King Salman met Chinese Vice Premier Zhang Gaoli

:: Saudi Arabia and China plan to establish a $20 billion investment fund as the Kingdom deepens ties with its biggest Asian oil customer.

King Salman met Chinese Vice Premier Zhang Gaoli in Jeddah on Thursday amid a flurry of deal-making between the countries, which are both pursuing economic transformation plans through Saudi Arabia’s Vision 2030 and China’s Belt and Road Initiative.

The pair plan to jointly operate the investment fund, sharing costs and profits on a 50:50 basis, Saudi Energy Minister Khalid Al-Falih told Reuters on Thursday.

He was speaking on the sidelines of an economic conference where senior officials and businessmen from both countries assembled.

Saudi Arabia is pursuing an aggressive international investment strategy spearheaded by the Public Investment Fund (PIF), which is taking multibillion-dollar stakes in companies such as Uber Technologies. The PIF is set to become the world’s largest fund when it receives the proceeds from the initial public offering (IPO) of Saudi Aramco.

“The key thing in this is the increasing economic relations between Saudi Arabia and China, which is its main customer for oil,” Jason Tuvey, an economist at London-based Capital Economics, told Arab News.

“It sees China as its main growth engine at a time when demand for oil in many developed markets is falling. Saudi Aramco will want to make sure it remains the ‘go to’ oil producer for China.”

The closer ties between China and Saudi Arabia may also extend to international debt markets if the Kingdom looks to add foreign bond sales denominated in yuan as well as dollars.

“One of our main objectives is to diversify the funding basis of Saudi Arabia,” Vice Minister of Economy and Planning Mohammed Al-Tuwaijri told the Jeddah conference, Reuters reported.

“We will do that through access to investors or bodies of liquidity in the markets. China is by far one of the top markets. We will also access other technical markets in terms of unique funding opportunities, private placements, panda bonds and others.”

Such overseas debt sales could not only help the country reduce its deficit but also fund job-creating investments at home.

Crown Prince Mohammed bin Salman is driving an ambitious economic diversification plan which aims to reduce the country’s dependence on oil and boost investment in new sectors.

He also co-chairs the high-level Saudi-Chinese Joint Committee with Zhang.

The first meeting of the committee was held in Beijing a year ago.