Chinese direct investment in the United Arab Emirates exceeded $12 billion in 2025, according to the “2025 Statistical Bulletin of China’s Outward Foreign Direct Investment” released last month. Capital flows into Saudi Arabia expanded as well, cementing the kingdom as the second-largest destination for Chinese capital in the Middle East and North Africa.
This surge comes as Riyadh and Abu Dhabi execute a delicate geopolitical balancing act. The MBN Great Powers Index places both Gulf states solidly in the pro-U.S. camp, anchored by decades of military ties with Washington. Yet both nations also rank at the top of the Index for engaging with both, a strategic hedge as their commercial and diplomatic ties with Beijing expand.
Technology is where that balancing act is hardest to sustain, because it runs straight into U.S. policy. Washington will give Gulf countries access to its most advanced AI chips only if they remove Chinese technology from their core networks. That leaves Riyadh and Abu Dhabi weighing Chinese investment against the American chips they need to build their digital economies.
This past September alone, Chinese tech giant Alibaba Cloud pledged to scale up its data center capacity and expand localized AI services across the UAE. Meanwhile, Tencent and Alibaba’s Ant International announced new cross-border digital payment solutions in Saudi Arabia. In Riyadh, hardware giant Lenovo unveiled its first Saudi-manufactured laptop produced at its massive 49-acre (200,000-square-meter) facility, part of a $2 billion deal with Alat, a subsidiary of Saudi Arabia’s Public Investment Fund.
For Beijing, this digital-economy push aligns directly with its Digital Silk Road, the technology-focused extension of the Belt and Road Initiative designed to export Chinese telecommunications, cloud architecture, AI models and surveillance systems to a global market.
“This initiative is vital as it helps China expand and promote its goods and services globally through direct investments,” says Dr. Jamal Zarrouk, Managing Director of Boulder Economics Consultancy in Dubai.
“China possesses the capital, technical expertise, and industrial capacity required for large-scale infrastructure rebuilds, making it a primary long-term partner across the Middle East,” he adds, regarding long-term regional development,
In the Gulf, this strategy has found fertile ground. Both Saudi Arabia’s Vision 2030 and the UAE’s Centennial 2071 require massive investments in digital infrastructure, advanced computing, and deep capital investment.
Mapping China’s Digital Silk Road
MBN has tracked Chinese technology firms’ presence in the Gulf since 2010.
Before 2015, China’s technology footprint in the Gulf was limited almost entirely to basic telecommunications hardware sales from firms like Huawei and ZTE.
Following the 2015 launch of the Digital Silk Road, Chinese tech projects in the UAE jumped sixteen-fold to 81 active initiatives. The footprint expanded far beyond telecom into surveillance networks, AI applications, e-payments, and robotics, bringing in major players like Alibaba, Tencent, Baidu, DJI, Yitu and Ant International Group.
Saudi Arabia recorded a similar sevenfold expansion to 56 projects, where artificial intelligence and telecom now stand on equal footing, and renewable energy is being boosted. Chinese solar manufacturers LONGi Green Energy and JinkoSolar took equity positions in Saudi solar parks, while SenseTime entered into a $206.5 million joint AI venture with the Saudi Company for Artificial Intelligence.
Washington Sets the Terms
Yet this deepening digital relationship lands directly in the crosshairs of great-power competition. Affordable Chinese 5G networks and cloud centers powered the Gulf’s early digital push, but the shift toward gigawatt-scale AI compute has reshaped the geopolitical rules.
Washington views Chinese hardware in critical infrastructure as a major security threat and has laid down a strict condition on access to its most advanced chips: Gulf nations must first eliminate Chinese technology from their core networks.
That condition reveals the limits of the two countries’ strategic hedging. Washington approved Microsoft’s landmark $1.5 billion investment in Abu Dhabi AI firm G42 in 2024 only after G42 agreed to strip out its Huawei hardware and adopt U.S. technology standards.
Replacing Chinese infrastructure with Western chips and cloud systems carries high financial and operational costs. For example, G42 tore out $150 million worth of Huawei equipment and hired an outside auditor to confirm the cleanup. But both Gulf states appear willing to pay the price to guarantee access to cutting-edge AI processing power. Saudi Arabia raised its pledged U.S. investment from $600 million to $1 trillion in 2025.
In July, the UAE secured Country Group A:5 status from the U.S. Commerce Department for high-tech imports. The tier is generally reserved for close U.S. allies and lets approved Emirati government agencies and companies receive controlled American technologies without a license. In Saudi Arabia, state-backed AI firm HUMAIN is constructing high-performance data centers alongside American partners like Nvidia, AMD, and Cisco under strict U.S. export guidelines.
The result is a complex geopolitical triangle. Washington remains the indispensable security guarantor and undisputed leader in advanced AI silicon and defense technology. Beijing, meanwhile, offers cost-effective infrastructure, green technology, and massive commercial scale without political strings attached.
Riyadh and Abu Dhabi demonstrate that while frontier AI hardware demands strict supply-chain loyalty, they can still leverage their vast wealth and energy resources to remain central power brokers in a multipolar world.
How far that balance can stretch is the open question. Chinese capital is still flowing into the Gulf’s digital economy, while the region’s AI ambitions rest on American chips and the conditions Washington attaches to them.
