Dubai’s Financial Partnerships with China and Hong Kong

01

What are some benefits seen by Standard Chartered

What are some benefits seen by Standard Chartered regional office in Dubai as a result of Dubai working more closely with the China/HK market in terms of investment and fund flows? What are some key aspects of the collaboration?

A key aspect of the collaboration between UAE, the Chinese and Hong Kong markets is its potential impact on enhancing capital market activities. This will complement the impact of the cooperation agreement between Standard Chartered and the Dubai Department of Economy and Tourism (DET), which aims to promote the growth of capital market activities, family offices, asset management, fintech, and virtual asset industries between Hong Kong and Dubai.

The growing relations between the UAE and China are not just beneficial but are also significantly boosting Standard Chartered’s network income. In the first half of 2023, Standard Chartered’s network income from the China-AME corridor saw a surge of 67% year on year for FY 2023, a clear reflection of the positive business ties between these regions.

Furthermore, we have been able to accelerate the rollout and impact of our innovative financial solutions – such as sustainable and green financing solutions, which are part of the strategic areas of cooperation with the DET. The agreement facilitates cross-border platforms to accelerate opportunities for cross-border trade and innovation exchange across the fastest-growing economies in the world.

02

Dubai’s vision of becoming a regional financial centre

With an inflow of corporates, financial institutions, and talents from China/HK, what is Dubai’s vision of establishing itself as a regional financial centre in the Middle East?

The China-UAE corridor has emerged as a crucial conduit, not just linking Asia with Africa and the Middle East but also significantly enhancing trade, knowledge exchange, and investment between these rapidly developing regions.

This corridor holds immense potential to spur job creation, foster technological advancements and drive substantial economic growth. The UAE’s strategic position at the intersection of key shipping routes, along with its sophisticated infrastructure, has naturally positioned it as a central hub for trade with China, inspiring Dubai’s vision to establish itself as a regional financial centre in the Middle East.

Furthermore, Dubai is already recognised as a global hub for trade, aviation, logistics, imports and exports. These inherent strengths are already being leveraged to position Dubai, and the UAE at large, as a gateway to the wider Middle East, Africa, and beyond, providing companies from across Asia access to a wealth of resources and expertise to reinforce their expansion and growth plans.

The UAE’s advanced infrastructure and unique geographic location also strengthens its position as a leading financial hub, enhancing its ability to support businesses in unlocking their potential across dynamic markets. The Dubai International Financial Centre is one of the region’s most advanced and well-established financial centres, and Standard Chartered is at the forefront of connecting key global markets – including China, Africa, India, and the United Kingdom.

03

The projection of Renminbi being used in Dubai market

What is the team’s overall perception, or projection, of Renminbi use in the Dubai market, both in trade and funding activities?

The internationalisation of the Renminbi (RNB) has made significant strides, thanks in large part to the policies, programmes and infrastructure introduced by China over the years to promote the widespread usage of the currency.

Over the years, the UAE has become an offshore RMB centre in the region, which further cements its position as the key destination for Chinese investments in the Arab world; especially with the UAE supporting RMB internationalisation as part of its broader economic diversification strategy. The UAE’s status as an offshore RMB centre has helped enhance the country’s positioning as the leading financial centre in the region. This has attracted a growing number of Chinese and other international companies to set up operations in the UAE.

Furthermore, the increasing business ties between China/HK and UAE suggest a growing use of the Renminbi in trade and funding activities. Standard Chartered’s strategic focus on connecting these markets supports this trend. Additionally, our extensive experience in international banking, RMB clearing, and capital markets positions Standard Chartered well to facilitate RNB denominated trade and investment flows between the two countries while creating new business opportunities for companies across both sides of this dynamic corridor.

It’s worth noting that enhanced collaboration around digitising cross-border transactions is also a focus for the UAE and China. A prime example of this is the Central Bank of the UAE’s (CBUAE) partnership with the Hong Kong Monetary Authority, the Digital Currency Institute of the People’s Bank of China, the Bank for International Settlements Innovation Hub Hong Kong Centre, and the Bank of Thailand to successfully conduct a Central Bank Digital Currency (CBDC) pilot across four jurisdictions using real-value transactions – dubbed ‘Project mBridge’. Earlier this year, the CBUAE marked its first cross-border transfer of its CBDC, the Digital Dirham, amounting to AED 50 million to China.

Along with the trend of international expansion of Chinese corporates, we believe that the UAE is the leading offshore RMB centre in the Middle East, especially with the UAE being a hub for capital, trade and personal mobility between China and the Middle East.

• About 60% of Chinese trade being re-exported through UAE ports to more than 400 cities in the Middle East and North Africa.
• As per Swift Global Trend Report as of December 2023, the overall cross-border RMB payment volume originated from UAE achieved 127% YOY growth, with UAE a natural choice for an offshore RMB centre.

04

The projection of Renminbi being used in Dubai market

Is the Standard Chartered UAE office seeing China/HK as a possible investment destination or trade partner?

As a leading international bank with deep roots in both Hong Kong and the UAE, Standard Chartered is well positioned to help its clients capitalise on the huge opportunities not only between these two markets but also across the wider markets within mainland China and the Middle East.

Hong Kong is an international financial centre, with well-established financial infrastructure and a wide range of financial products, which allows our Middle East clients to build their presence in Asia and invest in the region. In particular, Hong Kong has a variety of Connect schemes with Mainland China, which can super-connect the Middle East clients to Mainland China’s enormous onshore markets.

Additionally, greater ties between Dubai and China/HK provide widespread opportunities for investment and trade – our cooperation agreement with DET is one example of a platform specifically designed to promote business growth and development opportunities between these regions. By joining forces with partners like Standard Chartered, UAE can create cross-border platforms to accelerate opportunities for trade and innovation exchange, reinforcing its role as a key trade partner with China/HK.

05

The geopolitical backdrop

Given the geopolitical backdrop, how is Dubai positioning itself when market participants are increasingly adopting diversification strategies?

Dubai has showcased remarkable resilience and growth in attracting foreign direct investment (FDI) despite global economic headwinds. According to the Financial Times Ltd’s ‘fDi Markets’ data, Dubai ranked number one globally for attracting Greenfield FDI projects for the third successive year with 1,650 FDI projects. Furthermore, In 2023, the emirate’s non-oil trade reached an unprecedented 1.9 trillion Dirham (approximately $500 billion) – despite the United Nations Conference on Trade and Development pointing towards a global downturn in international trade. This impressive performance was further bolstered by a record-breaking number of new company registrations with the Dubai Chambers in 2023, surpassing 67,000 firms – the highest annual figure in its history.

Moreover, Dubai’s status as a global business hub was reinforced by a 34% increase in the number of new companies joining the Dubai International Financial Centre (DIFC) during the same year. The International Free Zone Authority reported a 177% increase in new business registrations.

Dubai’s credit ratings have also remained robust, with the UAE maintaining high ratings from major international credit agencies. The ‘Big Three’ credit rating agencies—S&P Global Ratings, Moody’s, and Fitch Group—continue to recognise the UAE’s economic stability and growth potential in 2024 – including an Aa2 rating in creditworthiness with a stable economic outlook by Moody’s.

FinanceAsia Q&A By Rola Abu Manneh, CEO of Standard Chartered in the UAE, Middle East, and Pakistan