28 Sep, 2012

Latham & Watkins¹, in partnership with the Dubai International Financial Centre and the Dubai Economic Council, hosted senior level conferences exploring the burgeoning ties between China and the Middle East on the new Silk Road. Held in China’s regulatory and financial capitals, Beijing and Shanghai, the conferences were attended by top executives from multinational and Chinese companies, banks, private equity and venture capital, as well as entrepreneurs and representatives of government bodies. 

Delivering the keynote address, Jeff Singer, Chief Executive Officer of the Dubai International Financial Centre Authority, discussed the growth of Dubai as a financial hub for Chinese firms looking to tap into the Middle East and North Africa (MENA) region. “DIFC today is one of the largest clusters of regional and international financial services firms in the region. Dubai has become a magnet for Chinese businesses operating in the MENA region with more than 4000 companies based in the UAE,” said Singer. “But there are still many opportunities between the two regions that have yet to be exploited in many different industries.” 

In introductory remarks, Allen Wang and Rowland Cheng, Latham & Watkins’ Office Managing Partners in Beijing and Shanghai, respectively, addressed the rapidly developing business ties between the two regions. The strengthening of the relationship is affirmed by a survey2 commissioned by Latham that found that 80% of investors polled expect significant growth in Chinese trade and 65% expect significant growth in Chinese investment activity in the MENA region over the next two years. 

“The MENA region offers both strong energy resources and an increasingly diversified economy, which is attractive to Chinese investors and businesses,” said Wang. The top three strategic sectors, according to survey respondents, are oil and gas (90%), infrastructure (75%) and mining (70%). The consumer and real estate sectors, each at 20%, also make the Top 10 list. 

“There is a profound sense of energy and dynamism on the new Silk Road. The strength and ambitions of the financial and business regional hubs in China and the Middle East are the lifeblood to this thriving and growing relationship,” added Cheng. 

Market Forces, Strategic Sectors, Powerful Allies 

The survey, conducted by Remark, the research arm of The Mergermarket Group, finds that nearly two thirds (60%) of Chinese investors surveyed expect steady expansion of the yuan as a reserve and settlement currency, while a quarter (25%) expect this expansion to occur more rapidly. The internationalization of the renminbi is a key driver for increased cross-border investment activity, according to the report. 

Leading economist and distinguished professor, Dr. Fan Gang, said: “With excessive foreign exchange reserves and expanding use of RMB as an international currency, Chinese investors are more and more looking outward for new opportunities.” Dr. Fan serves as the Director of China’s National Economic Research Institute, and as Secretary General of the China Reform Foundation, among other prominent industry positions, and was a former member of the Monetary Policy Committee of the People’s Bank of China. 

Dr. Edward Tse, Senior Partner and Chairman of Greater China at Booz & Company, commented: “Chinese companies are stepping up their overseas investment and the MENA region is becoming an increasingly attractive region for the Chinese. In going overseas, Chinese companies are learning to become more sophisticated. Nonetheless, there are still many lessons that they will still need to learn.” 

Dr. Ibrahim Elbadawi, the Director of the Macroeconomics Research & Forecasting Department at the Dubai Economic Counsel, who presented on the business environment in Dubai, said: “The economy of Dubai has been transformed by stellar growth over the last 30 years. However, the recent global economic crisis and the post crisis struggle for attracting foreign investment and developmental finance have led the Government of Dubai to further enhance its capacity to attract foreign investors. A Dubai 2015 Developmental plan is focusing on this by looking at the regulatory framework and soft infrastructure needed to attract foreign investment.” 

Bryant Edwards, a corporate partner in Latham & Watkins’ Hong Kong office, added: “This is an exciting time for businesses and investors in these two dynamic markets. The abundant and diverse opportunities for cross-border trade and investment are staggering. Bilateral trade and cooperation between these two regions are especially important for the global economy in light of the economic crises unfolding in other regions of the world. Ideas, money and ambition abound on the new Silk Road.” 

A series of panel discussions covered a wide range of topics, including:

  • Market forces driving cross-border trade and investment activity between China and the Middle East, and expectations for the development of this economic relationship;
  • Market and regulatory considerations for raising capital and investing in the Middle East, and the strategic sectors expected to benefit from inbound investment; 
    China’s role in the Middle East’s massive infrastructure build out, including the outsized role played by Chinese investors on some of the largest and most ambitions construction and infrastructure projects in the world; and
  • The Middle East’s growing focus on alternative energy, in particular solar, notwithstanding the region’s large petroleum reserves, and the opportunities for Chinese suppliers, contractors and banks. 

David Miles, Chair of Latham & Watkins’ Asia practice, said: “Economic and political forces point to closer cooperation between these two regions. For multinationals or entrepreneurs, the opportunities for growth tapping into the trade flows on the new Silk Road are very significant; for large scale infrastructure projects or emerging technology start-ups, and everything in-between, the present and future activity is astounding.” 

The new Silk Road conferences were organized and hosted by Latham & Watkins, in partnership with the Dubai International Financial Centre and the Dubai Economic Council, and took place in Beijing and Shanghai on September 24 and 26, 2012, respectively. The Mergermarket Group and Falcon and Associates co-sponsored the conferences, with support from the China Venture Capital and Private Equity Association. The Financial Times and 21st Century Business Herald and CCTV served as the international and local media partners, respectively. 


Picture: Shanghai

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