The markets in both countries can expect a more welcoming approach from Chinese Firms toward Islamic Finance, as it seeks to unlock untapped opportunities in cross-border Shariah compliant transactions.
As trade and economic relations between China and the UAE thrive over the past few years, Chinese ﬁrms are increasingly placing a growing importance on being Shariah compliant certiﬁed in order to attract Islamic investors and expand businesses in the Emirates. DANIAL IDRAKI writes.
China is the UAE’s number one trading partner as bilateral trade between the two countries was estimated at US$60 billion in 2015, compared with US47.6 billion in 2014, according to Dubai International Center (DIFC), with approximately 4,000 Chinese companies currently present in the UAE. Fresh from establishing a joint strategic investment fund of US$10 billion in December last year to invest in projects linked to the ‘One Belt, One Road’ (OBOR) initiative, the two countries further bolstered economic ties when it was recently reported that China’s central bank expects to pick a Chinese ﬁnancial institution to clear yuan transactions in the UAE by the end of the year, being only the second Middle Eastern country after Qatar to do so. As the estimated US$1.4 trillion OBOR initiative gains pace, Chinese ﬁrms are increasingly searching for opportunities in the Islamic ﬁnance space and are willing to innovate on products that suit the preference of Islamic investors.
Dubai, for its part, is becoming an important gateway for Chinese businesses eager to expand operations in the wider GCC region. One example is Chinese Business Hub (CBH) which aims to take advantage of the potential returns in the southern part of the city using Shariah compliant solutions. Initially set up to provide Chinese companies with an opportunity to build a presence in the UAE, CBH has revised its growth strategy to include non-Chinese ﬁrms following signiﬁ cant demand from global investors, particularly Muslim investors, keen to capture a slice of the Dubai
economy. The ﬁrm recently had its Dubai Commercial Investment product, an Ijarah-structured oﬃce space investment product, certiﬁed as Shariah compliant.
“It is important for us that this investment is now fully Shariah compliant as we have received a lot
of global interest, particularly here in the GCC and Pakistan, from Islamic investors looking for an investment product that is Shariah certiﬁ ed,” Gavin Smyth, the director at Crowngate International, told IFN. Crowngate is the exclusive master agent to market, promote and sell CBH’s investment product.
Beyond making progress in the UAE, Chinese ﬁrms are also utilizing Shariah compliant ﬁnancial solutions to attract investors from the Middle East into the Chinese market. Hong Kongbased Fullgoal Asset Management, for example, recently entered into a strategic partnership with Dubai-based Mawarid Finance to launch a Shariah compliant fund to tap into investment opportunities in the stock market of the world’s second-largest economy.
As China and the UAE step up bilateral relations on the back of the progress made with regards to OBOR and the yuan-clearing center in the Emirates, which would boost trade and investment between the two, the markets in both countries can expect a more welcoming approach from Chinese ﬁrms toward Islamic ﬁnance, as it seeks to unlock untapped opportunities in cross-border Shariah compliant transactions.