Gulf Investment in China Drives 2025 Boom in Finance and Energy

Gulf investment in China is reshaping the country’s 2025 economic landscape. Sovereign wealth funds from the Middle East are fueling growth across finance, energy, renewables, and logistics. This article explores sectoral trends, policy reforms, and the evolving China–GCC investment relationship.

---

Middle Eastern investment in China in 2025 is reshaping the flow of global capital. After a period of declining overall foreign direct investment (FDI), Beijing’s new measures, such as the 2025 Action Plan to stabilize foreign investment and reforms to the qualified foreign institutional investor (QFII) regime, are attracting renewed interest.

Sovereign wealth funds from the Gulf, which accounted for over 60 percent of China’s sovereign inflows in 2024, continue to drive activity this year. Capital is increasingly directed toward finance, energy, and downstream petrochemicals, renewables, logistics, and digital infrastructure, reflecting both diversification and alignment with China’s industrial and policy priorities.

This article analyzes how those flows are reshaping bilateral investment ties, explores the geopolitical and sectoral dynamics behind them, and highlights what business readers should watch in the months ahead, including China–Gulf Cooperation Council (GCC) Free Trade Agreement (FTA) negotiations, exchange-traded fund (ETF) product launches, and the conversion of memoranda of understanding (MoUs) into fully operational projects.

China’s FDI landscape in 2025

China enters 2025 at a complex juncture for FDI. On a balance of payments (BOP) basis, FDI inflows have weakened since the 2022 peak. The Ministry of Commerce reported FDI of RMB 358.2 billion (US$50 billion) from January to May 2025, down 13.2 percent year on year, reflecting weaker reinvested earnings and intracompany debt repayments. By contrast, utilized FDI, which tracks gross inflows, remained far more resilient, at US$163.3 billion in 2023 and US$116.2 billion in 2024.

The divergence highlights a persistent gap: BOP data capture reinvestment and offshore fundraising, while utilized FDI better reflects onshore capital committed to new projects. Beijing’s February 2025 Action Plan to stabilize investment directly addresses this tension, introducing incentives for reinvestment of profits, lifting restrictions on domestic loans for foreign-invested firms, and expanding the Catalogue of Encouraged Industries.

Against this backdrop, sovereign investors from the Gulf have consolidated their role as the single most dynamic source of capital. According to Global SWF, China attracted US$10.3 billion from state-owned investors in 2024, a 21 percent increase year on year, with 62 percent originating from Persian Gulf funds. That figure, which includes deals by Qatar Investment Authority (QIA), Abu Dhabi Investment Authority (ADIA), and Saudi Arabia’s Public Investment Fund, demonstrates a structural pivot in China’s capital inflows. Singapore’s GIC and Temasek accounted for another quarter of sovereign allocations, but Gulf players now account for the majority share and have stayed active into 2025, with transactions spanning finance, energy, real estate, and renewables.

The financing channels enabling this surge are widening. In May 2025, regulators approved QIA’s entry into China Asset Management Co. (ChinaAMC), reinforcing China–Gulf capital links through ETFs and asset management. Parallel to this, the Shenzhen Stock Exchange and Dubai Financial Market signed a memorandum of understanding in mid-2024 to deepen cross-border ETF investing, joint listings, and fixed-income offerings. The agreement was quickly tested when China’s first two Saudi Arabia ETFs launched, raising ~RMB 1.2 billion (US$169 million) and hitting the daily limit on debut.

At the regulatory level, revisions to the QFII framework in August 2024 streamlined account management, expanded eligible counterparties for FX hedging, and allowed more flexible repatriation of earnings. Together, these measures reduce frictions for Gulf sovereigns and asset managers, who increasingly view China allocations not only as diversification but also as a hedge against volatility in Western markets.

In sum, China’s 2025 FDI landscape is defined by a paradox: headline inflows remain under pressure in global statistics, yet targeted sovereign wealth fund commitments and policy-driven market openings signal deepening bilateral capital ties. The strategic weight of Gulf investors and new channels like ETF links and QFII reforms ensure that Middle Eastern flows will remain central to Beijing’s stabilization strategy.

Geopolitical drivers of investment

China’s growing strategic pull and the Gulf’s multipolar ambitions are redefining investment flows in 2025. The BRICS expansion serves as a clear marker: the UAE became a full BRICS member in 2024, while Saudi Arabia, though listed on the BRICS website, has not formally joined, careful to balance its traditional security ties with the U.S. against the economic and political opportunities of the Global South.

