Editor's note: Recently, the Middle East has once again become the focus of attention. On the one hand, Chief Executive of HKSAR John Lee and U.S. President Donald Trump's visits to the Middle East show that China and the U.S. are gradually stepping up their presence in the region; on the other hand, according to foreign media reports, Israel may strike Iran's nuclear facilities, and the situation in the Middle East may be heating up again.
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. Recently, the Middle East has emerged as one of the most prominent news keywords, aside from the trade war initiated by former U.S. President Trump. On one hand, both Hong Kong Chief Executive John Lee and U.S. President Trump visited the Middle East, which may suggest that the U.S. and China are increasing their engagement in the region. On the other hand, last week, CNN reported that Israel might be preparing to strike Iran's nuclear facilities, indicating a potential escalation of tensions in the Middle East.
Today, our topic will focus on the Middle East. We are joined by distinguished guests: Liu Qiang, Vice Chairman of Shanghai Rimpac International Strategy Research Center; Li Luxia, Director of the Southeast Asia Research Center at the Industrial and Commercial Bank of China (Asia); and the renowned economist Song Qinghui. Welcome to all of you!
First, I would like to ask Mr. Song: What are your thoughts on the recent visits to the Middle East by John Lee and former U.S. President Trump? What considerations might have prompted these visits at this time?
【Song】The recent visits to the Middle East by John Lee and former U.S. President Trump, while differing in identity and purpose, reflect the growing importance of the Middle East in the global geopolitical and economic landscape. Specifically, Mr. Lee's trip occurs against the backdrop of ongoing global economic shifts, where Chinese companies are actively seeking to diversify their markets. As a gateway for China's foreign engagement and an international financial center, Hong Kong naturally takes on the responsibility of expanding into emerging markets.This indicates that Hong Kong aims to reduce its over-reliance on traditional Western markets and seek new growth points for its economy through engagement with the Middle East.
On the other hand, Trump's visit underscores the central role of the Middle East in U.S. foreign strategy. The visit sends a message about solidifying the U.S. relationship with traditional allies like Saudi Arabia and the UAE, ensuring America's security and political influence in the region.
【Anchor】Now, regarding the outcomes of these visits, how would you evaluate whether they achieved their initial goals? Is there a shift of Middle Eastern countries toward China or the U.S.?
【Song】The relationship between Hong Kong and the Middle East is currently in a phase of actively expanding and establishing forward-looking ties. I believe Hong Kong's goal is to leverage its advantages as an international financial center and traditional service hub, making it a conduit for Middle Eastern capitalaccessing the Chinese mainland and the Asia-Pacific region, while also attracting Middle Eastern funds to Hong Kong.
The U.S. relationship with the Middle East is more complex. On one hand, relations with some traditional allies have fluctuated in recent years, facing competition from emerging powers like China in both political and economic arenas. On the other hand, the U.S. maintains a high level of dependence on the Middle East for security, military, and intelligence cooperation. I don't see a scenario where the Middle East shifts allegiance exclusively to the U.S. Most Middle Eastern countries, especially maritime nations, pursue pragmatic andmulti-alignment diplomatic strategies. They tend not to choose sides between the U.S. and China but seek to maximize their own interests, recognizing that maintaining good relations with both powers is crucial for their economic development.
【Anchor】Now, Mr. Liu, how do you assess the current state of relations between mainland China, Hong Kong, the U.S., and the Middle East after these recent intensive visits? Is there evidence of a shift toward China or the U.S. in the Middle East?
【Liu】The situation for mainland China, Hong Kong, and the United States in the Middle East has its own strengths and weaknesses. Hong Kong's primary advantage lies in its economy, but it is relatively weak in other areas. Mainland China's strengths are mainly reflected in economic and trade cooperation, which is generally welcomed by Middle Eastern countries because it is not accompanied by any political conditions. However, its weaknesses are concentrated in the areas of ideology and religion, which differ from those prevalent in the region, making seamless cooperation challenging. The U.S. advantages in the Middle East focus on hard power and some aspects of soft power, but there are significant problems. These include a mix of pro-U.S., anti-U.S., and fearful attitudes among Middle Eastern countries. Additionally, U.S. policies in the region have historically been marked by irrational pragmatism, leading to ongoing issues and a failure to achieve desired goals.
