Imports and Influence: China’s Growing Economic Presence in the Gulf

The Arab Gulf monarchies offer a window into the policy implications of China’s rising global economic influence, driven by its substantial manufacturing capacity and growing range of high-tech capabilities. Although Saudi Arabia and the United Arab Emirates (UAE) have been U.S. security partners for decades, growing Chinese energy imports from the region have driven years of commentary about the potential for China to develop a more robust security role in the Gulf. While this has not happened, and is unlikely to do so, the depth and increasing sophistication of China-Gulf economic ties limit the willingness of Gulf states to align with the United States outside of core security matters (such as buying weapons).

Artificial intelligence (AI) technologies are the latest flash point in debates about U.S. and Chinese influence within the Gulf. At the center of the current debate is Gulf state access to advanced microchips produced by U.S.-based firm NVIDIA, and access to U.S. AI expertise more broadly. Both U.S. and Gulf officials have portrayed greater access to advanced U.S. microchips (and expertise more broadly) as an opportunity for Gulf countries to align more closely with the United States after years of deepening Gulf-China economic ties.

Whatever the merits or risks of these deals, however, U.S. policymakers should not expect them to change the outlook of Gulf leaders who are resigned to close security cooperation with the United States (for now) and eager to invest in closer economic ties with China for the foreseeable future. Gulf leaders’ expanding economic ties with China will continue to reflect the state of China’s global economic presence rather than the effectiveness of select U.S. efforts to “win back” the Gulf. AI diplomacy is not a quick fix for expecting more from the Gulf states while offering less, especially while the United States undermines its own ability to generate new technological innovations.

AI diplomacy is not a quick fix for expecting more from the Gulf states while offering less, especially while the United States undermines its own ability to generate new technological innovations.

The Crossover Point

U.S. policy discussions on China’s role in the Middle East center around a “crossover point” at which China’s growing economic ties with the region (and especially the Gulf states) would either trigger or permit a broader clash with U.S. interests. John Alterman and John Garver, while counseling greater U.S.-Chinese cooperation, wrote in 2008 of the “potential for greater conflict” between the two powers in the region. Figure 1 depicts one clear crossover in the years that followed: China’s ever-greater reliance on crude oil supplies from the Persian Gulf region, even as direct supplies to the United States have subsided.

This competition framing assumes that China’s oil imports will eventually drive the country toward a more open security presence in the Gulf, as was the case for the United States during the Cold War and especially since the 1990–1991 Gulf War. CENTCOM commander Kenneth McKenzie exemplified this line of thinking in a 2020 interview, presenting China’s economic ties with the Gulf as efforts to “establish a beachhead” that could lead to “other things” down the line—perhaps arms sales or a direct security presence (akin to the U.S. Fifth Fleet, stationed in Bahrain, or the permanent U.S. bases in Kuwait and Qatar). Accordingly, any suggestion of Gulf-Chinese military cooperation generates significant U.S. media coverage, as seen in periodic reports on Saudi collaboration with China on ballistic missile production or acquisition.

Even when U.S. policy documents concede that Chinese leaders have little interest in addressing the Middle East’s “intractable security challenges,” they nevertheless portray Chinese policy as seeking “to instrumentalize the region in its efforts to construct a new, illiberal world order at the United States’ expense.” For some U.S. commentators, any diplomatic pressure on the Gulf states (particularly to address human rights) could threaten U.S. interests by encouraging them to move “ever deeper into China’s orbit.” For example, China’s (limited) role in brokering a Saudi-Iranian rapprochement in 2023 attracted outsize attention by seeming to herald “a new geopolitical reality in the Middle East.” Leveraging U.S. arms sales to the region to address human rights concerns might likewise create an opening for Chinese defense companies to make up the difference, as President Donald Trump argued in his first term.

Yet Gulf, Chinese, and even—when pressed—most U.S. commentators share an understanding that China will not play a meaningful role in Gulf security provision for the foreseeable future. Mohammed Alsudairi and Andrea Ghiselli found in a recent study that most Chinese foreign policy experts “oppose any and all military commitments [in the Middle East], including outright embeddedness in the security architecture . . . as the costs and risks would be far higher than any real gain.” Few observers within the Gulf have any illusions to the contrary. Alsudairi and Ghiselli find Saudi foreign policy commentators to have “no expectation that [China] will take on a security role,” even if “raising the spectre of a possible Saudi dash to Beijing” is useful in securing concessions from U.S. counterparts. Even the United States–China Economic and Security Review Commission, while gesturing at Chinese aims for a “future military presence,” concluded in 2024 that China “does not appear to wish to take up the U.S. role of major security contributor or build a network of alliances in the Middle East.”

