How China Became the Middle East Economic Power

Frustrated by long entanglements in Iraq and Afghanistan, the Obama administration in 2011 announced a strategic “rebalance” toward the Asia-Pacific, where China was emerging as Washington’s principal rival.

Gulf states, America’s closest since the 1940s, got the message as well. They did not abandon the U.S. security umbrella, but they hedged their bets by building far deeper economic links with, no points for guessing here, China. This eastern opening to China’s demand, capital, and industrial exports had reshaped the region’s economy.

That dynamic was on display December 12–16, during PRC Foreign Minister Wang Yi’s trip to the UAE, Saudi Arabia, and Jordan. Public readouts and reporting focused on trade and investment cooperation, energy ties, and Belt and Road–linked projects; in Riyadh, Wang also urged Gulf states to conclude the long-negotiated China–GCC free trade agreement, while describing China as a “trusted” partner in development.

As this week’s MBN China Tracker shows, a clear division of labor has emerged: the U.S. remains central to regional security, while China has embedded itself more deeply into the Gulf as a major buyer of regional crude oil and starting in the early Obama years, its main trade partner.

Trade between China and MENA countries rose to $480.7 billion in value in 2024, an increase of about 80 percent from 2020 and more than 2.5 times U.S. trade volume with the same countries last year.

The latest data for 2025, which includes figures up to October, indicates further growth. According to the data collected for the MBN Tracker, China’s trade with MENA countries reached $414.8 billion over the first 10 months of this year.

Iraq offers a useful case study in how China’s regional economic ties have grown. Trade between the two countries rose by nearly 80% between 2020 and 2024, to more than $54 billion. That’s more than five times the trade value between the U.S. and Iraq that year.

In a pattern repeated across the Gulf, China’s imports are almost exclusively crude oil, a reflection of President Xi Jinping’s push to diversify its crude oil supply to achieve greater energy security. In return,Iraq, like its neighbors, increasingly relies on China for heavy infrastructure, from power generation to manufacturing to construction. Shanghai Electric’s 2.3-gigawatt Wasit power plant in eastern Iraq, for instance, is now a critical pillar of the national power grid.

It’s the same story for Saudi Arabia and the United Arab Emirates, two other pivotal American partners. Chinese trade with Saudi Arabia reached nearly $102 billion in 2024, nearly four times the value of trade between the U.S. and the Gulf state. Alongside heavy machinery and industrial equipment, China has provided the kingdom with electric vehicles, an export in which China has become a global leader.

Trade between the UAE and China has more than doubled since 2020, also to nearly $102 billion in 2024, nearly three times the value of UAE trade with the United States that year.

Part of the difference is due to America’s declining reliance on Middle Eastern oil as its domestic production surged in the Permian Basin and other shale formations. In 2024, the United States produced about 13.2 million barrels of crude a day, compared with roughly 4.3 million barrels for China. This surge in production has made the U.S. better able to withstand shifts in OPEC production.

Nonetheless, Washington’s close security ties and arms sales continues to make it the region’s pre-eminent strategic partner, far outpacing China as the first installment of the MBN China Tracker showed. China seems happy to leave complex political engagement to the Americans, although Beijing’s work brokering a diplomatic rapprochement between Saudi Arabia and Iran two years ago suggests it can leverage its economic power for political ends when it chooses.

Not all ties are shifting in parallel. China continues to rely heavily on Iranian crude, now largely re-exported through Malaysia to circumvent sanctions. Beijing imported about 70 million metric tons of crude oil from Malaysia in 2024, seven times the volume in 2018, even as official direct imports from Iran fell to zero.

Israel, by contrast, remains firmly anchored to the United States. In 2024, Israeli trade with America exceeded its commerce with China by $14 billion, while the gap in foreign direct investment was wider still. U.S. direct investment in Israel rose to $52.7 billion in 2024, up from $41.3 billion five years earlier. China’s investment stood at a modest $2.5 billion, a disparity widened further by Beijing’s criticism of the Gaza war and by its Belt and Road focus on less developed markets.

Saudi Arabia, which is China’s single largest crude supplier, has emerged as the biggest beneficiary of that initiative in the Middle East, hosting 93 Belt and Road projects since 2021. The UAE, Iraq, Algeria and Egypt round out the top five. In Saudi Arabia, the projects span renewable energy, real estate, transport and power generation — sectors central to the kingdom’s effort to reshape its economy for a post-oil future. Iraq, meanwhile, has heavily relied on China to develop its oil and gas infrastructure.

All in all, the numbers collected by the China Tracker reflect not so much a major shift in relations of the two great global powers as a separation of functions: American power secures the Gulf; Chinese capital helps develop it.