Keywords

1 Introduction

With the pursuit of sustainable development, the Gulf countries are seeking an economic transformation and a diversification of industries. Developing diversified industries has been facilitated through specially designated economic zones within Gulf countries to cultivate new engines for economic growth. Since the Belt and Road Initiative (BRI) was proposed, China has been making increasing efforts to develop and strengthen its relations with the Gulf States and to invest in the special economic zones (SEZs) in the Gulf region. As an emerging economy, China has achieved economic growth by establishing and developing SEZs domestically. Economic development has led to China’s pursuit of promoting industrial upgrading and transnational connectivity, incentivizing Chinese enterprises to invest in SEZs in the Gulf region. This chapter examines how Chinese-invested projects grow in the Gulf region and how these projects affect the sustainable development of the Gulf states.

The existing literature that studies China’s cooperation with the Gulf states concentrates on understanding the forms of bilateral cooperation (see Armijo, 2013; Fulton, 2019a, 2019b) and the factors that affect either side to formulate policies regarding bilateral relations (see Fulton, 2020; Bin Huwaidin, 2022; Young, 2019). Instead of adopting a macro-level analysis of foreign policy and geopolitics, this chapter aims to contribute to existing literature by focusing on the development and implications of specific projects that China invested in the SEZs in the Gulf region. Building the analysis upon the framework of New Structural Economics (NSE), an approach to examining the strategies for economic growth (Lin, 2011), this chapter focuses on three cases of Chinese-invested projects — China-Oman Industrial Park in Duqm, the petrochemical and chemical fibre integrated project in Saudi Arabia’s Jazan City for Primary and Downstream Industries (JCPDI), and China-UAE Industrial Capacity Cooperation Demonstration Zone (CUICCDZ) — that have been developed as major projects of China’s investment in the Gulf region since the BRI was proposed. With the analysis of scholarly works, policy documents, media reports, and trade data, I argue that the projects that China invested in demonstrate the willingness of the Gulf States to utilize domestic comparative advantages for sustainable economic development. The Chinese-invested projects grow in the Gulf SEZs where “hard” infrastructure is offered with the policy support provided by China and the Gulf states, and contribute to the development of infrastructure and new industries in the recipient countries.

The following sections of this chapter are developed in the following order. The chapter begins by reviewing the existing literature on China’s economic connectivity with the Gulf region. NSE is then elaborated upon as the framework of analysis. To analyse how China has been incentivized to invest in the SEZs in the Gulf region, I investigate how China proposed the BRI and how the Middle East, especially the Gulf region, has become an important node in the BRI. Based on this background of China investing in the Gulf region, the three cases of China’s investment in the SEZs in Oman, Saudi Arabia, and the United Arab Emirates (UAE) are studied. Finally, I discuss the role of Chinese investments in economic development in the Gulf region through a comparative analysis of the three cases.

2 China’s Economic Cooperation with the Gulf States

China has been developing economic relations with the Gulf region for decades. Since China decided to reform and open up at the end of the 1970s, the country has been focusing on economic development. In the 1990s, the end of the Cold War witnessed the development of economic relations between China and the Gulf States. Energy cooperation started to become a central topic in China’s relations with the Gulf States (Calabrese, 1998). Oil importation to China has been facilitated. In the 1990s, Oman was a crucial partner for China’s oil imports, given that Oman’s crude oil was suitable for China’s emerging oil refining technology at that time (Bin Huwaidin, 2002, p. 210). As for China’s economic cooperation with Saudi Arabia, in the 1990s, the trade volume between the two countries increased, yet oil was not the major product that contributed to bilateral trade, as the quality of Saudi oil was incompatible with China’s oil refinery industries at that time (Bin Huwaidin, 2002, p. 234). Still, China viewed Saudi Arabia as a partner for oil imports in the long term and managed to attract Saudi investments to China’s oil refinery industries (Bin Huwaidin, 2002, pp. 234–235). In terms of the economic relations between China and the UAE at the end of the 20th century, oil trade was also a pillar in bilateral relations, and the UAE was regarded as another long-term oil trade partner for China (Bin Huwaidin, 2002, p. 250).

