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How is China shaping reforms in the Gulf?

China’s increased influence in the Gulf could help shape regional reforms, which could gradually undermine Western influence and interests in the region.

The China-brokered deal restoring diplomatic ties between Saudi Arabia and Iran highlights both the Gulf’s push for economic reform and diversification as well as the increasing influence of China in the region.

China’s economic success story is a source of inspiration for governments in the Gulf. Although their historical trajectories differ, their respective development models are both partially motivated by the transformative social and economic implications of large-scale protests: the 1989 Tiananmen Square protests in China and the 2011 Arab Spring protests across the Middle East.

While the Gulf’s regional development patterns are unique to their local context and national aspirations, they share many features with the so-called ‘China model’.

The China model

The China model inherited its foundations from the Beijing Consensus, which has four key components applied to ensure political stability after the 1989 protests:

First, more centralization of power in the hands of the party-state, less tolerance for opposition, and defiance of external political pressures. Second, a top-down developmental approach to peace and stability that focuses on collective rights and security of society as a whole. Third, creating economic prosperity, more jobs and better living standards to root out public discontent. Fourth, an aggressive nationalist ideology that has come to dominate the domestic political discourse under Xi Jinping.

Beijing’s policy is economic growth as the precursor to social stability and status quo preservation. In aiming to stave off long-term risks from over-reliance on fossil fuels, the Gulf’s economic diversification adopts many of the China model’s sociopolitical principles, such as peace through development, more centralized decision-making and more resilience in the face of external political pressures. It also proposes a restructuring of the social contract with serious steps towards ending the current rentier system built on oil and gas revenues.

A Gulf Spring?

The Gulf reforms can be viewed as a countermovement to the regional economic and social disintegration dominant since the Arab Spring, when Gulf states realized that social degradation and a lack of hope and economic participation among young people can fuel regional instability. The depth and scale of the reforms could bring about economic and societal transformation equivalent to a ‘Gulf Spring’.

The post-Arab Spring push for economic reform in countries that witnessed political change was largely unsuccessful due to political instability, social and economic decay caused by internal conflicts, and the rise of authoritarianism. By contrast, ongoing Gulf reforms encourage openness and sophistication of the economy, greater incentives for private enterprises, deeper integration into the global economic system, and technological innovation. Such objectives principally align with Western values of interdependence as pillars of a liberal rules-based international order, which is particularly important in the context of increased global competition with China.

Economic reform plans across the Gulf, such as Saudi Vision 2030, the Abu Dhabi Economic Vision 2023 and Qatar National Vision 2030, also reflect shared concerns about an over-reliance on oil and gas revenues as primary growth drivers and a basis for state authority. With fossil fuel consumption projected to diminish in the long term, it has become necessary to include economic diversification in regional development strategies. Plans focus on creating a knowledge-based market economy, diversifying growth levers away from oil and gas, attracting foreign direct investments (FDI), encouraging entrepreneurship and private sector participation, and creating high-value jobs to encourage the economic integration of their citizens.

Parallel reforms

China is itself going through a combination of economic restructuring and social reform. Since 2012, Xi’s economic vision has been focused on reviving the central authority of the Communist Party of China (CPC) in economic decision-making, remodelling China’s growth from fast growth to high-quality growth by emphasizing the central role of domestic consumption to stop the accelerated debt accumulation, redistributing wealth to address economic inequality and using the technology sector as a long-term growth engine.

In both models, the rationale is to create favourable economic conditions for a more sustainable growth model in the long term.
But the Chinese leadership’s control of essential growth-driving sectors, its top-down approach to economic planning and state monopoly in sectors connected to national and economic security riddles its ‘market economy with Chinese characteristics’ model with distortions and weaknesses.

Similar state-centric economic policies can also be found in Gulf diversification plans. Private sector activity is still conditional and reliant on government-sanctioned projects and political connections and this is likely to continue. Gulf countries must also disengage their supply-side reforms and domestic consumption from an over-reliance on oil and gas revenues.

Reforms in China and the Gulf are interdependent because oil will continue to power the fiscal and financial engines of diversification in the Gulf and will also be crucial for China’s energy security in the medium to long term.

Increasing Chinese influence

China’s influence is increasingly noticeable in Gulf states’ trade and foreign policies. China’s Global Development Initiative (GDI) and Global Security Initiative (GSI) advocate an inclusive collective security regime for the Gulf region, underpinned by Chinese solutions. Beijing promotes non-interference, sovereignty, multilateralism, de-escalation and economic integration as the pillars for peace in the region.

China’s facilitation of Saudi-Iranian rapprochement was a historic moment and highlights how its values are taking root in the strategic thinking of Gulf leaders. The push for de-escalation and normalization currently sweeping across the region, along with the hedging and increased emphasis on multilateralism, are proof of profound similarities with Chinese principles.

These developments run parallel to agreements to link China’s Belt and Road Initiative (BRI) with Gulf countries’ diversification plans and align their economic strategies, benefits and development values.

This increasing convergence is significant because it creates a symbiotic, rather than clientelist, relationship between the China model and new development patterns in the Gulf.

Although Gulf reform plans largely align with Western principles of globalization, openness and interconnectivity, China’s increased influence will likely shape their final outcome, which could gradually undermine Western influence in the region. Over time, this could create less favourable conditions for Western interests as the China model takes hold and offers no-strings-attached alternative to the clientelism that has long shaped Western interactions in the Gulf.

If the US, the UK and their allies do not take urgent steps to revise their approach to the Gulf – without abandoning their values – they may lose the chance to influence the long-term trajectory and outcome of Gulf reforms and could unintentionally help create space for China’s influence to further expand.