Illustration: Peter C. Espina/GT
Saudi King Salman bin Abdulaziz Al Saud arrived in Beijing on Wednesday, embarking on a four-day state visit to China. China is one of six countries - the others are Malaysia, Indonesia, Brunei, Japan and the Maldives - on King Salman's 31-day Asian trip, a signal that Saudi Arabia is turning to the East for diversification.
Strengthening economic cooperation and political relations with East Asian countries is the primary goal of King Salman's trip. The Saudi economy relies heavily on oil revenues, which account for 40 percent of the economy, 80 percent of fiscal income and 90 percent of export value. But the oil price slump caused the country to run high deficits of $98 billion and $79 billion in 2015 and 2016, respectively. Moreover, the world economic downturn, rise of new energy, failure to curb oil output and other factors are expected to restrain any oil price rebound in the long run.
What's more disturbing is that with the increasing energy independence in the US, except for a small amount of oil products, the US is no longer in need of Saudi oil, which has weakened the longstanding security relationship between the two countries. At the same time, Saudi Arabia has been losing the European energy market as a result of the increasing marketing efforts made by Russia and other non-OPEC oil producers.
Against such a backdrop, Saudi Arabia has unveiled major reform plans like the "Vision 2030" agenda, an ambitious reform program released in April 2016 aimed at reducing the country's reliance on oil and creating a prosperous and sustainable knowledge-based economy. King Salman's Asian trip also reflects the country's change in its diplomatic policy and its approach to a diversified strategy.
The economic complementarities and great strategic interests between China and Saudi Arabia will make China an important part of King Salman's trip, with economic and trade cooperation the key issue of King Salman's visit. Also, with the US greatly slashing oil imports from Saudi Arabia, China has become the largest buyer of Saudi oil, and Saudi Arabia is one of China's biggest sources of crude oil. Given the high proportion of energy trade in bilateral trade, Saudi Arabia's top priority is to expand its share in China's energy market. Meanwhile, both parties may aim to actively promote cooperation in the downstream oil sector.
Moreover, the connection between China's One Belt and One Road initiative and the Saudi Vision 2030 agenda will likely bring greater cooperation potential for the two countries. Saudi's Vision 2030 targets the development of a new economic structure based on non-oil sectors, representing opportunities in terms of infrastructure construction and production cooperation. As an important country along the Belt and Road route, Saudi Arabia has expressed strong interest in the Belt and Road initiative, and has already joined the Asian Infrastructure Investment Bank as a founding member.
It could be expected that King Salman's visit to China will primarily focus on topics like connecting the Vision 2030 plan and the Belt and Road initiative, enhancing economic and trade cooperation through high-level consultations, finishing negotiations on the China-Gulf Cooperation Council Free Trade Agreement as soon as possible and promoting cooperation in areas such as the energy, financial services, manufacturing and infrastructure sectors.
In addition, as Saudi Aramco will launch an IPO worth $2 trillion next year, marketing its listing plan and attracting Chinese strategic investors to participate in the record floating will also be one of the key goals of the King's visit.
In terms of geopolitics, as the rivalry between Saudi Arabia and Iran intensifies, it certainly feels greatly threatened by the Iranian nuclear deal. China has maintained a good relationship both with Saudi Arabia and Iran. If necessary, China can play an active role in their peace talks and help ease regional tensions. After all, a stable Middle East is conducive to the implementation of the Belt and Road initiative.
The author is a professor with the School of Foreign Studies at University of International Business and Economics. firstname.lastname@example.org