Chinese companies have made more direct investments in Saudi Arabia this year than ever before, amid the country’s ambitious diversification agenda and strengthening bilateral ties between Beijing and Riyadh.

Between January and September, a record 21 greenfield projects were announced by Chinese businesses in Saudi Arabia worth an estimated $16.2bn, according to fDi Markets. This was up from eight projects in 2022 and higher than any previous full-year period.

Analysts say a driving force for growing investment is opportunities presented by Saudi Arabia’s Vision 2030, a plan to diversify the country’s culture, society and oil-dependent economy. The importance of China to Saudi Arabia’s ambitions was underlined during the Arab–China Business Conference held in Riyadh in June. 

Investment minister Khalid al-Falih said at the event that the “time has come” for China to become the “principal investment partner in the Arab world’s development drive”. More than 30 agreements were signed by Chinese companies to invest in the country, according to Saudi’s press agency, including in sectors such as technology, renewable energy, agriculture and tourism.

More than half of the $10bn of pledges came from a $5.6bn deal signed between Saudi’s ministry of investment and Chinese electric vehicle (EV) maker Human Horizons. In a boost to Saudi’s plans to develop a domestic EV manufacturing industry, Human Horizons will establish a research, development, manufacturing and sales joint venture in the country.

Other Chinese EV companies have also formed partnerships with local firms to enter the Saudi market. This includes EV start-up Enovate, which has entered a joint venture with Sumou Holding to establish a $500m manufacturing plant locally.

Saudi’s sovereign wealth fund, the Public Investment Fund, has played a critical role in developing this ambition. It is a joint venture partner in Ceer, a domestic EV brand launched in November 2022 by Crown Prince Mohammed bin Salman. 

“China is a strategic partner for Saudi Arabia’s ambitions and investment requirements,” says Igor Hulak, a partner at consultancy Kearney Middle East & Africa. He expects “this to be only the beginning”, with more Chinese companies likely to follow the success cases of early moving Chinese investors.

The growing investment trend follows a strengthening of bilateral diplomatic ties between China and Saudi Arabia. This includes Chinese president Xi Jinping’s visit to Riyadh in December 2022 for a Sino–Arab summit and the inclusion of Saudi Arabia in the expanded Brics+ group of developing countries.

Mega-projects such as Neom and King Abdulaziz Economic City present significant opportunities for Chinese companies to sell building materials, processed goods and water treatment equipment. 

“Private sector investors in Saudi Arabia hold Chinese companies in high regard for their know-how and technology, seeing cultural differences as an opportunity to learn and embrace new and more productive ways of working,” says Mr Hulak.

Metals also features as a key sector for Chinese investment in the country, with three investments worth more than $1bn already recorded in 2023 by fDi Markets. This includes Baoshan Iron & Steel allocating $4bn to a metal plate manufacturing site in the Ras Al-Khair Special Economic Zone on the country’s eastern coast with the Persian Gulf.

Besides the Arab–China Business Conference, several other key events have been held in Saudi Arabia during 2023 that are indicative of the growing relations with China. 

The Future Investment Initiative Conference, which took place in October in Riyadh, attracted twice the Chinese delegates that attended in 2022. Some $1.33bn of cooperation agreements were also signed between Saudi Arabia and China at the Saudi–Chinese Business Forum held in Riyadh in August.

Despite this growing interest and major investment pledges, Mr Hulak cautions that China’s slowing domestic economy could potentially lead to slightly lower future foreign investment flows into the country.

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