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China Builds Growing Middle East Export Market Share, At the Expense of Competitors
By Nader Habibi
Al-Jazeerah, May 31, 2006
High oil export revenues have enabled the countries of Middle East and North Africa (MENA) to purchase more goods and services from the rest of the world and as a result the entire region's merchandise imports have sharply increased in recent years. The imports of the MENA region as a whole grew by 27% and 19% in 2004 and 2005 to reach US$385 billion (3.8% of world trade level). Although the fast growth of the MENA market has created more export opportunities for all industrial countries, the competition among these countries for exporting to the region is very strong. As demonstrated in the table below, not surprisingly, industrial countries are among the top exporters to all MENA countries. In the past five years, however, Chinese products have posed a major challenge to other industrial countries. In 2005 China ranked among top exporters to half of the 20 MENA countries.
China's share of Saudi Arabia's import market grew from 3.6% in 2000 to 7.2% in 2005 as it rose from eighth- to fourth-largest exporter to the Kingdom. The United States is still the leading merchandise exporter to Saudi Arabia but its share has declined from 21.7% in 2000 to 12.8% in 2005. While the volume of Saudi imports has grown by 66% during this interval, the value of merchandise imports from the United States have remained unchanged at US$6.9 billion dollars. Another industrial country that has failed to increase its exports to Saudi Arabia is the United Kingdom. U.K. exports declined negligibly from US$2.42 billion to US$2.36 billion while its relative share of the Saudi market fell from 7.5% in 2000 to 4.4% in 2005.
The ascent of China is even more visible in the U.A.E market. After growing by 73% over 1995-2000, China's merchandise exports to the United Arab Emirates grew by an astonishing 320% during 2000-2005. As a result China's relative rank among top exporters to U.A.E. rose from 10th place in 1995 to first place in 2005. The U.S. and the U.K. are still among the top four exporters to the U.A.E. The data also reveal that China's ascent has come at a heavy cost to Japan, whose relative ranking fell from the top exporter to U.A.E. in 1995 and 2000 to sixth in 2005. China has had less success in smaller Gulf Co-operation Council (GCC) countries (Kuwait, Qatar, Bahrain and Oman) although its exports to these countries are steadily growing. The U.S., the U.K. and Japan have preserved their positions among the top five exporters to these countries in the past 10 years.
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Trade Partners with the Largest Shares of Merchandise Exports to MENA Countries in 2005 |
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First |
Second |
Third |
Fourth |
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| Algeria | France (27.89%) | Italy (7.64%) | Spain (7.01%) | Germany (6.61%) |
| Bahrain | Saudi Arabia (45.24%) | Japan (5.82%) | Germany (5.64%) | U.S. (4.76%) |
| Egypt | U.S. (11.67%) | Germany (7.88%) | China (7.13%) | France (6.94%) |
| Iran | Germany (14.24%) | China (8.29%) | Italy (7.51%) | U.A.E. (6.77%) |
| Iraq | Syria (22.34%) | Turkey (20.89%) | U.S. (12.00%) | Jordan (5.12%) |
| Israel | U.S. (23.47%) | Belgium (9.34%) | Germany (7.64%) | U.K. (6.19%) |
| Jordan | Saudi Arabia (17.72%) | China (7.41%) | Germany (6.25%) | U.S. (5.73%) |
| Kuwait | U.S. (14.36%) | Germany (11.39%) | Japan (8.57%) | U.K. (6.11%) |
| Lebanon | Syria (11.36%) | Italy (11.24%) | France (9.30%) | Germany (7.01%) |
| Libya | Italy (20.93%) | Germany (10.51%) | Korea (6.72%) | Turkey (5.49%) |
| Morocco | France (30.97%) | Spain (12.00%) | Italy (5.69%) | China (5.46%) |
| Oman | U.A.E. (19.44%) | Japan (16.88%) | U.K. (8.37%) | U.S. (7.23%) |
| Qatar | France (12.42%) | Japan (11.26%) | U.S. (11.23%) | Germany (8.86%) |
| Saudi Arabia | U.S. (12.83%) | Germany (9.63%) | Japan (7.83%) | China (7.18%) |
| Sudan | China (21.71%) | Saudi Arabia (9.03%) | India (5.11%) | Germany (4.94%) |
| Syria | Saudi Arabia (10.42%) | Egypt (6.02%) | China (5.95%) | Italy (5.73%) |
| Tunisia | France (25.32%) | Italy (22.98%) | Germany (9.63%) | Spain (5.42%) |
| U.A.E. | China (9.76%) | U.K. (9.56%) | U.S. (9.47%) | India (8.83%) |
| Yemen | U.A.E. (13.48%) | Saudi Arabia (10.71%) | China (9.08%) | Kuwait (4.65%) |
In addition to economic factors such as price and quality of each exporter's products, the geopolitical factors also occasionally play a role in a country's success in exporting to MENA countries. Iran, for example, has consistently used foreign trade as a tool for obtaining the support of its trade partners in its nuclear program dispute with the United States. In the second half of 2005 it imposed severe restrictions on Korean products in retaliation for Korea's opposition to Iran's nuclear program in an international ruling. Korea fell from the second-ranking exporter to Iran in 2000 (with a 10.5% market share), to fifth in 2005 (6.4% of total exports). Iran has also used trade and investment incentives to win China's support for its nuclear dispute with the United States. Consequently China's share of the Iranian market rose from 5.2% in 2000 to 8.3% in 2005. The decline in the relative share of U.S. exports in the Saudi market is also partly due to the difficult diplomatic relations between the two countries after September 11, 2001 and Saudi opposition to the U.S. occupation of Iraq.
The prices of oil and natural gas are expected to remain close to their current high levels in the next two years and MENA countries will have sufficient export earnings and international reserves to grow their merchandise imports from the rest of the world. We therefore expect a gradual increase in the Middle Eastern share in global trade. Middle East imports of industrial and manufactured goods will grow faster than demand for other products and competition among industrial countries for market share in MENA countries will remain intense. Asian countries - China in particular -have been able to increase their market share in many MENA countries and we anticipate that this trend will continue in the near term.
(Source of data for table above: IMF Direction of Trade Statistics)
Nader Habibi is an economist with concentration on Middle East. He works for Global Insight economic consulting firm. (nader.habibi@globalinsight.com)
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| Earth, a planet hungry for peace |
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| The Israeli Land-Grab Apartheid Wall built inside the Palestinian territories, here separating Abu Dis from occupied East Jerusalem. (IPC, 7/4/04). | ||
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| The Israeli apartheid (security) wall around Palestinian population centers in the West Bank, like a Python. (Alquds,10/25/03). |