35 Asian Legal Business | September 2024 China and the Middle East, as a result of which many Chinese companies decided to move their factories in Southeast Asia to Saudi Arabia and other places in the Middle East,” explains Hou. Since this May, with the U.S. announcing anti-dumping and antisubsidy investigations of photovoltaic cells from those four Southeast Asian countries, another group of Chinese photovoltaic companies have begun to relocate. “Because of the prior approval process from the National Development and Reform Commission, the Ministry of Commerce, the State Administration of Foreign Exchange and other agencies in China, these clients usually have very tight project schedules.” Apart from factors attributable to the Chinese side, social development needs in the Middle East constitute another driver. Ma Jun, director of Ning Ren Law Firm’s Beijing office, tells ALB that Saudi Arabia and the UAE have been promoting economic diversification in recent years. “To support Saudi Arabia’s 2030 development vision, sovereign wealth funds from the Middle East with Saudi Arabia as the core have been actively making industrial investments in China, hoping to attract high-quality Chinese companies to expand their Middle Eastern business. Examples include investment in NIO by CYNV, an investment firm backed by Abu Dhabi, and investment in Lenovo Group by Alat, a company of Saudi Arabia’s Public Investment Fund.” According to Global SWF data cited by Reuters, from June 2023 to June 2024, Middle East sovereign wealth funds have invested $7 billion in China, a five-fold increase year-on-year. Capturing all industries As to what industry clients are most attracted by this round of investment in the Middle East, Jia says: “The attraction is all-round. Chinese clients from all industries have shown strong investment interest”. In fact, Chinese companies are no strangers to investing in the Middle East and developing business there. The pioneers among them are infrastructure and construction engineering companies. As projects, financing and dispute resolution in this field are exactly Jia’s specialisation, he has witnessed first-hand recent changes in relevant investments. “Large central or State-owned engineering enterprises from China have almost all set up regional offices or branches in Dubai, and the projects undertaken by Chinese contractors range from power stations and solar energy to roads, bridges, ports and high-rise buildings, covering all industries. This group of contractors has gained experience over many years, and many have managed to localise their operations. In the past two years, more Chinese companies of a smaller size have begun to enter the Middle East to meet huge infrastructure renewal needs in the Middle East, especially from Saudi Arabia.” According to Jia, the GCC countries, by virtue of their strong oil economy, have attracted a large number of landmark infrastructure and engineering projects and accordingly well-known contractors, sub-contractors and suppliers in the global construction scene, and thus represent “a global stage”. Therefore, the projects and deals he and his team get involved in on behalf of Chinese companies actually have a very strong international flavour. “We have created a dispute resolution service chain covering Beijing, Dubai and London,” says Jia. For example, in 2022, he led the successful withdrawal of a 130-million-yuan bank letter of guarantee case faced by a Chinese contractor of the Abu Dhabi Airport project, and assisted the Chinese EPC contractor of a major photovoltaic project in the Middle East in responding to and winning the ICC London arbitration filed by a Spanish subcontractor. As the industries represented by Chinese companies coming to the Middle East have become more diverse in the past two years, Hou shares several fields that she pays special attention to. “The first is the new energy vehicle (EV) industry. In terms of business logic, the Middle East, although a very good consumer market, is relatively expensive on the production side for labour and R&D costs. However, given the intensified competition in the domestic market this year, some auto companies have begun to entertain the idea of setting up factories in the Middle East. For example, in one project that we are currently involved in, the client plans to set up a sales company and build a sales network in Saudi Arabia first and will consider setting up an R&D and manufacturing base there after its products are accepted by the local market.” The second is traditional manufacturing. Since 2023, Hou and her team have been involved in a metal smelting project in Saudi Arabia with investment of tens of billions of dollars. According to her, “on the one hand, a project like this consumes a lot of energy, and energy cost is relatively low in the Middle East. On the other hand, such energy-intensive enterprises currently find it difficult to obtain quotas for production capacity increase in China.” The challenge of such projects often lies in their huge size, and “from early-stage site selection, project planning, to financing, etc., detailed technical work is required in all aspects.” Hou also pays attention to two other relatively new areas. One is the financial industry, “including traditional large banks and private equity investment funds. For GPs, the Middle East has become a good option for raising funds overseas. We have seen that a large number of Chinese private equity firms are considering setting up offices in the Middle East, but how much money can actually be raised and how to meet the back-home investment requirements of local funds need further observation.” The other is e-commerce. “According to public reports, Shein, Temu and Alibaba already have business presence in the Middle East via the business model of selling low-cost Chinese products to the Middle East through digital platforms. Chinese products are said to have influenced the consumption and lifestyle of people living in the Middle East to a certain extent, and this is very interesting,” adds Hou. Middle East
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