【Anchor】Now, Ms. Li, why do you think both the U.S. and China are placing significant importance on the Middle East in the current context?
【Li】Currently, Middle Eastern countries are actively promoting a diversified economic transformation, moving away from their traditional reliance on energy. Meanwhile, China is continuously pushing for deeper economic openness and accelerating its industrial transformation. This creates vast cooperation opportunities in the infrastructure, energy, and manufacturing sectors. Moreover, the Middle East is rich in oil, gas, and mineral resources, while China's large manufacturing industry has a strong demand for these resources, providing a solid foundation for mutual trade cooperation. In recent years, trade between mainland China and Middle Eastern countries has been growing rapidly, surpassingUSD500 billion in 2020.
The Middle East also maintains close economic ties with the U.S. Currently, as the U.S. government addresses debt pressures and promotes re-industrialization, the cooperation potential with the Middle East has gained more attention. On one hand, high oil prices have enhanced the financial strength of Middle Eastern countries. On the other hand, the development of the photovoltaic industry has resulted in relatively low electricity prices in the region. Additionally, Middle Eastern countries are actively advancing digital economic development, providing a foundation for U.S.-Middle East cooperation in cross-border investment and industries such as semiconductors.
【Anchor】Yes. Mr. Liu, what is your perspective?
【Liu】The Middle East holds significant influence on the world, both in terms of energy and religion. To borrow from Brzezinski's concept of the geopolitical chessboard, I believe this region is a new focal point of global geopolitics. Therefore, effectively managing the Middle East brings substantial benefits, which are self-evident. This is why both the U.S. and China view the Middle East as a very important area to focus on.
【Anchor】Now, Mr. Song, looking ahead, how do you assess the trajectory of relations among mainland China, Hong Kong, the U.S., and the Middle East?
【Song】I foresee that the relationship between Hong Kong and the Middle East will gradually deepen, becoming an important bridge. Hong Kong will strive to become the gateway for Middle Eastern capital accessing the Chinese market and a launchpad for Chinese enterprises investing in the Middle East. There will likely be enhanced cooperation in areas such as green finance, digitalized economy, technological innovation, and professional services. In the future, Hong Kong will also serve as a convenient passage for Middle Eastern companies and talents entering Asia, especially the Greater Bay Area.
The relationship between the U.S. and the Middle East may become increasingly complex. I have noticed adjustments within the U.S. military presence and security levels in the region, but the Middle East's status as a major security partner for the U.S. is unlikely to be fully replaced in the short term. The U.S. will continue to focus on the energy market, prevention, and regional stability. There may be disagreements with certain Middle Eastern countries on issues like human rights and democracy, but overall, competition and cooperation will coexist, and this partnership will likely be emphasized in the future. The independence and autonomy of Middle Eastern countries are strengthening, and a diversified foreign policy will become the norm for them.
【Anchor】Now, Ms. Li, what are your thoughts?
【Li】The Belt and Road Initiative and the strategic alignment with the Middle East countries' 2030 visions provide an objective foundation for ongoing deep cooperation between mainland China and the Middle Eastern nations. In terms of the depth of economic and trade cooperation, taking Qatar, the UAE, and Saudi Arabia as examples, mainland China accounted for 7.7% of exports to these three countries and 18.8% of imports in 2023. In contrast, the U.S. accounted for 2.9% of exports and 7.0% of imports, respectively, making mainland China the largest trading partner for these three nations.
Regarding the breadth of economic cooperation, in recent years, mainland China's trade with the Middle East has expanded from energy to areas such as the digitalized economy, green infrastructure, and high-end manufacturing. Hong Kong has also been actively engaging in deep cooperation with Middle Eastern countries in areas like financial technology innovation, green energy, and asset management. For example, the M-Bridge project, a multilateral central bank digital currency initiative, involves significant collaboration with the Central Bank of UAE.
Additionally, Hong Kong leverages its strengths as a financial center and in legal and consultancy services to facilitate investments from mainland enterprises into the Middle East and help Middle Eastern companies explore the mainland market, acting as a crucial super connector and value enhancer.
