China’s outwards investment and Belt and Road initiative will have an increasing influence in Middle East markets

China’s overseas investment plans are busily transforming the economies of countries across Africa, Asia Pacific markets and into Europe. In particular, the Belt and Road initiative (B&R) has attracted much publicity, but its effects have, so far, been limited in the Middle East.

The total stock of China’s outwards foreign direct investment (FDI) has reached some $1.809trn, of which $30bn is in the Middle East and North Africa (MENA) and $173bn is officially part of the B&R initiative.

Jindong Xu, an expert consultant at the Insurance Association of China, gives an update on the impact of B&R and the country’s broader overseas investment plans.

“In respect of FDI stock, the top 5 countries are UAE, Israel, Iran, Saudi Arabia and Ethiopia in MENA,” Xu tells GR. “According to the Ministry of Commerce of China, in 2017 the flow of China’s outwards FDI was $158bn, about $1.8bn of which goes to Middle East and North African countries, and $20.2bn goes to B&R countries.”

The top recipients of Chinese FDI within the MENA region and its neighbouring markets are the UAE, Israel, Iran, Saudi Arabia and Ethiopia, Xu explains. B&R investments are mainly focused “on the areas of infrastructure, exploitation of resources, power generation and manufacturing”, he adds.

Big Chinese insurers, such as PICC, Ping An, Taiping and Huatai, do much of the business, backed by big international re/insurers, such as Swiss Re, Munich Re, Scor, CV Starr, Chubb and AIG.

Different factors influence the re/insurance of China’s FDI projects, Xu explains. Local insurers could do business if they appear attractive under local regulatory rules, if local insurers and brokers can provide services in Chinese, pricing and terms and conditions, and attitude to claims settlement.