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Chinese Companies Proving Key to Middle East Infrastructure
A wide array of new infrastructure projects are being developed across the Middle East, many of them in collaboration with entities from China. These projects include the giga-projects such as NEOM and Sudair Industrial City in Saudi Arabia, heavy investment in upgrading existing hydrocarbon facilities, as well as the development of new renewable energy facilities.
There are also numerous transport schemes underway, including Abu Dhabi’s airport expansion, and the new high-speed rail project linking all the GCC countries. These are being built not by infrastructure development companies from the West, but by numerous Chinese companies.
The UAE national rail project – called Etihad Rail – is one such transport project. It was established in June 2019 to manage the development, construction and operation of the UAE’s national freight and passenger railway network. The project reached completion in February 2023. The project supports the UAE’s Sustainable Development Goals by reducing carbon emissions in the road transport sector by 21%,and reducing road transportation emissions per capita by 40%, by 2050.
One of the key engineering, procurement and construction partners in the project is China Railway Construction Corporation (CRCC). The Chinese firm was awarded one of the packages worth AED4.6 billion (US$1.25 billion) for the construction of 145km of the line, connecting the ports of Fujairah and Khorfakkan to the rest of the national rail network at the Dubai border with Sharjah. The firm has also been awarded similarly sized packages for other phases 2 to 4 of the project.
Another large Chinese EPC firm is China State Construction Engineering Corporation Middle East, which implemented the first phase of the Etihad Rail project. It has also helped build numerous other transport projects in the region, including a terminal at Abu Dhabi International Airport, the expansion of Dubai International Airport, and numerous other bridge and road projects, including maintenance work of all internal roads in Dubai.
PowerChina is a further large EPC contractor in the Middle East that has been a key player in constructing a number of large-scale infrastructure projects in UAE, including two desalination plants and two renewable energy projects. The Taweelah Desalination Project is a seawater desalination project in Abu Dhabi. A consortium of PowerChina and Spain's Abengoa successfully won the bid to be its EPC contractors. Meanwhile the Dubai Hassyan Desalination Project is the first seawater desalination project developed by Dubai Electricity and Water Authority (DEWA) whose EPC contractor consortium comprises PowerChina and France's Sidem.
PowerChina is also the EPC contractor for the Al Ajban Solar Photovoltaic (PV) Independent Power Project that will be located in the Ajban area of the Emirate of Abu Dhabi. It is a 1.5 gigawatt greenfield solar PV plant that will generate enough electricity to power approximately 160,000 homes across the UAE.
As seen above, in many cases Chinese infrastructure companies in the region have opted to form consortia with local and international entities. This allows them to align interests, while bringing Chinese technology and local understanding to the projects.
For instance, in 2018 a consortium consisting of ACWA Power from Saudi Arabia, and Chinese entities, the Silk Road Fund and Shanghai Electric Group was awarded the contract for the Mohammed bin Rashid Al Maktoum Solar Park - Phase 4. The consortium set up Noor Energy 1 as the local project company. Noor 1 would design, build and operate the power plant, DEWA would be the offtaker, while Shanghai Electric Group would be the contractors. The total project cost would be around USD4.3 billion.
ACWA and the Silk Road Fund have since undertaken numerous other projects around the region with a similar structure. These include a share purchase agreement for the 1.5 GW Sirdarya combined cycle gas turbine (CCGT) facility in Uzbekistan and the acquisition of 49% of ACWA’s renewable subsidiary by the Silk Road Find.
In the transport infrastructure sector, COSCO Shipping and Abu Dhabi Ports and have formed a new joint venture - COSCO Shipping Ports-Abu Dhabi - to construct a deep water, semi-automated container terminal under a 35-year concession agreement with a total Cost USD738 million.
Meanwhile in Qatar, the 2022 World Cup entailed huge investment into infrastructure. The largest stadium in Qatar, the Lusail Stadium, was built by CRCC with a capacity of 80,000 spectators. HSBC Qatar acted as the working capital provider and cash management bank for this strategic infrastructure project, valued at USD768 million.
The combination of Middle East developers and Chinese infrastructure companies is leading to the development of world-class infrastructure throughout the Middle East region. From stadiums, renewable power and desalination plants, to road, rail and port projects, the region’s infrastructure is being transformed.
HSBC is uniquely positioned to enable and support many of these infrastructure projects through the provision of finance, including trade finance, as well as FX, payments and other services. HSBC’s hubs in Dubai, Riyadh, Beijing and Shanghai and international platforms such as HSBCnet and FXevolve create a seamless bridge between both its Chinese clients in the Middle East and the Middle East clients in their dealings with their Chinese counterparts.
