With Aramco IPO approval, China cozies up to Saudis

Chinese officials are upping their efforts to endear themselves to the Saudi royal family—a move to develop closer business ties with the cash-rich kingdom and its ruler Mohammed bin Salman as relations with the U.S. falter, FOX Business has learned.

Continue Reading Below

The effort comes as talks with the U.S. and China have reached a critical stage with both sides agreeing on basic principles for Phase One, even if a final deal hasn't been reached.

The evidence of China's outreach to the Saudis could be seen last week at the kingdom's investment conference in Riyadh, the Future Investment Initiative. Referred to as “Davos in the Desert”—the confab brings together world economic leaders and banks to showcase the oil-rich Saudi economy that is looking to diversify.

FOX Business has learned China sent 381 government officials, bankers, and business people—the largest delegation yet to the event since it began in October 2017.

Now, as the royal family seeks to monetize its massive state-run oil company, Saudi Aramco, with an initial public offering that could value it near $2 trillion, Chinese banks are looking to play a key role in the IPO both by underwriting shares and purchasing the stock, people with direct knowledge of the matter tell FOX Business. A formal announcement on the IPO came Sunday.

“China spreads its resources around in a geopolitically strategic way,” said Charles Horner, a Senior Fellow at the Hudson Institute. “And the Chinese have a voracious appetite for oil, which makes a relationship with Saudi Arabia particularly important.”

An outside spokesman for the Saudi sovereign wealth fund, Public Investment Fund, declined comment. A spokesman at the Chinese Ministry of Commerce did not respond to a request for comment.

The Chinese government has been making a concerted effort to cozy up to the Saudis as the royal family seeks to modernize the nation and open itself to outside investment ahead of Saudi Aramco’s pending deal. In February of this year, bin Salman went to Beijing to meet with Chinese President Xi Jinping to hammer out a trade deal with $28 billion in economic agreements. “The Silk Road initiative and China’s strategic orientation are very much in line with the kingdom’s Vision 2030,” bin Salman said in a statement about the two countries.

CLICK HERE TO READ MORE ON FOX BUSINESS

For years, China has been vying for political influence globally, but less noticeable has been its outreach to various wealth and oil rich countries in the Middle East. In the last several years, China has strengthened its relationship with another wealthy country in the region, United Arab Emirates, starting a joint investment fund with Mubadala (UAE’s sovereign wealth fund).

The China-Saudi alliance also emerges at a time when the Trump Administration is trying to rebuild ties that have strained after the October 2018 murder of journalist Jamal Khashoggi, a critic of the regime and the crown prince. Adding to those tensions: bin Salman's widely criticized attempt to consolidate power by placing numerous ministers and royal family members under house arrest. Caught up in the sweep was Saudi Arabia’s Prince Alwaleed bin Talal who counts American companies among his biggest holdings in his massive investment portfolio.

Such controversies sent a chill through U.S.-Saudi relations. Last year, top executives at most major banks and senior government officials boycotted the Saudi investment conference.

But this year as President Trump has made it clear he views Saudi Arabia as the centerpiece of its Middle East foreign policy, top U.S. officials including Treasury Secretary Steven Mnuchin and the president’s son-in-law and adviser Jared Kushner attended. Kushner has cultivated a close relationship with bin Salman and hailed the prince as a reformer when he was named successor to his father King Salman in June 2017.

Whether Saudi Arabia’s continued relationship with China will fundamentally alter the U.S.-Saudi alliance remains to be seen. The Kingdom is broadening its relations throughout the world and is receptive to all investments.  But observers say it won’t engage in deals at the expense of American relations.

“Saudi Arabia is committed to the American connection… They don’t think that ultimately China will protect them,” Horner adds.