Intertrust N : Chinese investment in the UAE continues to flourish

Ivy Yang, Commercial Director, Intertrust Group China, and Francesca Borghi, Business Development Manager, Intertrust Group UAE, explain why the UAE is seen as a welcoming regional hub for businesses investing in infrastructure, sustainable energy, finance, and fintech.

The United Arab Emirates (UAE) is attracting growing interest from Chinese businesses as the Gulf state actively courts investment from the world's second-largest economy.

More than 6,000 Chinese companies have set up operations in the UAE over the past few years, and bilateral trade is forecast to grow to USD 200 billion in 2030, up from USD 50 billion in 2021.

The relationship between the two countries was historically built around oil but today it flourishes in areas as diverse as infrastructure, sustainable energy, finance, and fintech.

Doing business in the UAE

What makes the UAE so attractive to Chinese investors? Partly it's about geography. The UAE is well located for expansion into Central Asia, Africa, and even Europe, and an obvious entry point into the Middle East as a whole.

For that reason, companies looking to invest in the Gulf region's Belt and Road Initiative (BRI), i.e. infrastructure projects initiated by China, often choose the UAE for their local headquarters.

Other Gulf countries share the same geographical advantages, but the UAE has worked hard to distinguish itself as a natural choice for foreign investment.

Stability and familiarity: UAE free trade zones

Most importantly, the UAE offers a stable and business-friendly investing environment.

In addition, the country has a large professional services sector and has successfully attracted relevant foreign talent, including specialists in technology, sustainability, and finance.

The country's economic zones are particularly appealing to foreign investors. The UAE offers 40 interdisciplinary free trade zones, with their own laws and regulations, tax benefits, and easy business set-up procedures.

Chinese companies often favour the largest and most established of these, like the Dubai International Financial Centre (DIFC) or Abu Dhabi Global Market (ADGM). But the wide range of economic zones makes the UAE attractive to Chinese companies in many sectors.

Foreign-owned investment in the UAE

As important as the UAE's free trade zones is what is happening away from them. A few years ago, foreign investors needed to have a local sponsor to open a company outside the free-zone network.

That's no longer the case. A recent landmark legal ruling means that investors from overseas can own 100% of the entities they set up in the majority of business sectors, wherever they are in the country.

That is a major attraction for Chinese companies, who generally prefer ownership models to working with local partners over whom they have no control.

The UAE has also gone out of its way to make Chinese investors and visitors welcome. The government operates a dedicated China desk, manned by fluent Chinese speakers. Signage in Chinese can be found everywhere from free trade zones to shopping malls.

Finally, both governments are increasingly focused on sustainability. The UAE government is keen to diversify away from an over-reliance on hydrocarbon production, and Chinese businesses are encouraged to meet new sustainability targets.

The result is that the UAE's flourishing renewable energy sector is becoming a key target for Chinese investment.

Overcoming barriers to Chinese investment in the UAE

The UAE is targeting Chinese investment, but that doesn't mean setting up and managing local operations in the region is easy. The process is not as straightforward as it is in Hong Kong or Singapore, for example.

Chinese businesses are often working to tight deadlines when it comes to implementing structures, and translating local regulations around specific activities can be challenging. As they struggle with the nuances of local compliance and culture, timelines can easily slip.

Later on, foreign companies often find that reporting, filing, and other necessary tasks may be more time-consuming than expected. At that point, many turn to a service provider with an in-depth knowledge of local regulations and business culture to smooth the process of managing and maintaining their UAE investments.

This article is intended for potential Professional / Market Counterparties only and not intended for retail clients.

Why Intertrust Group?

• CSC completed its acquisition of Intertrust Group in November 2022. Together we offer a global solution for subsidiary governance, fund strategies, and capital markets transactions, and navigate the ever-changing compliance and regulatory environment that our clients face. With capabilities in more than 140 jurisdictions, we are capable of doing business wherever our clients are-and we accomplish that by employing experts in every business we serve.
• Intertrust Group offices in China and the UAE collaborate to help Chinese investors set up and maintain operations in the Middle East, offering a full range of registration, compliance, and accounting services.
• Intertrust Group has the experience and expertise to help Chinese corporations make the most of tax and regulatory benefits, inside and outside the UAE's free trade zones.
• Intertrust Group is registered in ADGM and regulated by the ADGM Financial Services Regulatory Authority