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Editor’s Note:

Chinese companies "group together to seek gold" in the Middle East

As China's economy continues to grow, Chinese companies going overseas has become an important means to promote economic development and enhance the core competitiveness of enterprises. Looking at the global market, Chinese companies are gradually realizing the strategic value of the Middle East market. Arab countries represented by the UAE, Saudi Arabia and Oman have gradually become a new hot spot for Chinese companies to set off another round of going overseas.

Let’s go to the Middle East.

Recently, many new energy leaders including JinkoSolar, Sungrow Power Supply, TCL Zhonghuan, Envision Group and others have announced that they have won large orders or joint investments in Saudi Arabia, involving photovoltaic storage and wind power. Earlier, GCL Technology, Junda Technology, CHINT Solar, Trina Solar and other companies also reached cooperation with Middle Eastern countries and planned to build factories.

A month ago, JinkoSolar Chairman Li Xiande was a guest on CCTV's "Dialogue" program, where he talked about opportunities in the Middle East. He said that JinkoSolar has a 45% market share in the Middle East from a product perspective, and has been expanding in the region for more than a decade.

In the past year, Arab countries represented by the United Arab Emirates, Saudi Arabia and Oman have become the new hotspot for Chinese new energy enterprises to go overseas. An industry analyst told the 21st Century Business Herald reporter that, unlike the previous photovoltaic enterprises’ group layout in Southeast Asia, the Middle East market has a certain demand space and “is not used as a springboard for export like Southeast Asia.”

Image source: Xinhua News Agency

In the past year, 9 Chinese new energy companies invested in the Middle East

According to statistics from 21st Century Business Herald, since the fourth quarter of last year, nine Chinese companies in the photovoltaic, wind power and mining sectors have announced their investment in the Middle East. Among them, four projects have publicly disclosed their investment scales, with a total amount of approximately RMB 37.181 billion.

The photovoltaic manufacturing sector is the main investment direction for Chinese new energy enterprises in the Middle East, including silicon materials, silicon wafers, battery cells, modules and brackets.

Specifically, on the silicon material side, Trina Solar, GCL Technology and United Solar may plan to build silicon material production capacity of more than 200,000 tons.

According to information previously released by Trina Solar and GCL Technology, the former plans to plan an integrated project in the UAE, including an annual production of 50,000 tons of high-purity silicon materials, while the latter will build a comprehensive silicon ecosystem in the UAE, which will become the company's largest granular silicon project overseas.

In addition, according to public reports, another Chinese company may lead the third silicon material project in the Middle East. In March this year, the groundbreaking ceremony of the polysilicon factory project in Sohar Free Zone, Oman was held. The project has an investment of more than 520 million riyals and an annual output of 100,000 tons of polysilicon. The 21st Century Business Herald reporter learned that the leading company of the aforementioned Oman polysilicon project is United Solar, whose founder Zhang Longgen is the former director and CEO of Daquan New Energy.

On the silicon wafer side, TCL Zhonghuan and Trina Solar will build a total production capacity of more than 50GW.

Trina Solar's partners include AD Ports Company PJSC and Jiangsu Overseas Cooperation Investment Co., Ltd., and they plan to build a 30GW silicon wafer production capacity project in the Khalifa Economic Zone in the UAE. TCL Zhonghuan's partners are Vision Industries Company and Saudi Arabia's Public Investment Fund (PIF). The three parties will set up a joint venture to build a 20GW silicon wafer factory with a total investment of approximately US$2.08 billion.

In terms of cells and modules, JinkoSolar, Junda Solar and Trina Solar plan to produce 10GW, 10GW and 5GW of capacity respectively. The investment details released show that JinkoSolar's partners are also Vision Industries Company and Saudi Arabia's Public Investment Fund (PIF). The three parties will set up a joint venture to build a 10GW high-efficiency cell and module project with a total investment of approximately US$985 million. Junda Solar plans to invest in a TOPCon photovoltaic cell manufacturing plant with a 10GW capacity in Oman, with an investment of approximately US$700 million.

It is not difficult to see from the investment plans announced by the above-mentioned Chinese companies that in this round of boom in going to the Middle East, the sovereign funds of Middle Eastern countries are also deeply bound with Chinese companies.