The twenty-first century witnessed the development of China’s economic cooperation with the member states of the Gulf Cooperation Council (GCC), and the economic ties in trade and energy between China and Saudi Arabia have been strengthened (Liu, 2016). In addition to trade and energy, other forms of economic cooperation between China and the GCC member states have been developed, as investment and infrastructure construction projects have become components in the economic relations (Qian & Fulton, 2017). The BRI proposed in 2013 has facilitated China-GCC economic cooperation. Both China and the GCC member states have been incentivized to develop economic connectivity. The GCC member states benefit from the economic cooperation with China given the volume of oil exportation, and China not only acquires the resource for economic development but also develops the potential to leverage the BRI as an approach to facilitating reconciliation in the Gulf region amid the rise of regional geopolitical conflicts (Niblock, 2017). Additionally, the development of the China-GCC Free Trade Agreement (FTA) helps China retain energy security (Qian & Fulton, 2017), and China’s investment in the development of manufacturing industries in the Gulf region contributes to China’s goal of transforming its industrial capacity to the Middle East (Kenderdine & Lan, 2019). Amid the development of economic cooperation between China and the GCC member states, inter-personal and cultural communication between the two sides also increased (Armijo, 2013).

When focusing on China’s economic cooperation with Oman, Saudi Arabia, and the UAE since 2010, economic connectivity involves various aspects, including trade, investments, and the construction of infrastructure. Oman, Saudi Arabia, and the UAE are early participants in the BRI, while the three countries develop cooperation projects with China based on their different types of political, economic, cultural, and geographical characteristics and comparative advantages (Fulton, 2020). The protests against youth unemployment in Oman led to political instability. As China has been a crucial trading partner of Oman, developing economic relations between China and Oman contributes to mitigating the problem of unemployment in Oman and providing China with the energy supply that is essential for economic growth (Fulton, 2019a, p. 120). As China’s important partner in the Gulf region, Saudi Arabia has developed a plan — Vision 2030 — that aims to facilitate sustainable economic growth and demonstrates compatibility with China’s BRI in the sense that the bilateral cooperation projects have not only strengthened China-Saudi relations but also served the domestic and international policy objectives of the two countries (Fulton, 2019a, p. 73). Regarding China’s economic cooperation with the UAE, the bilateral trade has made the UAE a crucial economic partner for China, and the bilateral cooperation contributes to mitigating the pressure that the UAE encounters in the Middle East regarding security affairs (Fulton, 2019a, pp. 140–141). Furthermore, as the UAE pursues economic diversification, acting as the re-exporter of Chinese products has become a component of the UAE’s economic industries in addition to oil exportation (Fulton, 2019a, p. 141). On the other hand, although both China and the Gulf states are motivated to facilitate economic cooperation, the economic relations between the two sides have encountered challenges, given that the Gulf States, having been embedded in the international order led by the United States and having benefited from the trade ties with China, are confronted with a predicament amid the tension between China and the United States (Fulton, 2018).

3 The Framework of Analysis: New Structural Economics (NSE)

When examining the strategies for development, the notion of NSE takes structural changes and industrial upgrading into consideration (Lin, 2011) and stresses the positive changes that emerging economies could bring to other developing countries (Lin & Wang, 2017: 19). Lin (2011: 194) argues that, according to NSE, different countries reveal different "factor endowments" at different stages of development. Hence, the most suitable industrial structure for a country changes at different development stages, and requires the support of “hard” and “soft” infrastructure (Lin, 2011: 195). According to Lin (2011), development is a process instead of a dichotomized classification of developing countries and developed countries. In this sense, the strategies that a country adopts for development demonstrate the uniqueness of the country and do not necessarily derive from the experience of developed countries. Lin articulates that, in the process of development and industrial upgrading, in addition to the fundamental role played by market mechanisms for resource distribution, the development of infrastructure is essential as well and is expected to be supported by the government given the high externalities of developing infrastructure.

