Abstract:Trade is at the importance of the growing links between Saudi Arabia and China, which center on the crude oil and petrochemical industries. The trade between Saudi Arabia and China commenced before they established their official diplomatic relations in 1990. However, since the establishment of diplomatic relations in 1990, the trade between the two countries flourished largely based mainly on Saudi oil exports. The Sino-Saudi relationship is China’s most important in the Middle East and has become one of Saudi Arabia’s most important relationships beyond the Middle East as well.

This thesis focuses on the oil trade and growing relationship between China and Saudi Arabia. China is the world’s second largest oil consumer country and Saudi Arabia is the world’s top oil exporter. It will also give us a view of the barriers and challenges both the countries are facing in the oil trade.

The structure of foreign trade is an important part of a country's foreign trade reflects the level of development of foreign trade, but also reflect the economic strength of the country to some extent, the level of development of domestic industry and enterprise competitiveness situation. So here we will focus on the oil trade, studying this detail will give us a greater view on oil trade. In recent years, bilateral trade between China and Saudi Arabia increase close trade volume is growing. In this paper, based on a UN trade database data analysis and classification of two codes for nearly 10 years, the structure of trade between Saudi Arabia, the main conclusion is: sand bilateral trade structure in line with the theory of comparative advantage, China's main exports to Saudi Arabia manufactured goods, mainly oil imports.

KEYWORDS: CHINA, SAUDI ARABIA, MIDDLE EAST, OIL TRADE, BILATERAL TRADE.

Table of Contents

1 Introduction 1

1.1 Background 1

1.2 Problem Statement 2

1.3 Significance of Study 2

1.4 Aims & Objectives of the Study 3

1.5 The Organizations of Research 4

1.6 The Contributions & Limitations of This Study 4

2 Review of the Literature 6

2.1 Background 6

2.2 China’s Domestic Energy Situation: 6

2.3 Realist Interpretations: The Conflict is Inevitable 7

2.3 China’s look to the Middle East for Energy 9

2.4 Middle East Oil: Vital Role and few Alternatives 10

2.5 Conclusion 10

3 Research Design & Methods 11

3.1 Design 11

3.2 Sources and methods for gathering data 11

3.3 Methods for analyzing data 12

3.4 Introduction to China’s oil trading activities and Partnership 13

3.5 Summary 18

4 China-Saudi Oil Trade Relations 20

4.1 China and Saudi Economic Relations 20

4.2 Trade Ties: Growing Interactions 21

4.3 Trade 23

4.4 The Logic behind the Boom 25

4.5 Trade Theory 26

4.6 Markets Divarication 28

4.7 Economic Obstacles 29

4.8 Current Oil trade relation 32

5 Conclusion & Future Research 33

5.1 Conclusion 33

5.2 Future research 33

Acknowledgment 35

References 36

ABBREVIATIONS

ARAMCO Saudi Arabian Oil

Bpd Barrels per day

EIA Energy Information Administration

FDI Foreign direct investment

G20 The top 20 economies in the World

GDP Gross Domestic Product

IEA International Energy Agency

KSA Kingdom of Saudi Arabia

Mb/d Million Barrels Per Day

Mn Million

OPEC Organization of Petroleum Exporting Countries

PRC People‘s Republic of China

Tn Trillion

TET Trade Expectations Theory

U.A.E The United Arab Emirates

U.K The United Kingdom

U.S United States

UN United Nations

WTO World Trade Organization

1 Introduction

1.1 Background

From 20th century, China has been steadily increasing its economic, political, and military influence in the Middle East region. Much of China’s drive to develop closer relations with Middle Eastern states is driven by its growing demand for energy. This thesis focuses on the oil relationship established between The People‘s Republic of China (PRC), the world’s top oil importer, and The Kingdom of Saudi Arabia (KSA), the world‘s top oil exporter and challenges faced by them. While Saudi Arabia sees China as a strategic trade partner and an enormous potential market. The study‘s main aims are: to investigate the challenges faced by China in this oil trade. It will also give us a look at the importance of this oil trade for both the countries.