The Gulf monarchies’ reliance on U.S. security provision is reflected in the stability of U.S. arms sales to the region, despite periodic complaints by Gulf rulers about U.S. human rights pressure or concerns about the reliability of U.S. security commitments. While a few of the Gulf Cooperation Council (GCC) states, most notably the UAE and Qatar, have diversified their purchases away from the United States—they have generally opted for purchases from European countries such as France, Italy, and the United Kingdom—there is little sign of an impending “dash to Beijing” for security provision (see figure 2). Limited arms sales from China to the Gulf instead follow a clear pattern: deals of opportunity where Washington (along with other U.S. security partners) has explicitly ruled out a sale. Such is the case with the Royal Saudi Strategic Missile Force, which has periodically acquired long-range ballistic missiles from China dating back to the 1980s.

Likewise, despite occasional joint military exercises with GCC states, China has yet to establish a permanent military presence in the Gulf (despite periodic speculation). While staunch U.S. support for Israel has strained its relations with Gulf partners, GCC states have not canceled joint military exercises; some even reportedly offered select assistance to Israel at the request of the United States when Iran attacked in April 2024. While Israel’s September 2025 airstrike on Doha raised new concerns about U.S. reliability, initial responses have been to strengthen regional security partnerships (by Saudi Arabia) and doubling down on U.S. security guarantees (in Qatar) rather than gesturing at ties with China.

Economic Context

At the same time, there has been another crossover of sorts as the GCC’s imports from China have nearly tripled since 2008 (see figure 3), even as those from the United States flatlined around 2012. While U.S. security relationships with GCC states will endure, the geopolitical calculations of Gulf rulers will also reflect the economic realities of a world where China can supply an enormous range of in-demand goods at competitive prices and at adequate quality.

Take automobiles as an example (see figure 4). The United States has historically sold substantial numbers of vehicles in the GCC, even if Japanese and European manufacturers have accounted for a greater market share. Yet GCC car markets are not isolated, as U.S. markets are, from surging Chinese car exports, driven by long-term investments in the sector and current production capacity far in excess of domestic demand. Inexpensive cars from firms such as JAC, GAC, or SAIC accounted for nearly 14 percent of the GCC’s automobile imports (by value) in 2021–2024, up from almost nothing a decade prior.¹ This is hard to miss on the ground. When I visited Saudi Arabia in May, for example, Chinese cars were widely available at a rental agency in the southern city of Abha.

We can observe the same pattern with respect to high-tech imports, which represent not only present purchases by the GCC but also economic sectors that these countries are keen to develop at home through global partnerships. Chinese tech companies have supported key upgrades and expansions of the GCC’s telecommunications networks and data storage capacity, typically offering a steep discount relative to competing firms. This engagement is reflected in aggregate trade data. 5G cell phone infrastructure, for example, was the subject of the last round of U.S.-China technological competition in the Gulf. Looking at one piece of cell tower infrastructure (base stations, HS Code 8517.61) during key years of 5G adoption (2018–2023), Chinese goods accounted for almost 80 percent of GCC imports.

The same pattern holds with respect to other tech-sector supply chains, which have formed a crucial part of economic diversification ventures in Saudi Arabia and the UAE especially. Saudi Arabia, for example, has dramatically increased its imports of semiconductors and related goods as it seeks to build out a new tech ecosystem. Saudi Arabia has sourced a substantial portion of these imports from Chinese firms, as have the UAE and the remaining GCC countries (see table 1). Both the UAE and Saudi Arabia have likewise sourced a significant share of advanced microchips from China, albeit with the United States accounting for a substantial remainder in Saudi Arabia and elsewhere in the GCC.²    

A New Beginning With AI?

However, the growing economic and political prominence of AI technologies has seemingly offered the United States a new foothold for economic and geopolitical competition vis-à-vis China. Successive administrations have sought to bar China from accessing advanced semiconductors and computing chips as a means of locking in U.S. technological (and ultimately geopolitical) advantages. At the same time, U.S. officials have debated how best to translate this advantage into a tool of influence without risking U.S. data security or inadvertently leaking the underlying technology.

The Gulf monarchies have emerged as a focal point in these debates, particularly after the Trump administration struck deals with Saudi Arabia and the UAE to allow each access to advanced NVIDIA microchips. The Trump administration has presented these deals as reinforcing ties with strategic partners, against concerns that shared technology might leak to Chinese actors.

The UAE presents a clear test case for how much leverage the United States can actually exert via AI diplomacy. It is clearly the Gulf monarchy best positioned to execute on their end of a deal. Its state-backed company Group 42 (G42) dates back to 2018, is chaired by a powerful Emirati royal, and is supported in the background by an entire University of Artificial Intelligence. (In contrast, Saudi Arabia’s HUMAIN is a more recent venture, overtaking the preexisting Saudi Company for Artificial Intelligence.) Emirati officials have also emphasized that the United States is a “partner of choice” in AI development; G42 declared it would cut ties with Chinese firm Huawei (ripping Huawei hardware out of G42 facilities and selling G42 investments in Chinese companies) to secure the Biden administration’s approval for a major $1.5 billion investment from Microsoft.