This chapter adopts NSE as the framework of analysis given the potential of NSE to capture the unique characteristics and “factor endowments” in the process of economic growth in developing countries. Although the Gulf countries are mostly rich in oil resources, each country presents different characteristics in pursuing economic development and develops different patterns of cooperation with China. By adopting NSE as the analytical framework, this chapter develops a perspective to examine the characteristics and comparative advantages that a certain Gulf state demonstrates when developing cooperation projects with China. Additionally, NSE attaches importance to industrial upgrading and structural optimization, encourages the state to provide infrastructure and a market setting to facilitate industrial upgrading (Lin & Wang, 2017: 26), and stresses the potential positive changes that China, a developing country with rapid economic growth, would be able to bring to other developing countries (Lin and Wang, 2017: 19). In this sense, NSE provides a framework for the analysis of China’s investments in the SEZs in the Gulf region, as the economic cooperation between China and the Gulf states involves the development of infrastructure and presents the actions conducted by developing economies to facilitate economic growth (for the list of developing countries, see United Nations, 2022).

4 BRI: China Goes Global

The BRI consists of the Silk Road Economic Belt and the 21st Century Maritime Silk Road. In 2013, when China’s President Xi Jinping visited Nazarbayev University in Kazakhstan, the idea of developing a framework that connects China with Central Asia, West Asia, and Europe based on the routes of the ancient Silk Road was addressed. In the same year, during the president’s visit to Indonesia, another framework — the Maritime Silk Road — was proposed. The two frameworks were then merged and developed to become the BRI that China proposed. In the BRI, the Middle East is regarded as the nexus that connects the Silk Road Economic Belt with the 21st Century Maritime Silk Road (Scobell, 2018, p. 11), and is therefore crucial to China’s goal of promoting transborder and transregional connectivity.

The BRI is rooted in China’s domestic development objectives and foreign policy goals. As the economy develops, China has been pursuing industrial transformation and upgrading. The twenty-first century has witnessed a series of Chinese national appeals for industrial transformation and structural adjustment. In 2001, China proposed the 10th Five-Year Plan, a comprehensive development plan for the period from 2001 to 2005, in which the structural imbalance in Chinese economic development was spotted as a major problem, and the Plan articulates the importance of industrial transformation and structural adjustment (State Council, 2001). In China’s 12th Five-Year Plan proposed in 2011, structural adjustment is described as the main direction of accelerating industrial transformation (Xinhua, 2011). The increasingly ageing population has also incentivized China to transfer domestic industries to developing countries with lower labour costs (Johnston, 2019).

At the foreign policy level, China has gradually shifted its focus from striving for a favourable international environment for domestic economic development to an increasing willingness to get involved in global economic development and exert more influence internationally (Ohashi, 2018). The Middle East, as the nexus of the BRI (Scobell, 2018, p. 11), is essential to China’s goal of exerting more influence on the global stage. China’s 13th Five-Year Plan uses an entire chapter to elaborate upon the BRI, and the Five-Year Plan articulates that China aims to shoulder more international responsibilities, including providing aid, consultancy, and training sessions for developing countries in the field of economic policies, development plans, and human resources (Xinhua, 2016), indicating China’s willingness for more involvement in international affairs.

5 China-Oman Industrial Park in Duqm

The economy of Oman has been dominated by the oil sector and is far from being regarded as diversified (Al-Mawali et al., 2016). In the 1990s, Oman proposed Vision 2020 for economic diversification (Yoel, 2018, pp. 1–2). According to Vision 2020, Oman aims to cultivate a more diversified economy, encourage the development of private sectors, and facilitate effective competition (Oman Ministry of Economy, n.d.). Based on Vision 2020, the Special Economic Zone Authority at Duqm (SEZAD) was established in 2011 and contains an area of 2,000 square kilometres, which is considered to be the largest SEZ in the Middle East and North Africa (SEZAD, n.d.). SEZAD is designed to be a comprehensive economic zone that develops not only logistics given the great significance of the zone as a port, but also industries, tourism, and education (HSBC, 2019, p. 2). The establishment and development of SEZAD have marked Oman’s efforts to pursue economic diversification and to the reliance on oil trade in the country’s economic growth (Castelier & Müller, 2019).