The Belt and Road Initiative (BRI) remains China’s backbone for infrastructure-connected diplomacy. In 2024-25, Middle Eastern economies – particularly GCC states – have stood out as top destinations under BRI for port expansions, industrial zone development, and trade corridor linkages. China’s grip isn’t limited to hard infrastructure; its strategic investment now spans technology, green energy, and logistics in the Gulf.

Meanwhile, regional trade-/investment integration is gaining new energy. In May 2025, ASEAN, China, and GCC held their first trilateral summit in Kuala Lumpur, signing a joint statement promising cooperation in high-quality Belt and Road projects, enhanced connectivity, trade facilitation, and investment in the green economy and digital sectors. This ASEAN-GCC-China “triangle” acts as both a hedge and an opportunity against rising protectionism elsewhere.

Progress toward a formal China-GCC FTA is less mature, but momentum is visible. Trade pacts at the ASEAN-China level have recently been upgraded (three-point-zero versions) to include digital and green economy elements, setting an example. The GCC’s strategic role in energy, logistics, and finance gives it leverage in negotiations, especially as China seeks stable supply chains, reliable markets, and allies in shifting global trade alignments.

In 2025, geopolitics shapes the direction of investment flows. Gulf states see China not just as a buyer of hydrocarbons, but as a partner in industrial, technological, and economic diversification. For China, translating this geopolitical alignment into concrete deals, FTAs, infrastructure, and trade flows is critical to sustaining foreign capital inflows and institutional investors’ confidence.

Sectoral focus with deal illustrations

To understand how these dynamics translate into concrete outcomes, it is useful to examine the sectors where Gulf capital is most actively reshaping China’s investment landscape. The following case studies illustrate how financial services, downstream energy, renewable power, and logistics infrastructure are absorbing Middle Eastern inflows. Each sector reflects not only immediate deal activity but also the broader strategic intent behind Gulf investors’ diversification into China’s economy.

Finance & asset management

Sovereign wealth funds from the Gulf are diversifying away from developed markets and turning to China’s financial sector, encouraged by reforms in the QFII/QFI regime and rising two-way demand for capital market access. Inflows into Chinese equities and asset management have grown as Gulf investors hedge against U.S. exposure and seek higher long-term returns.

Announced on May 23, 2025, the QIA secured approval to acquire a 10 percent stake in ChinaAMC, China’s second-largest mutual fund manager with RMB 1.8 trillion (US$250 billion) in assets. The deal makes QIA the third-largest shareholder. It is the first major Gulf entry into China’s mutual fund industry. The deal ties Gulf capital to Chinese ETFs, supports Shenzhen–Dubai link initiatives, and signals a long-term shift toward institutionalized Gulf participation.

For Beijing, it signals confidence at a time of weak FDI inflows; for Doha, it provides a foothold in Asia’s largest fund market while reinforcing political-economic ties.

Energy & petrochemicals

Gulf energy firms are embedding downstream in China to secure demand, hedge against volatility, and lock in long-term customer bases for hydrocarbons. For China, these investments align with the strategy of co-developing refining and petrochemical capacity to support industrial upgrading.

On April 28, 2025, Sinopec and Saudi Aramco signed a US$3.95 billion joint venture agreement to operate a refinery and petrochemical complex in Fujian. This JV sits within the larger Gulei complex and anchors Gulf downstream exposure inside China’s coastal petrochemical cluster. The venture, Fujian Sinopec Aramco Refining and Petrochemical Co., will integrate port operations, crude supply, and downstream petrochemicals. In parallel, SABIC, Aramco’s chemicals subsidiary, advanced its own project in Fujian, highlighting Riyadh’s multi-layered strategy to anchor its downstream footprint in China.

These deals cement interdependence: China secures crude supply and petrochemicals, while Saudi Arabia embeds downstream capacity in line with Vision 2030.

Renewables & clean tech

Gulf sovereigns and corporates are aligning with Beijing’s decarbonization agenda, channeling capital into solar and wind to both diversify their portfolios and learn from China’s technology leadership. The alignment is also political, with both sides positioning themselves as leaders of the global energy transition.

In January 2025, ACWA Power announced its formal entry into China’s renewables sector with agreements exceeding 1 GW of capacity. Projects include a 132 MW solar PV portfolio in Guangdong developed with Sungrow Renewables, and a 200 MW wind portfolio with Mingyang Smart Energy, totaling US$312 million. These mark the first batch of a pipeline intended to scale above 1 GW.

ACWA’s expansion illustrates a reciprocal strategy: Saudi capital leverages China’s world-class solar and wind supply chains, while China taps Gulf financing to accelerate its green transformation. For Beijing, it signals that foreign investment is no longer confined to hydrocarbons; for Riyadh, it provides operational exposure to the technologies underpinning its own domestic clean-energy push.