Emirati officials have been willing to pay dearly for access to cutting-edge U.S. technology, reportedly pledging to invest an additional $1 billion in the United States for every $1 billion in NVIDIA chips it is permitted to buy. (As an indication of current U.S. foreign policy processes, the UAE deal also came alongside a sizable Emirati investment in a cryptocurrency partially owned by the Trump family.)

The Other AI Alignment Problem

Yet the UAE is unlikely to “choose sides,” as called for in a recent congressional letter, on the basis of these recent deals. In the recent past, the UAE has repeatedly erred on the side of preserving and reinforcing ties with China even at the cost of rankling U.S. officials. During the COVID-19 pandemic, Emirati authorities quickly accepted and distributed China’s Sinopharm vaccine, even as Saudi Arabia demurred for months while it distributed Moderna and AstraZeneca vaccines. The UAE likewise joined Egypt in accepting membership in the BRICS group that includes China, attending the 2024 summit in Kazan, Russia. (Saudi officials have left the matter “under consideration” without making a formal commitment one way or the other.) Suspected Chinese military activity in Abu Dhabi’s main port also raised red flags within the U.S. intelligence community, hindering U.S. arms sales to the country. Even after Trump passed through Abu Dhabi in May, the UAE’s minister of industry and advanced technology led a high-level delegation to China to promote economic cooperation.

These enduring ties extend to UAE-China cooperation on AI as well. A Wired profile of Tahnoun bin Zayed noted China’s surprising lack of protest over the UAE’s supposed pivot to the United States on AI, suggesting “some kind of backdoor understanding between the two nations.” When G42 sold off its China-related holdings, it did so to Emirati investment firm Lunate, whose parent company is chaired by none other than Tahnoun bin Zayed. China’s Minister of Science and Technology Yin Hejun met with the UAE’s top AI official, Minister of State Omar Al Olama, at the sidelines of China’s World Artificial Intelligence Conference in Shanghai. China’s ambassador to the UAE, Zhang Yiming, later met with Olama in Dubai to discuss “practical cooperation” in the field of AI. The United States’ status as “partner of choice” may be more superficial than hoped. 

U.S. policymakers will be fortunate if their leverage extends to safeguarding such advanced technology from Chinese surveillance, let alone achieving a broader realignment in the GCC’s economic ties. The UAE eventually abandoned efforts to purchase the advanced F-35 fighter rather than address U.S. concerns over its strategic ties with China, and even now Emirati leaders have yet to convince Commerce Secretary Howard Lutnick to permit advanced microchips to flow directly to G42 (rather than American companies based in the UAE).

U.S. policymakers will be fortunate if their leverage extends to safeguarding such advanced technology from Chinese surveillance, let alone achieving a broader realignment in the GCC’s economic ties.

While competition with China in the Gulf may serve as a convenient justification for recent tech deals, greater engagement with Silicon Valley is unlikely to “box out China from the Middle East,” as White House AI and crypto czar David Sacks recently put it. In the longer term, Trump administration crackdowns on immigrants and universities will likely help ensure that new technological innovations happen outside the United States, further reducing what the United States offers the Gulf outside of arms deals.

Conclusion

China’s sizable (and growing) economic ties to the Gulf will drive narratives of U.S.-China “competition” in the region for the foreseeable future. On the one hand, these narratives clearly overstate the desire or capacity of Chinese officials to engage in the Gulf region’s security dynamics, and the extent to which Gulf leaders view China as a meaningful security alternative to the United States. On the other hand (at least in the United States), they tend to understate the integration of Chinese and Gulf economies beyond the sale of energy resources, and the economic (as well as, ultimately, political) value Gulf rulers see in partnering with Chinese firms to achieve digital transformations and economic diversification at home.

Seen in this light, U.S. tech deals in the region should be evaluated on their bilateral merits—whether data can be protected from abuse or surveillance, whether data centers in the region expose the United States to additional geopolitical risk, and whether technologies stemming from these deals can be kept from feeding into regional conflicts and repression. The advantages in recent tech deals for Silicon Valley firms are clear: access to sizable streams of capital, subsidized energy for new data centers, and (for some tech leaders) more freedom from the messy political constraints of democracy. Yet they are unlikely to generate a broader economic realignment in the Gulf toward the United States and away from China—even within higher-tech industries. Without broader changes in the U.S. economy so that it can offer consumer and industrial goods at competitive prices, tech deals have the potential to put U.S. digital infrastructure at risk while gaining little additional leverage in return.