34 ASIAN LEGAL BUSINESS – JULY 2023 WWW.LEGALBUSINESSONLINE.COM CHINA FOCUS The Middle East stretches from the southern and eastern parts of the Mediterranean to the coast of the Persian Gulf, among which the Gulf Cooperation Council (GCC) countries, comprising the United Arab Emirates (UAE), Oman, Bahrain, Qatar, Kuwait, and Saudi Arabia, have the greatest potential for investment cooperation. According to the latest report from Investment Monitor, the region continued to attract foreign capital inflows over the past three years, registering FDI growth of 13.6 per cent in 2022. Against this backdrop, the Middle East has also become a hot destination for Chinese companies venturing abroad. A 2022 report by PricewaterhouseCoopers states that as the Middle East is an important region for cooperation under the Belt and Road Initiative, Chinese companies have been gradually deepening partnerships with companies there and that nearly half of the 118 Chinese companies covered in the report have been operating in the Middle East for over a decade. In particular, Saudi Arabia, the largest economy in the Middle East, has become one of the two major investment destinations alongside the UAE. eWTP Arabia Capital, a local Chinese investment firm based in Saudi Arabia, welcomed more than 500 visiting Chinese companies and institutions last year, and the cooperation between China and Saudi Arabia is expected to reach new heights this year. Lin Wei, Managing Partner of P.C. Woo & Zhonglun WD, has similar observations. “Saudi Arabia is an important economy in the Middle East, registering a GDP of $1.1 trillion billion in 2022. In addition, the country is rich in natural resources, and has a vast market and great potential, which explains the sustained interest of Chinese investors in recent years.” In addition, during the China-Arab Summit last December, leaders of China and Saudi Arabia signed the first Comprehensive Strategic Partnership Agreement between the People’s Republic of China and the Kingdom of Saudi Arabia. With China’s Belt and Road Initiative and Saudi Arabia’s Vision 2030 strategies in increasing alignment, the level of cooperation between the two countries in multiple areas has also been at historic highs. According to Lin, Chinese investors usually invest in five areas in Saudi Arabia. “The first is oil and natural gas; the second is infrastructure construction; the third is real estate, with Chinese investment playing an important role in the Saudi property market.” “The fourth is science and technology, where Chinese investors mainly invest in AI, cloud computing, big data, Internet of Things, etc.; and the fifth is education, where Chinese investors have made huge investments in language training, overseas education, etc.” “Chinese investment covers a wide range of fields in Saudi Arabia, and is growing year by year. In terms of industry, both sides are eager to leverage each other’s advantages. The main focus of Chinese enterprises is on obtaining energy and infrastructure profits, while that of Saudi Arabia is to access more Chinese technology and human resources. The near future will be the honeymoon period of the partnership between China and Saudi Arabia, and there will be great growth potential going forward,” adds Lin. UNIQUE LEGAL, SOCIAL ISSUES However, Chinese investors also face challenges when venturing to Saudi Arabia. Speaking of the legal risks that require special attention, Lin says that investors should first learn about the basic information and concepts of Saudi law. “The Saudi legal system is based on Islamic law. Saudi royal decrees are another major source of law, but they are called ‘regulation’ rather than ‘law’ to indicate they are subordinate to Shariah law. Such regulations complement Shariah law in areas such as Image: Mohammed younos/ China has embarked on new diplomatic outreaches in the post-pandemic era, and the Kingdom of Saudi Arabia is beginning to play an increasingly important role, becoming a new destination of choice for Chinese companies keen to invest overseas. Legal experts, however, caution that despite the abundant opportunities there, prospective investors must prepare early for risks. BY CHARLIE WU CRACKING THE KINGDOM