Logistics & digital infrastructure

Gulf investors are expanding into logistics and data infrastructure to support China’s outbound EV supply chain and the rise of artificial intelligence-driven data centers. These bets are forward-looking: logistics supports China’s export corridors, while data infrastructure rides demand for cloud and AI.

In August 2025, ADIA committed up to US$1.5 billion to Singapore-headquartered GLP, a leading logistics and data center developer with extensive operations in China. The investment will finance logistics parks, renewable-powered data centers, and digital infrastructure upgrades. Simultaneously, Abu Dhabi Ports partnered with Ningbo to build an automotive logistics ecosystem, targeting China’s EV exports through Gulf-linked shipping corridors.

For China, Gulf capital reinforces critical infrastructure underpinning its export and digital economy strategies. For the UAE, the investments diversify away from oil and secure a role in future growth sectors where China is globally competitive. Together, they show a shift from transactional capital inflows to long-term institutional partnerships in building logistics and data ecosystems.

The four sectors, finance, energy, renewables, and logistics/data, highlight how Middle Eastern investment in China is no longer opportunistic. It is structural, diversified, and strategically aligned with both sides’ national goals: financial connectivity, energy security, decarbonization, and supply chain resilience. Sovereign wealth funds anchor these moves, but corporates like ACWA and Aramco play equally central roles. The  Middle Eastern capital is becoming a durable component of China’s FDI landscape, reshaping the mix of industries that drive the bilateral relationship.

Regional comparison of investment inflows

In 2025, Middle Eastern capital into China stands out in contrast to investment flows from ASEAN, the EU, and the US, both in scale and in intention. Gulf sovereign wealth funds now control over 50-55 percent of global SWF deployment, with the combined assets of Saudi Arabia’s PIF, ADIA, and Kuwait’s KIA reaching approximately US$4-5 trillion mid-2025. Their share of sovereign inflows into China has grown; while exact deal-by-deal comparisons remain partially opaque due to proprietary data constraints, publicly reported deals place Gulf funds as dominating China-bound SWF capital among state investors.

By contrast, investors from the EU and the US are becoming more cautious. They are enacting “de-risking” strategies, with Western governments raising scrutiny on supply chains, imposing export controls, and tightening investment vetting, especially in tech and dual-use sectors.  These steps have slowed, but not reversed, flows; some Western institutional investors continue to scale back exposure, preferring more stable jurisdictions or partial hedges (e.g. ASEAN members).

ASEAN countries, meanwhile, are rising as alternatives: trade and investment pacts with China and the Gulf (such as the recent ASEAN-GCC-China summit) provide pathways for capital diversion and cooperation in infrastructure, green energy, and finance. Aggregated FDI into ASEAN in 2023 reached historic highs (around US$230 billion), showing resilience in embedding investment, even as global FDI softens.

Middle Eastern capital is not just offsetting Western retrenchment; it represents strategic, long-term commitments aligned with China’s industrial and policy priorities.

Meanwhile, Western investors are slow to re-engage deeply due to regulatory, geopolitical, and reputational risks. That gives Gulf funds both opportunity and responsibility: their growing influence in China depends not just on deal flow, but on trust, regulatory consistency, and clear policy signals from both sides.

What to watch

Negotiations for a China–GCC FTA remain a top signal of future capital flows. China’s Ministry of Commerce confirmed in May 2025 that it has completed upgraded negotiations on CAFTA 3.0 and is working toward early completion of FTA talks with the GCC. A finalized FTA would reduce tariffs, enhance investment protections, and accelerate cross-border supply chain integration, especially for energy, infrastructure, and manufacturing.

ETFs are emerging as a major conduit for Gulf-China financial connectivity. Saudi Arabia recently launched the Albilad CSOP MSCI Hong Kong China Equity ETF, the region’s largest China-focused vehicle (around US$1.2 billion), granting Saudi investors direct exposure to prominent Chinese companies via Hong Kong listings.  In parallel, Hong Kong and the UAE are strengthening financial ties, enabling mutual recognition of funds and cross-listing of ETFs on the Abu Dhabi Securities Exchange. MoUs between China Universal Asset Management and Azimut to explore a China-UAE ETF link further highlight this trend.

Another priority is converting MoUs into projects, particularly those backed by Saudi Arabia’s Public Investment Fund. In Fujian, the Gulei complex aims for full operation by 2030, with interim milestones critical for investor confidence

These developments make 2026 pivotal: progress on the FTA, ETF expansion, and delivery of petrochemical projects will determine how far Middle Eastern capital can entrench itself in China’s economy.