GCC can benefit from China

By Francis Matthew, Editor at Large
Published: May 22, 2008, 00:08

There will be a major shift in the world's power structure as China moves up to take its place as one of the world's two future superpowers over the next two to three decades. The change will not be very comfortable and will upset many conventional ideas that we all have at the moment.

This change will be particularly important for the Gulf states, and will force them into new economic alliances, which in turn will bring new political interests. The recent World Economic Forum on the Middle East spent a lot of time looking at how this shift might happen and what its impact will be.

The new economic network will probably include China as a manufacturing centre, India as a service centre, and Gulf Cooperation Council (GCC) states offering energy and capital and Africa bringing substantial territories of arable land.

But these economic focuses are only part of the picture since all the regions in this emerging network will become more domestically prosperous in the next 20 years, and their people will demand more and higher quality services and goods.

The largest force this new economic alliance will be China, which is the forth largest GDP in the world today, but is only the 106th if measured in GDP per capita. This means that even if it is very big today, it can only become a lot bigger as it makes its way up the chart.

This will create a huge demand for energy, and along with Iran and Iraq, the GCC is well placed to provide the energy in projects that will dwarf the present day scale of operations.

China's future demand will make the big volumes around the Iran-Pakistan-India, or even the Dolphin project, seem puny. Huge investments will be needed to let the future GCC supplies get to China, which will cement the future alliance, deepening it for both sides.

The tremendous business opportunities in investing in China's march up the GDP per capita chart means that any large Gulf company with global businesses will not be able to avoid working in China over the next 20 years.

Arabs will become familiar with China and its people, speaking one or more of its languages, and working there.

USA politics

This shift means that the sole reliance on the United States from a strategic point of view may have to change. It is not clear how China will use its new global political influence, but if it follows what it has been doing for the past two decades, it will be a relatively disinterested power.

What is clear is that the proportion of the Gulf's economic links with the US will fall in relation to the rest of the world, as has already started. This has been made amply clear by the way that the economic downturn in the US has not devastated the Gulf or many other developing countries.

The power of the new economies has allowed the world to ride out the American crisis in a way that would have unimaginable a few years ago.

It is therefore possible that we are watching the high point of American power in the world. We certainly have an incumbent president who believes in using American power, and he has stretched it way beyond what his predecessors wanted, as he sidelined the United Nations and pursued his unilateral goals.

In the future, the US may find the multi-polar world of the future too powerful to ignore, and will not be able to force the world to accept its views, for example on how democracy should be implanted by force.

This is good news for the GCC as it will find itself able to build many new alliances and find a more open position in the world.

While no GCC state welcomes the Bush view of the Middle East, most enjoy good relations with the United States and appreciate the values that the United States stand for. But this will not exclude the GCC looking for new major strategic partners in the world.

India stands ready as a neighbour and two ministerial visits this month have made clear that it is already a willing and good friend. China is fast becoming the dominant force that will be there for centuries.

And of course the GCC itself has yet to mature into a working regional body capable of taking its place as a single entity in the councils of the nations.

But regardless of its failings today, the GCC and the Arab world is where the UAE is based and will find its closest and most vital alliances, as they all find their way forward into their multi-polar future.