Headways and Headwinds Facing China’s Economic Diplomacy in the Middle East

China’s impressive success in rapidly expanding its investment and ties with the Middle East and North Africa (MENA) region in the last two decades is a significant, yet under-investigated subject. What factors contribute to China’s success? China’s prudent policies of win-win trade ties and investment in building infrastructure have paid dividends. Its lack of a colonial history in the region and its aversion to military intervention and political meddling in internal affairs of other countries, what Chinese leaders refer to as “respect for sovereignty” and their delicate political balancing act—that has enabled it to forge extensive ties at the same time with regional players such as Iran, Israel and Saudi Arabia which are antagonistic to one another in various ways—have all served as assets in its regional economic diplomacy. China comes to the table with a clean slate and deep pockets. Another asset in China’s arsenal is its massive investment in infrastructure in the MENA such as broadband telecommunications, ports, roads, railroads, dams, factories, and subways that often increases public welfare, and, for the most part, is perceived in a positive light by the public in host countries. Another benefit of investment in new infrastructure is that it has embedded China in the economies of the region for the long haul. Thus, a dependency has emerged that cannot be severed easily. However, the tendency of Chinese firms to take their own labor force to the region instead of employing the local labor force and creating jobs has generated a backlash in several countries. Moreover, many small indigenous businesses that cannot compete with cheap Chinese manufactured goods have become resentful of China’s expanding economic role in their nation. The Chinese business community needs to address these problems effectively if it intends to sustain its economic success in the region.