Arabia have exceeded 10,000 vehicles.

In September, American electric vehicle company Lucid opened its first factory outside the United States in Saudi Arabia, with an initial annual production capacity of 5,000 electric vehicles. The reason why Lucid landed in Saudi Arabia is not only because the Saudi government promised to purchase up to 100,000 cars from the company within 10 years, but also because Lucid is the company with the highest shareholding ratio of PIF, with the latest shareholding as high as 60.60%.
It seems that it is not just Chinese automobile companies that are digging gold in Saudi Arabia.
Saudi Arabia has become a new hot spot for overseas exports

Many Chinese companies that have deployed overseas have already keenly planned their deployment in Saudi Arabia in advance. According to data.ai statistics, TikTok downloads in 2022 surpassed Tawakkalna, which was developed by the Saudi government in response to the coronavirus, and ranked first in the Saudi application and game download list. During the same period, SHEIN ranked first among retail software downloads in Saudi Arabia.

In the mobile game market, Chinese manufacturers also outperformed other players. Among the top six mobile games spent by Saudi users in 2022, Tencent, Yalla, Longteng Jianhe, Zhipin Network, and Lilith occupy 5 places.

Qi Xiao, CEO of Huawei’s Saudi Cloud Business, said, “Saudi Arabia is moving towards opening up in recent years, and the local government and various industries are promoting digital transformation at a high speed. The successful experience of Chinese companies in digital technology development and digital transformation is very suitable for Saudi Arabia’s current situation. In terms of development direction, opportunities are everywhere in Saudi Arabia’s digital industry.”

Saudi Arabia has also invested heavily in infrastructure construction, which Chinese companies are best at.

After the “2030 Vision Plan” was proposed, Saudi Arabia planned a brand new city NEOM on the Red Sea. NEOM is located in Tabuk Province in northwestern Saudi Arabia, adjacent to the Red Sea and the Gulf of Aqaba, close to the maritime trade route via the Suez Canal, and has a very unique appearance. The Line, the centerpiece of NEOM, will be one of the largest buildings in the world, reaching a height of 488 meters and a length of 120 kilometers, capable of accommodating millions of people. The two buildings with mirrored glass curtain walls integrate the city and nature by reflecting the surrounding environment.

NEOM plans to cover an area of ​​26,500 square kilometers and is expected to have 9 million residents by 2045. In the plan, NEOM is positioned as a global innovation and technology center and will focus on the development of nine major industries, including energy and water, biotechnology, food, advanced manufacturing and entertainment.

The estimated investment of NEOM is as high as 1 trillion US dollars. Due to the unreasonable planning and huge investment amount, NEOM was questioned by many people when it was proposed. However, NEOM has now started construction, and many Chinese companies are involved.

It is understood that China Railway Construction has become one of the first batch of constructors of the THE LINE new city project in the NEOM project. Blasting and excavation work at the site has begun for the tunnel’s tunnel and supporting tunnels. The “Middle East Economic Digest” reported that China Railway Construction won the relevant contract in June 2021.

The official website of Power Construction of China also shows that on August 7, 2022, Power Construction of China’s Saudi NEOM New City ultra-high tower pile foundation project officially started construction. This is the first basic pile foundation project to be started for the project.

In addition, according to the information reviewed by the reporter, China State Construction Engineering Corporation, Shandong International Economic and Technical Cooperation Co., Ltd., China Geological Engineering Group and other companies have also successively participated in the construction of NEOM.

The rise of Saudi Arabia is the epitome of the collective transformation of Middle Eastern countries. Middle Eastern countries are highly dependent on the oil economy. With the transformation of the energy structure, the pressure of carbon emissions, environmental governance, and cyclical fluctuations in oil and gas prices are forcing them to undergo economic transformation. In addition to Saudi Arabia, the United Arab Emirates has also proposed the “2030 Plan” and competes with Saudi Arabia in shipping, aviation, technology and other fields.

It can be said that there are abundant funds, blank industries, and huge development potential. For Chinese companies interested in overseas development, there are many opportunities hidden in the Middle East in the future.

error: Content is protected !!