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Growing China-Mideast Ties

Interviewee: Ben Simpfendorfer, Chief China Economist, Royal Bank of Scotland, Hong Kong
Interviewer: Jayshree Bajoria, Staff Writer, CFR.org
December 14, 2009

China became the largest exporter to the Mideast in 2008, overtaking the United States with nearly $60 billion of exports. Ben Simpfendorfer, chief China economist at the Royal Bank of Scotland in Hong Kong, says China's growing demand for oil has resulted in high growth rates in the Arab world, which in turn looks to China for consumer goods. China's growing exports to the Middle East also ensure employment for hundreds of thousands of workers otherwise facing potential job losses in the economic downturn.

Beyond the burgeoning economic ties, Simpfendorfer says Islam is central to the relationship. "Maintenance of good relations between China's government and its Muslim population is key to its relations with the Middle East," he says. The July 2008 riots involving Muslim Uighurs and ethnic Han Chinese in northwest Xinjiang province highlighted the troubles facing some of China's Muslims, who total about 20 million. But Simpfendorfer says the Arab world sees the Uighur issue more as an ethnic separatist problem than a religious one.

China's trade with the Mideast is not without consequences for the manufacturers in the region. Simpfendorfer says there are rising job losses in low-cost manufacturing countries like Egypt and Syria. Continued growth in China's exports to emerging markets could result in social and economic instability in these countries. A better trend, he says, would be an appreciation in the Chinese yuan that leads China to build factories in the emerging markets, resulting in more balanced growth within the industrializing world.

China also faces political challenges as it looks to greater engagement in the Mideast; Beijing walks a tightrope as it balances relations with Washington and Tehran. Simpfendorfer says China's concerns over the Iranian nuclear program outweigh its need for oil at present.

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