Digital Dead Heat in the Desert

Since last year, residents in Dubai have been able to call on a Chinese-manufactured drone to get a Starbucks latte delivered. 

It is a trivial convenience, but also a telling one. The drone reflects China’s broader ambition: to have its technology products — from fiber-optic networks and cell phones to food delivery — embedded into everyday life in Gulf countries, which have emerged as a key arena in its great-power rivalry with the United States.

“The United States is engaged in a strategic competition with China over the nature of the global system,” the RAND Corporation said in a recent report. “At the heart of this competition is technology.”

As this week’s fifth installment of the MBN China Tracker shows, Chinese technology companies have established themselves across the region since President Xi Jinping announced China’s Digital Silk Road in 2015, the technological counterpart to its bricks-and-mortar Belt and Road Initiative.

China is counting on its relatively cheaper telecommunications technology, from 5G to cell phones, to gain a foothold, just as the U.S. looks to leverage its advantage in AI. But there is overlap, and the two powers are fighting for influence with the region’s governments on tech as well as for market share.

Saudi Arabia and the United Arab Emirates are especially attractive for the global rivals. Both have deep pockets and abundant energy, which are prerequisites for building the expensive, power-hungry digital infrastructure on which future technologies will depend. 

Big Brother from Beijing

Perhaps China’s clearest area of dominance lies in its export of rare earth elements and products, which are essential components in everything from wind turbines to semiconductors.

That supremacy is no surprise, given China’s global rare earth minerals market share. But the reasons MENA countries import these materials say something about their ambitions. Turkey, by far the region’s largest buyer, uses rare earths to feed a sizable manufacturing base and support its defense industry. The UAE, meanwhile, often plays its familiar role as a trading hub, re-exporting many of the rare-earth products it imports.

Chinese surveillance technologies are also in high demand, according to the China Tracker, driven in part by Beijing’s Global Security Initiative, which Xi announced in 2022. Since then, Chinese surveillance exports to the region have steadily increased, heightening Western concerns that such technologies may reinforce authoritarian governance.

The UAE, Turkey and Saudi Arabia have been the largest buyers. Iran is also a customer, and Chinese technology and training is linked to Tehran’s violent crackdown on protesters that killed thousands.  

Another prominent Chinese banner project is its smart cities push. Smart cities combine sensors, cameras and other monitoring devices with data analytics and artificial intelligence to improve government services. Urban centers face persistent challenges like traffic congestion, crime and pollution that can be managed through data collected by devices collected through the Internet of Things.

China’s “equipment is cost effective; its equipment performs well, or at least well enough; and it is relatively easy to contact with, in that it does not require many non-economic commitments,” Howard Shatz, a senior economist at RAND and co-author of the report on China’s Smart Cities push, said in an email.

The Middle East and North Africa is younger and more urban than the global average, making it particularly attractive terrain for smart-city projects. Dubai and Abu Dhabi, for example, rank among the world’s smartest cities.

But, as the RAND study notes, the same technologies can also be used to suppress dissent, monitor civilians and erode privacy.

American Pushback

Security concerns led the Biden administration to pressure allies to block Huawei from building out 5G infrastructure, which it said could make countries vulnerable to Chinese spying. The effort met with greater success in Europe than in the Middle East, although recently Iraq’s minister of construction said during the Middle East Peace and Security Forum in Duhok, Iraq, that the country had pulled back on some technology cooperation with China due to U.S. warnings, Shatz said.

Last summer, the Trump administration unveiled its own vision for technological dominance in America’s AI Action Plan.

“Whoever has the largest AI ecosystem will set global AI standards and reap broad economic and military benefits,” the document states.

That strategy is already taking physical form. Through the Stargate UAE project, the United States and its partners are backing the construction of large, AI-optimized data centers in the Gulf. Microsoft said it plans to invest $15 billion in the UAE to expand AI data centers there, and last year bought a minority stake in the Abu Dhabi-based AI company G42.

So far, there’s no clear winner. “Both are doing well,” RAND’s Shatz said. 

The speed at which China is able to deploy digital infrastructure and its interest in avoiding political and cultural entanglements have enabled Huawei to build cloud data centers in Riyadh and ZTE fiber-optic cables in Algiers. The Trump administration, meanwhile, is showing less concern about export controls and more interest in striking deals with its Middle East allies. 

That leaves Gulf Coast leaders in the digital driver’s seat, able to pick and choose which country’s tech can not only deliver coffee the fastest but a broader economic makeover as well.