Investment by Saudis in China Grows

Posted on May 19, 2008

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Javid Hassan, Arab News

Saudi investments have been flowing into China on three levels — industrial ventures, refinery joint ventures and investment in the capital market.

The low cost in China of both production and skilled manpower, together with mounting energy needs, have always acted as a magnet for institutional investors from the Kingdom. Even private sector entrepreneurs have been quick to capitalize on its natural resources, especially cotton, for converting it into finished textiles for which there is a growing market back home.

In July this year, a leading Saudi clothing company launched a $50 million cotton spinning project in Shihezi, in China’s northwest Xinjiang province. Ajlan ibn Abdulaziz Al-Ajlan & Bros, a leading Saudi garment manufacturer, set up a 160,000-spindle project. It goes into operation next June, according to Tageldin Saad, Ajlan’s CEO in China.

The project is expected to net 650 million yuan ($88 million) in annual sales revenues. Before the project in Xinjiang, Ajlan had invested $200 million in its five subsidiaries in east China’s Suzhou and Shandong, Tageldin said. Xinjiang, China’s largest cotton base, produced two million tons of cotton last year, while Shihezi’s output was 300,000 tons.

Referring to the Kingdom’s institutional investment in the energy sector, Li Yan Lin, Economic and Commercial Counselor at the Chinese Embassy, told Arab News that China Petroleum & Chemical Corporation (Sinopec) signed the long planned contract in March this year with Saudi Aramco and the US major ExxonMobil for a $3.6 billion refinery project in southern China’s Fujian province. The refinery, located in Quanzhou, will have a crude refining capacity of 240,000 barrels a day and is expected to be operational in early 2009, Lin said.

A separate contract was signed by Sinopec, Exxon and Saudi Aramco for a retail joint venture to manage and operate around 750 filling stations and a network of terminals in Fujian. [more]

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