Regarding the prospects for cooperation between the Middle East and the U.S., as discussed earlier, in the context of the U.S. government addressing debt pressures, promoting manufacturing return, and competing in new energy innovation, it is expected that the U.S. will continue to actively promote cooperation with the Middle East in trade, investment, and finance.
【Anchor】Now, Ms. Li, how do you think Hong Kong should leverage its positioning to expand into the Middle Eastern market? Specifically, what should be done in terms of attracting Middle Eastern capital and developing cooperation in the real economy? And what does strengthening cooperation with the Middle East mean for the Hong Kong market?
【Li】Looking ahead, Hong Kong can combine its unique advantages to further enhance its role as a super connector and value enhancer, serving regional economic and trade cooperation. This process can also support the local economy's diversification and transformation, as well as contribute to the development of an international financial center.
In terms of trade and investment cooperation, Hong Kong can build a more comprehensive economic and trade connection platform, promote the signing of free trade agreements, and provide valuable services for mainland and regional enterprises investing in Middle Eastern companies, as well as for investments in Hong Kong and mainland markets. This creates opportunities and direction for Hong Kong to leverage its strengths.
The attractiveness of Hong Kong's headquarters economy is also expected to be enhanced in this process. In terms of financial connectivity, further strengthening the links between Hong Kong and the Middle Eastern markets in asset management, bonds, and stock markets can enrich cross-border financial products, facilitate investment transactions, and offer tax optimization schemes to attract Middle Eastern capital. This can help position Hong Kong within the broader Asia-Pacific market, allowing investors to share in the growth and transformation benefits from the Middle East. Recently, CATL's IPO in Hong Kong, which introduced cornerstone investors from the Middle East, has played a positive and demonstrative role in enhancing the valuation of Chinese stocks in the new energy vehicle (NEV) sector.
【Anchor】Mr. Song, what are your thoughts on the cooperation between Hong Kong and the Middle East?
【Song】I believe there are two key areas to focus on for future cooperation. First, Hong Kong should leverage its international expertise in areas such as law, accounting, auditing, arbitration, consulting, construction, urban planning, and project management to provide high-level services for Middle Eastern countries in infrastructure development, economic diversification reforms, and international operations.
Second, we should further strengthen cooperation in innovation and technology. By utilizing Hong Kong's technological advantages and the collaborative effects of the Greater Bay Area's industrial chain, we can engage in joint research and development, talent exchanges, or technology transfers in fields such as artificial intelligence, big data, biotechnology, smart cities, and financial technology. Additionally, Hong Kong can serve as an important bridge for technological cooperation between the Middle East and the Greater Bay Area.
【Anchor】Now, regarding the recent CNN report that U.S. intelligence suggests Israel may be preparing to strike Iran's nuclear facilities, how do you view the tense situation in the Middle East as a potential uncertainty for expanding into the market? What impact do you think the Middle Eastern situation has on international cooperation?
【Song】First, if a military conflict occurs, it could lead to the destruction of local infrastructure, supply chain disruptions, threats to the safety of personnel, and a significant devaluation or freezing of assets. Clearly, the return on investment for businesses would face immense uncertainty.
Second, war or regional conflicts could trigger economic recession, inflation, and a decline in household consumption capacity, leading to stagnation in business activities. In such a context, normal market orders would be severely disrupted.
Finally, ongoing tensions could erode international confidence in the Middle East, resulting in significant capital outflow. This would make it exceptionally difficult for businesses to secure financing in the region. The tense situation in the Middle East has far-reaching implications for international cooperation. For instance, in terms of energy, as the largest global energy supply region, any conflict could directly cause sharp fluctuations in international oil and gas prices, triggering inflationary pressures and economic uncertainties worldwide, thus impacting each country's energy security strategies.
From the perspective of great power rivalry, tensions in the Middle East may exacerbate the strategic competition and influence struggles among major powers such as the U.S., China, Russia, and the EU. These countries are likely to intervene more frequently in regional affairs, whether through diplomatic mediation or military and economic aid, to safeguard their interests, further complicating the situation.
【Anchor】OK, thank you. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang. Thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung, Rachel Liu | Translate: Kato Ip | Proofread: Chris Liu
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