In May 2016, a contract was signed between the administrative authority of SEZAD and Ningxia Province of China. Both sides agreed to build a China-Oman Industrial Park in SEZAD that covers an area of 12 square kilometres with an overall investment of approximately 10 billion USD (Xinhua, 2018). China-Oman Industrial Park is the largest industrial park invested in by a single country and contains 35 planned projects, including oil exploitation, construction, logistics, and solar power, as well as hospitals, schools, and other infrastructure (China Ministry of Foreign Affairs, 2017). China-Oman Industrial Park is expected to attract more Chinese enterprises and investments to cooperate with various sectors in SEZAD, such as heavy industries, light industries, and tourism (HSBC, 2019, p. 2).

SEZAD has offered favourable policies for Chinese investors, including a tax exemption for 30 years and the lifting of financial constraints (CCPIT Ningxia, 2017), demonstrating the willingness to cooperate with Chinese investors to facilitate economic development and diversification. China’s participation in SEZAD has promoted the development of infrastructure. In 2017, one year after signing the contract, China constructed roads and coordinated the electricity and water supply for the industrial park (CCPIT Ningxia, 2017). In 2018, China and Oman agreed to construct a power plant and a water desalination plant to supply enterprises in the light industries (SEZAD, 2018: 38). In this sense, China-Oman Industrial Park contributes to Oman’s economic growth by developing infrastructure.

Furthermore, China utilized its comparative advantages to facilitate the development of human resources in Oman. Given that China has the experience of training skilled labour that has facilitated manufacturing industries, China has provided educational programmes for young Omani people, sharing management experience and holding training sessions in new technologies and human resources. Additionally, China has agreed to train 1000 young Omani people in petrochemical engineering, construction materials, renewable energy, and computer software, in order to enhance the young people’s skills for future jobs in various sectors at SEZAD (SEZAD, 2018, pp. 40–41).

However, concerns regarding China-Oman Industrial Park have occurred in some aspects. First, it is questioned whether China’s immense investments in Oman would result in debt burdens on the investment recipient country. Similar situations of massive investments that occurred in some African and Asian countries have led to difficulties for the recipient countries to pay the debt (The Economist, 2019). Second, the effect of promoting the employment of young Omani people that the Chinese-invested project aims to bring needs further evaluation. Due to the lower labour costs when an enterprise employ non-Omani workers, some Chinese investors tended to employ more non-Omani workers once the investors met the requirement of offering 10% of the total job vacancies of the enterprise to Omani people  (Liu, 2019). The reluctance of some Chinese investors to hire more Omani people may hinder the effect of Chinese investments on promoting local employment and sustainable economic growth.

6 The Petrochemical and Chemical Fibre Integrated Project in JCPDI

Saudi Arabia has been dependent on oil for economic growth. In 1979, oil rents accounted for nearly 90% of the country’s GDP. From 2000 to 2014, oil rents took more than 30% of the  GDP of Saudi Arabia (World Bank, n.d.). Although oil has been a significant resource that Saudi Arabia has been dependent on for economic growth, the high dependency on oil, however, has brought risks to sustainable economic development. The fluctuations in oil prices in the international market have  imposed instability on oil rents, hindered Saudi Arabia’s potential for long-term economic growth, and incentivized the country to promote structural transformation and economic diversification. In 2006, Saudi Arabia decided to build JCPDI with an area of 106 square kilometres (Royal Commission for Jubail and Yanbu, n.d.). The geographical location of JCPDI on the Red Sea coast demonstrates the zone’s strategic significance in international shipping and the zone’s advantages of being able to connect with other cities in Saudi Arabia by air and by road networks. JCPDI aims to develop heavy industries, mining industries, petrochemical industries, and downstream industries by utilizing local agricultural, mineral, and other resources (Royal Commission for Jubail and Yanbu, n.d.).2020

