Arab Today, arab today difc pledges support to china’s obor development initiative
Last Updated : GMT 04:31:08
Arab Today, arab today
Arab Today, arab today

DIFC pledges support to China’s OBOR development initiative

Arab Today, arab today

Arab Today, arab today DIFC pledges support to China’s OBOR development initiative

Dubai International Financial Centre
Dubai - WAM

Dubai International Financial Centre (DIFC) has pledged to support China's ‘One Belt, One Road' (OBOR) development initiative in realising its own growth objectives over the next decade.

DIFC's leadership team is visiting Beijing and Shanghai this week to announce the Centre's expansion plans, which will see it triple in size by 2024. China is the first country outside the UAE to have been chosen for a formal unveiling of the strategy.

Speaking to journalists in Beijing yesterday, Essa Kazim, Governor of DIFC, said that the Centre's position at the heart of MEASA, a vast economic region with an estimated combined GDP of US$7.9 trillion, would help China catalyse the OBOR trade and investment initiative.

"China is a strategic partner of the UAE and, today, its most important source of imports," said Kazim. "Boasting an internationally recognised legal and regulatory framework and a dynamic cluster of financial and non-financial businesses, DIFC is ideally placed to promote trade and investment between China and the emerging markets of MEASA, helping the country look beyond its borders to secure fresh economic opportunities."

DIFC's 10-year strategy targets an increase in assets under management from US$10.4 billion to US$250 billion, balance sheet growth from US$65 billion to US$400 billion, and a financial company portfolio of 1,000 firms, up from 382 in June 2015. The total workforce employed within the Centre is also expected to rise from 18,521 to 50,000.

As much as half of DIFC's expansion will be driven by increased economic activity in the ‘South South' economic corridor (encompassing Asia, Middle East, Africa, and Latin America), with the rest generated by existing clients, the continued enhancement of core services and the extension of their reach into global markets.

First proposed in 2013, the OBOR initiative aims to enhance connectivity and cooperation along the land-based ‘Silk Road Economic Belt' and oceangoing ‘Maritime Silk Road', linking the markets of Europe, the Middle East, Asia and increasingly those of Africa.

There are five priorities: infrastructure; trade and investment; internationalisation of the Chinese currency, the renminbi (RMB); cultural exchange; and policy cooperation and coordination.

His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, emphasised the UAE's readiness to work with China in achieving the goals of the OBOR initiative at a meeting with China's Foreign Minister Wangi Yi in February this year.

In April, the UAE joined 56 other countries in Europe and Asia as a founding member of the Asian Infrastructure Investment Bank (AIIB), a development bank dedicated to lending to projects that make up the OBOR initiative.

According to the DIFC Governor, China and the wider Asian region are playing an increasingly significant role in the Centre's rapid evolution.

"Asian firms are an engine for growth, reflecting a broader regional and global economic trend, accounting for 11% of the financial services companies within DIFC but as much as 50%-60% of its incremental business activity," said Kazim. "DIFC offers the tools, talent and supporting environment to help Chinese realise its development priorities in the MEASA region."

Inspired by the OBOR, Chinese financial firms have been increasingly active on DIFC's global financial exchange in recent months. Bank of China (BOC) listed RMB2 billion (US$322 million) in bonds on NASDAQ Dubai in July to support cross-border trade and infrastructure activities, while Industrial & Commercial Bank of China (ICBC) listed RMB3.2 billion (US$500 million) in bonds in June. Agricultural Bank of China (ABC) issued RMB1 billion (US$161 million) in bonds on the exchange last September.

ABC and ICBC operate full branches within DIFC, while BOC and a fourth bank, China Construction Bank (CCB), plan to convert their subsidiary offices into full branches soon, providing greater flexibility in operating and growing their business in the region.

Besides China's four biggest banks, accounting for more than half of its banking sector, DIFC hosts three non-financial companies: CPF Limited, PetroChina (the listed arm of state-owned China National Petroleum Corporation) and the regional headquarters of the Chinese telecommunications equipment leader ZTE Corporation.

Dubai's close proximity to and increasing connectivity with the African continent is a major factor in the expanding bilateral trade relationship between the UAE and China, which grew 18.5% in 2013-2014 to US$54.8 billion.

China is Dubai's biggest non-oil trading partner, accounting for US$47.6 billion in trade volumes in 2014, with the bulk of that (60%) re-exported to Africa and Europe.

"The UAE-China success story is one of sustained investment and ever closer cooperation," said Kazim. "Some 200,000 Chinese live and work in Dubai, or 10% of its expatriate population, while an estimated 4,200 Chinese firms are based in the UAE. Ten Chinese cities are now connected to the UAE with direct flights, driving double-digit growth in the number of Chinese tourists Dubai receives each year."

The DIFC delegation is visiting China to meet prospective clients in banking, capital markets, insurance and wealth management, besides attending partner events and the 2015 China Economic and Financial Forum.

"China is rich in opportunity and optimism," added Kazim. "Seven per cent growth of a US$10 trillion economy is still more than three times the growth being experienced by the US, and 5 times that of India in absolute terms. DIFC's 10-year strategy is providing new avenues for Chinese trade and investment flows, aligning with the country's efforts to diversify and source new consumers for its economic production."

"DIFC will continue on its upward trajectory thanks to its advanced business ecosystem and the closer ties being forged with the Chinese financial services sector and business community as a whole," said Kazim, Governor of DIFC.

Meanwhile, Dubai's successful bid to host the 2020 edition of the World Expo heralds sustained growth in the domestic economy in the near term, translating into further expansion of DIFC's business cluster and additional opportunities for the Chinese financial services sector; for example, in project finance. According to a study by Oxford Economics, Expo 2020 is expected to create 277,149 jobs (40% of them permanent) and attract 25 million visitors, more than 70% of them from overseas.

 

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