For example, in the investment projects of JinkoSolar and TCL Zhonghuan, Saudi Arabia's Public Investment Fund PIF indirectly holds 40% of the shares of the joint ventures, making it the largest shareholder together with Chinese companies. In the integrated silicon ecosystem project of GCL Technology in the UAE, Mubadala Investment Company PJSC (Mubadala Sovereign Fund) is an important financial partner.

Risks and opportunities coexist

At present, the biggest overseas risk facing China's new energy industry is undoubtedly the frequent trade frictions.

Previously, in order to circumvent the high tariffs imposed by European and American countries, Chinese photovoltaic enterprises had "taken advantage" of Southeast Asia to build production capacity in countries such as Thailand, Malaysia, and Vietnam, which were the target markets for product exports. However, as the United States further launched anti-dumping and countervailing duty investigations on solar products from four Southeast Asian countries, many Chinese companies will face restrictions on their photovoltaic production capacity in Southeast Asia.

Against this background, the Middle East market is heating up and has become a new overseas market for Chinese photovoltaic companies.

"The new energy market in the Middle East is indeed a blue ocean. Major Arab countries have expressed their determination to transform their energy systems and vigorously develop renewable energy. According to known plans, if it develops smoothly, there will indeed be huge demand," a person from a photovoltaic company told a reporter from 21st Century Business Herald.

The reporter noted that, taking the three Middle Eastern countries of the United Arab Emirates, Saudi Arabia and Oman as examples, all countries have released vision plans. Among them, the UAE's "National Energy Strategy 2050 Update" pointed out that it plans to more than double the installed capacity of renewable energy to 14.2GW by 2030; Saudi Arabia has increased the scale of renewable energy development on the basis of the "2030 Vision", planning to develop at a rate of 20GW per year and achieve an installed capacity of 130GW by 2030; Oman has proposed the "2040 Vision" to accelerate the investment and promotion of renewable energy and green hydrogen projects.

In fact, the Middle Eastern countries, which have accumulated huge wealth through the oil economy, have to use "money" to invest in the future. Under the general trend of global energy transformation, the foundation on which the Middle Eastern countries rely for survival continues to be impacted, which is also the direct reason why the Middle Eastern countries and China have frequently strengthened cooperation and exchanges on new energy in recent years.

In this process, sovereign funds in the Middle East play a key role as "buyers". Take the Saudi Arabian Public Investment Fund (PIF) as an example. According to the data of the Global Sovereign Wealth Fund Institute SWF, the latest total asset management scale of this sovereign fund is US$925 billion, making it the fifth largest sovereign wealth fund in the world.

Regarding the cooperation agreements signed with JinkoSolar, TCL Zhonghuan and Envision Group, Yazid Humid, vice president of the Saudi Arabian Public Investment Fund, said that these new agreements are part of the Saudi Arabian Public Investment Fund's efforts to promote the localization of advanced technologies in the field of renewable energy, and will help Saudi Arabia achieve its goal of localizing 75% of components for renewable energy projects by 2030.

It is worth affirming that the "two-pronged approach" of market and capital has made Chinese new energy companies' expansion into the Middle East not equivalent to Southeast Asia. As far as the photovoltaic market is concerned, the Middle East region has great development potential. According to statistics from Infolink Consulting, in 2023, the demand for photovoltaics in the Middle East will be about 20.5GW to 23.6GW. Among them, Saudi Arabia has become China's sixth largest exporter of photovoltaic modules, with an amount of US$1.34 billion.

It should be pointed out that although the Middle East has huge development potential, there are also investment risks.

A person from a business that plans to invest in the Middle East once told a reporter from 21st Century Business Herald that overseas projects are unlikely to be started so quickly, and that the construction speed abroad will not be as fast as that in China, including the decision-making speed of foreign governments.

The reporter noticed that TCL Zhonghuan and JinkoSolar also warned of investment risks.

"Due to certain differences between the laws, policy systems, and business environments of the Kingdom of Saudi Arabia and those of China, the future business management process may face the impact of uncertainties such as changes in macroeconomic and industry policies, market competition, etc., and there are certain market risks, operational risks, and management risks," JinkoSolar said.