In 2016, the Chinese enterprise Pan-Asia began to build a petrochemical and chemical fibre project in JCPDI with a planned investment of 3.2 billion USD (Yuan, 2019). This project aims to extend the upstream and downstream polyethylene terephthalate (PET) industrial chain by providing the main products that the industrial chain needs, including purified terephthalic acid (PTA), PET, and chemical fibre products (Pan-Asia, n.d.-a). According to Pan-Asia Saudi (n.d.-a), the petrochemical and chemical fibre integrated project is planned to be undertaken in three phases. The first phase is from October 2018 to August 2020, in which PET and PTA plants and other supporting equipment were planned to be developed. The second phase started in June 2019 and is planned to be completed in June 2021 by building new PET and PTA plants. The third phase started in July 2021 and is expected to be completed in June 2024. With the PET and PTA production developed from the previous two phases, the goal of this phase centres around the development of the chemical fibre industry by utilizing the upstream raw materials.

The project receives support from not only Chinese investors but also the Saudi Arabian government. On the side of Chinese investors, to take charge of the project, in 2017, Pan-Asia Saudi was established with offices in both Jazan and Riyadh (Pan-Asia, n.d.-a). Pan-Asia Saudi is a subsidiary of Pan-Asia, an enterprise that concentrates on the production of bottle-grade PET chips (Pan-Asia, n.d.-b). Pan-Asia Saudi has taken this project as a significant approach within the framework of BRI that strengthens China’s relations with Saudi Arabia and promotes bilateral connectivity. On the official site of the enterprise, Pan-Asia Saudi articulates that the project not only matches the objectives of China’s BRI but also connects with the expectations for development that Saudi Arabia conveys through Vision 2020 (Pan-Asia Saudi, n.d.-b). Apart from the enthusiasm presented by Chinese investors, Saudi Arabia has provided support for the project. The project enjoys long-term low-interest loans from the Saudi Industrial Development Fund, and the imports of machinery, equipment, and raw materials are exempt from customs duties (Pan-Asia Saudi, n.d.-c).

In this Chinese-invested project, the objective of economic diversification and the comparative advantages of Saudi Arabia have been unveiled. In 2016, Saudi Arabia proposed Vision 2030 to promote economic diversification and public employment as well as to reduce the impact of international oil price fluctuations on Saudi Arabia’s economic growth (Moshashai et al., 2020). Although Saudi Arabia aims to develop diversified industries, the country values its economic potential of oil resources and leverages the advantages of oil for economic growth. In the National Industrial Development and Logistics Program, a part of Vision 2030 that focuses on industrial plans, oil, and oil-related industries are categorized as having “great untapped potential” for economic growth (Kingdom of Saudi Arabia, 2019, p. 36). Based on the comparative advantages of oil resources, the development of the petrochemical and plastic industries is included in Saudi Arabia’s plan for the first wave of development (Kingdom of Saudi Arabia, 2019, p. 28). With the emphasis of leveraging oil resources and developing new industries based on oil, the petrochemical and chemical fibre project invested by the Chinese enterprise connects with Saudi Arabia’s objectives of utilizing comparative advantages to develop new industries for sustainable development. The project unfolds revolutionary significance in the process of economic diversification of Saudi Arabia, given that PTA production had not been developed in the country before Chinese investments arrived (Chen & Han, 2019, p. 21).

7 China-UAE Industrial Capacity Cooperation Demonstration Zone (CUICCDZ)

In the past decades, the economic development of the UAE has largely been dependent on oil and the global oil market (Mosesov & Sahawneh, 2005). In 2010, the UAE proposed Vision, 2021 (UAE Vision, 2021, n.d.), in which the notion “non-oil real GDP growth” was put forward as the priority of the UAE’s economic prospect (UAE Government, n.d.). Within the framework of Vision 2021, the UAE planned intends to develop a knowledge-based economy (Parcero & Ryan, 2017), and to take advantage of the country’s geographical location to facilitate international finance, trade, and communication. To fulfil the objectives for development, the construction of Khalifa Industrial Zone Abu Dhabi (KIZAD) was unveiled to attract foreign investments. KIZAD aims to develop industries in multiple sectors, such as steel, packaging, and health care, by providing infrastructure, electricity, and water (KIZAD, n.d.). Furthermore, KIZAD enjoys the UAE’s geographical advantage as a node in international transportation and thereby unfolds the potential to facilitate international trade and communication.

