21Dialogue|Interview with Oliver Wyman Managing Partner Zhemin Pei: The Middle East is increasingly willing to invest in China

21st Century Business Herald He Liuying reported from Boao and Shenzhen

Recently, two-way investment between China and the Middle East has been heating up rapidly.

In December 2023, Abu Dhabi investment agency CYVN invested 15.7 billion yuan in NIO, and in September, Mubadala Investment Company, the third largest sovereign wealth fund in the UAE, officially opened an office in Beijing. Chinese enterprises and Chinese capital have also accelerated the pace of going to the Middle East, including science and technology, energy and other enterprises have chosen to go to the Middle East.

"Middle Eastern economies are thinking about the post-oil future, focusing on non-oil sectors, which encompasses a range of opportunities, including critical metals, clean technology, renewable energy and, more broadly, artificial intelligence, online gaming, etc., which are all growth drivers for non-oil sectors. Chinese companies are active in these areas and, in many cases, leaders in some areas. This creates opportunities for the Chinese private sector to look for business opportunities and partners in the Middle East. During the Boao Forum for Asia Annual Conference 2024, Oliver Wyman Consulting Managing Partner Zhemin Bei said in an exclusive interview with the 21st Century Business Herald.

Regarding the Middle East's investment boom in China, Pei Zhemin analyzed that Middle Eastern economies are working hard to carry out the energy transition, and they recognize the need to invest in leading technologies, especially clean technologies, and they can find these industries in China. At the same time, they also need to diversify their investments outside of traditional markets such as Europe and the United States.

In Pei's view, China's investment cooperation with the Middle East has been established, and "we believe that this investment trend and business trend will accelerate."

Middle Eastern capital is becoming more and more willing to invest in China

21st Century: Recently, the Middle East sovereign wealth fund has accelerated into China, what factors do you think is driving this trend?

Zhemin Pei: Middle Eastern economies are working on the energy transition, and they recognize the need to invest in leading technologies, especially clean technologies, and they can find these industries in China.

At the same time, they also need to diversify their investments outside of traditional markets such as Europe and the United States. China is clearly a global economic powerhouse, and there is a need to recognize the need to invest more money here. We expect this trend to continue.

21st Century: Some analysts believe that it is not easy to get funding from Middle Eastern sovereign wealth funds. What are your thoughts on this, and what are the current characteristics of Middle Eastern sovereign wealth funds' investments in China?

Zhemin Pei: Sovereign wealth funds have a lot of options, they can invest in developed markets such as the United States, Europe, Japan and South Korea, as well as emerging markets. Therefore, China is competing with all these markets to attract capital.

It is clear that China has succeeded in the field of innovation, such as cleaning, digital technology, etc. The simple reason is that when you have world-class technology that you can export globally, especially to the Middle East, it's easy to attract capital.

Of course, valuation is also very important, some time ago the valuation of China (assets) was quite high, and now the valuation is more reasonable. So, I think the willingness to invest in China is getting stronger.

21st Century: How will the current economic transformation in the Middle East affect the investment trends between China and the Middle East?

JJ: Middle Eastern economies are thinking about the post-oil future and focusing on developing non-oil sectors, which encompasses a range of opportunities, including critical metals, clean technology, renewable energy and, more broadly, artificial intelligence, online gaming, etc., which are all growth drivers for non-oil sectors.

Chinese companies are active in these areas and in many cases leaders in some areas. This creates opportunities for the Chinese private sector to invest in the Middle East and to look for business opportunities and partners in the Middle East.

It's important to build strong relationships, and that relationship takes time. It is too early to tell whether this investment strategy has succeeded. But the relationship has been established and will continue. We believe that this investment trend, the business trend, will accelerate.

21st Century: What do you think are the positive significance of Middle Eastern capital entering China?

Zhemin Pei: China, Saudi Arabia, the United Arab Emirates and other countries are all energy and economic powers, and these countries are all contributors to global growth and global stability.

The Global South accounts for about two-thirds of the global population and half of the world's GDP, while China, Saudi Arabia, and the United Arab Emirates are all large countries in the Global South. As a result, these countries have been very active in establishing partnerships at both the private sector and the government sector.

Technology companies are prone to attracting Middle Eastern capital

21st Century: How do you see the change in the international status of the US dollar today?

JJ: I think the dollar has a natural advantage that is hard to replace, but there is a recognition that the global economy may be too dependent on the dollar, so there is a growing interest in increasing transactions in other currencies, including the renminbi. It's not easy, but the development of new payment technologies, central bank digital currency technologies, will facilitate this process.

I think change is happening, but it's slow. At the same time, the renminbi also faces some challenges, such as a relatively closed capital account and insufficient liquidity in the offshore market.

21st Century: Will the Middle East's investment boom in China accelerate the internationalization of the RMB?

Zhemin Pei: In the long run, there is a possibility of this, but we have not seen this phenomenon in the short term.

21st Century: Is the Middle Eastern business community interested in the development of the Guangdong-Hong Kong-Macao Greater Bay Area, and what are the main business opportunities they are looking for?

Zhemin Pei: They're not looking at specific regions, they're looking at tech companies, and these tech companies are emerging in cities like Shenzhen and Guangzhou. We actually see a significant investment opportunity in the Middle East for technology companies in the Greater Bay Area. But like I said earlier, [the point] is that the technology of these tech companies can be exported to the Middle East, or they plan to invest in the Middle East as well.

21st Century: At present, Chinese enterprises are also "entering the Middle East", how do you evaluate the business environment in the Middle East?

JJ: My advice is to be patient, think long-term, and find good partners, and don't expect to rush into the Middle East tomorrow to make money. Similarly, if a foreign company wants to enter China, I give the same advice.

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