5.1.5 The project contract increased 19

5.2 The challenges of developing trade cooperation between Saudi Arabia and China 20

5.2.1 China's oil import dependence is strong 20

5.2.2 China's cheap labor advantage weakened 20

5.2.3 The GCC surrounding situation is not stable 21

5.2.4 Shallow foundations of China in Saudi Arabia 21

5.3 Suggestions on the development of trade cooperation between China and Saudi Arabia 21

5.3.1 Strengthen high-level cooperation, consolidate bilateral ties 21

5.3.2 Open up the export-oriented energy strategy layout 22

5.3.3 Strengthen investigation 22

Summary 24

Acknowledgment 25

References 26

1 Introduction

1.1 Background and meaning of the research

Since July 21st 1990 when China and Saudi Arabia formally established diplomatic relations, the sound development of bilateral relations, relations between the two sides in the political, economic, science and technology, military and religious aspects are mutually beneficial cooperation models; masses diplomacy between the two countries has also been considerable developing. After entering into the 21st century, China's economy is developing rapidly, the demand of Saudi's oil and investment is increasing, as well as the demand of exportation and goods. Chinese comprehensive national strength has made Chinese influence in the world more and more significant. In dealing with the issue of peace in the Middle East and the fight against international terrorism, China has received more and more support and expectation from countries like Saudi Arabia and other Middle East countries. The political, economic and trade cooperation between China and Saudi Arabia continues to deepen, and the relationship between the two countries is developing towards a more friendly and closer trend.

Chinese leaders spoke highly of bilateral tie that not only shows the relationship between the two countries have made great achievements, but also mean that the relation between two countries in the future prospects. But within the continuous development of the relationship between  change of the international situation, Chinese and Saudi Arabia will be encounter a series of difficulties and obstacles, the situation in the Middle East countries, competition, the international hot issues there may be a stumbling block of the relations between the two countries. In recent years, China's trade deficit with Saudi Arabia continues to increase, coupled with the impact of the global economic crisis, economic and trade relations may also be twists and turns. These issues require the scholar’s attention and research, to discover the existing problems in the bilateral relation thoroughly, which must be on the Sino Saudi trade relation to make a comprehensive and detailed review and analysis. Find out the advantages and disadvantages of the exchanges between the two countries and put forward the countermeasures, in order to contribute to the development of dealings between the two countries better.

1.2 Literature review

The Following discussion provides a brief review of trends in China’s oil sector over recent years, before reviewing the countries strategy for oil imports and identifying some key issues to watch over the coming years. During the 1980s China was a net exporter of about 20 million tons of oil per year. In the mid-1990s this situation changed[1]. Demand for oil exceeded the domestic capacity to produce and China became a net importer of oil. The gap between domestic demand and supply grew to almost 110 million tons in 2003. Despite expensive exploration campaigns onshore and offshore, the domestic output of oil has been increasing at only 1-2% per year. As old, large fields go into decline, new discoveries are barely compensating. It is most unlikely that a sustained growth of supply will be achieved and total national oil production may reach a peak during the coming ten years. The demand for oil has risen in all major sectors. But the share used by industry has shown a sustained decline as that used for transport has grown to 40% of total oil consumption[2] . Oil use in other sectors and for non-energy applications has also grown. The number of registered vehicles grew eighteen-fold between 1980 and 2002. Over the same period freight traffic rose by four times and total passenger traffic by six times. Since 1990 the contribution of oil to energy use in transportation has risen from 65% to more than 90% as the role of coal has diminished. This sub-section attempts to present the relevant literature on China–Saudi Arabia relations with a major focus on the bilateral trade since 1990.