As China’s largest export market and the second-largest trading partner in the Arab world, the UAE is one of China’s most important partners in the Middle East (China Ministry of Foreign Affairs, 2020). In 2017, China and the UAE signed an agreement to build CUICCDZ with an area of 12.2 square kilometres in KIZAD (Jiangsu Belt and Road Portal, n.d.). The project received a total amount of investment of approximately 6 billion RMB (China Daily, 2019). CUICCDZ aims to attract investments and enterprises in environmental-friendly and technology-intensive manufacturing industries and third industries, including building materials, food, finance, and packaging (All-China Federation of Industry and Commerce, 2020).

The advancement of “hard” and “soft” infrastructure is a fundamental step in the development of CUICCDZ. Since 2018, “hard” infrastructure has been constructed by Chinese investors, including the building of the service centre of CUICCDZ, factory buildings, staff apartments, facilities for water and electricity supply, and an urban road network with a total length of approximately 8.5 kilometres and a total investment of 250 million RMB (SASAC, 2019). Apart from the development of “hard” infrastructure, a service platform was established, providing financial guidance, consultancy, and evaluation services to investors (China International Contractors Association, 2019). In 2022, as infrastructure has been developed (NDRC, 2022), CUICCDZ became available for enterprises to start to operate (Su & Yang, 2022). In addition to the efforts of Chinese enterprises to construct infrastructure, the UAE has also contributed to the growth of CUICCDZ by providing favourable policies. Enterprises and individuals who invest in CUICCDZ are exempted from value-added tax, income tax, and consumption tax (All-China Federation of Industry and Commerce, 2020).

The efforts of both China and the UAE to develop CUICCDZ are connected with the enhancement of bilateral relations between the two countries. In 2018, China’s President Xi paid a visit to the UAE, and the two countries agreed to upgrade bilateral relations to a comprehensive strategic partnership, the highest level of partnerships in China’s diplomatic relations (Fulton, 2019c). In July 2019, Sheikh Mohammed bin Zayed bin Sultan Al Nahyan, the Crown Prince of Abu Dhabi at that time, visited China, during which the two countries officially declared a series of measures to enhance the comprehensive strategic partnership and CUICCDZ was regarded as a significant project in bilateral cooperation in infrastructure, energy, and industrial capacity (Xinhua, 2019).

Economic complementarity between the UAE and China benefits not only Chinese investors, but also the development of the UAE. The comparative advantages of the UAE in transportation, international communication, and oil resources help Chinese investors save the costs of production and international shipping and thereby enhance the competitiveness of products in the global market. In addition, given the UAE has scarce rainfall and faces a shortage of water resources to develop agriculture, Sino-Science Fujian Photobiotech, a Chinese enterprise specializing in smart agriculture, signed an agreement to invest in the UAE (Ding, 2020), contributing to local agricultural development.

8 Discussion

The NSE framework concentrates on the role of comparative advantages, market, and governmental support of “hard” and “soft” infrastructure in structural transformation and economic upgrading. The analysis of the three cases contains an elaboration on the background of the SEZs receiving Chinese investments, the economic development pattern and industrial structure of each recipient country, the construction of “hard” and “soft” infrastructure, the comparative advantages of each recipient country, bilateral relations between China and the recipient countries, and bilateral economic complementarity. The Chinese investments and the settling of industries in the investment recipient countries follow the flow of structural transformation for both sides. The geographical advantages of the Gulf region and the rich oil resources have also incentivized China to build increasing connections with the Gulf states. By considering economic complementarity and the comparative advantages of the recipient countries, China’s investments in the three cases centre around the industries that have already been developed in China domestically. These industries, on the other hand, meet the needs of the recipient countries regarding economic diversification and reduce the recipients’ reliance on oil trade in the conventional pattern of economic growth.

The three cases also indicate how "hard "and “soft” infrastructure contribute to the development of the three projects in the Gulf region. As is shown in the three cases, the Chinese-invested projects in the SEZs in Oman, Saudi Arabia, and the UAE have been reliant upon existing SEZs that provide roads, water, and electricity as “hard” infrastructure. Favourable tax policies, land rents, and other services attract various industries, sectors, and enterprises to the recipient countries. The “hard” and “soft” infrastructure helps to build a “local enabling environment” (Lin & Wang, 2017, p. 5) and makes the Chinese-invested projects more appealing to Chinese investors intending to establish enterprises in the Gulf region. In addition, since China invested in SEZs in the Gulf region, Chinese investors have built infrastructure for the projects they invested in. Taking the responsibility of attracting more Chinese investments from enterprises working in manufacturing and third industries, the Chinese investors that previously constructed and now operate the projects in the Gulf SEZs are motivated to develop the infrastructure in a short period and negotiate for more favourable terms with the recipient country for the Chinese-invested projects within the Gulf SEZs.

On the other hand, the three cases present different levels of cooperation between China and each recipient country. CUICCDZ enjoys the highest level of bilateral cooperation by being recognized as a project of governmental cooperation between China and the UAE, and thereby develops with the enhancement of political, economic, and cultural relations between the UAE and China. China-Oman Industrial Park in Duqm is another significant BRI project, but its evolution has not demonstrated the capability to be connected with a peak in Oman-China bilateral relations. The petrochemical and chemical fibre integrated project in Jazan City, with the smallest scale given that the project is not an industrial zone, obtains comparatively less attention diplomatically and politically.

The three projects demonstrate that industries from the emerging economy — China — have been transferred to Gulf countries with comparative advantages and enabling institutional environments. Yet, different local factors reshape the prospects of the Chinese-invested projects in the SEZs in the Gulf region. Although the three investment recipient countries — Oman, Saudi Arabia, and the UAE — are experiencing the transformation from an oil-dominated economic growth pattern to economic diversification, the approaches adopted by the three countries vary and result in the differences between industries developed in the Chinese-invested projects in each country. While Oman has been trying to achieve economic transition by developing logistics and solar power, Saudi Arabia has adopted a comparatively different approach by developing heavy industries and petrochemical industries. The UAE’s plan for economic transition presents another pattern of striving for sustainable development by facilitating the making of a knowledge economy, a digital economy, and a global financial centre.

9 Conclusion

Through the analytical framework of NSE, this chapter studies three cases—China-Oman Industrial Park in Duqm, the Petrochemical and Chemical Fibre Integrated Project in JCPDI, and CUICCDZ—  as the indications of Chinese investments in the Gulf region. The chapter argues that the Gulf states have built an enabling environment for Chinese investors and the invested projects by providing “hard” and “soft” infrastructure. However, the three projects obtain different levels of favourable policies given that the levels of cooperation between China and each investment recipient country vary. Additionally, the approaches adopted by each investment recipient country to achieving economic diversification vary, and this leads to different sectors and industries that each investment recipient country encourages Chinese investors to develop. The three Chinese-invested projects have contributed to the economic development of the investment recipient countries. The projects utilize local comparative advantages to facilitate economic diversification. China-Oman Industrial Park in Duqm and the Petrochemical and Chemical Fibre Integrated Project in JCPDI develop manufacturing industries by utilizing comparative advantages of rich oil resources, and CUICCDZ facilitates the development of third industries by taking advantage of the UAE’s strategic geographical location. Furthermore, the three projects facilitate the economic growth of the Gulf recipient countries by constructing "hard" infrastructure, offering consultancy services, and sharing staff management experience. The arrival of Chinese investments in the Gulf SEZs has also contributed to the development of manufacturing industries that are new to the recipient countries but have been specialized in by Chinese enterprises..

This chapter aims to provide a new perspective on analysing China’s investments in the SEZs in the Gulf region, a topic that merits future research. The three Chinese-invested projects are still at the preliminary stage of constructing infrastructure and attracting investments. Given that the three projects are the recent development outcomes of China’s investments in the Gulf region, how the projects continue to grow and the long-term effect of the projects on the economic diversification and development of Oman, Saudi Arabia, and the UAE needs future studies.