WASHINGTON: The dramatic arrest of a Chinese telecommunications executive has driven home why it will be so hard for the Trump administration to resolve its deepening conflict with China.
In the short run, the arrest of Huawei’s chief financial officer heightened skepticism about the trade truce that Presidents Donald Trump and Xi Jinping reached last weekend in Buenos Aires, Argentina. On Thursday, US stock markets tumbled on fears that the 90-day cease-fire won’t last, before regaining most of their losses by the close of trading.
But the case of an executive for a Chinese company that’s been a subject of US national security concerns carries echoes well beyond tariffs or market access. Washington and Beijing are locked in a clash over which of the world’s two largest economies will command economic and political dominance for decades to come.
“It’s a much broader issue than just a trade dispute,” said Amanda DeBusk, chair of the international trade practice at Dechert LLP. “It pulls in: Who is going to be the world leader essentially.”
The Huawei executive, Meng Wanzhou, was detained by Canadian authorities in Vancouver as she was changing flights Saturday — the same day that Trump and Xi met at the Group of 20 summit in Argentina and produced a cease-fire in their trade war. The Globe and Mail newspaper, citing law enforcement sources, reported that Meng is suspected of trying to evade US sanctions on Iran. She faces extradition to the United States, and a bail hearing was set for Friday.
The British bank HSBC is cooperating with US authorities in its investigation, people familiar with the matter said Thursday.
Huawei, the world’s biggest supplier of network gear used by phone and Internet companies, has long been seen as a front for spying by the Chinese military or security services, whose cyber-spies are widely acknowledged as highly skilled. A US National Security Agency cybersecurity adviser, Rob Joyce, last month accused Beijing of violating a 2015 agreement with the US to halt electronic theft of intellectual property.
Other nations are increasingly being forced to choose between Chinese and US suppliers for next-generation “5G” wireless technology. Washington has been pushing other countries not to buy the equipment from Huawei, arguing that the company may be working stealthily for Beijing’s spymasters.
Beijing protested Meng’s arrest but signaled that it doesn’t want to disrupt progress toward settling its trade dispute with the Trump administration. Chinese Commerce Ministry spokesman Gao Feng said China is confident it can reach a deal during the 90 days that Trump agreed to suspend a scheduled increase in US import taxes on $200 billion worth of Chinese products.
US national security adviser John Bolton told NPR that he knew of the pending arrest in advance. He noted that there has been much concern about the suspicion that Chinese firms like Huawei use stolen US intellectual property.
In the view of the United States and many outside analysts, China has embarked on an aggressive drive to overtake America’s dominance in technology and global economic leadership. According to analysts, China has deployed predatory tactics, from forcing American and other foreign companies to hand over trade secrets in exchange for access to the Chinese market to engaging in cyber-theft.
Washington also regards Beijing’s ambitious long-term development plan, “Made in China 2025,” as a scheme to dominate such fields as robotics and electric vehicles by unfairly subsidizing Chinese companies and discriminating against foreign competitors.
In addition to Trump’s tariffs, the administration is tightening regulations on high-tech exports to China. It’s also making it harder for Chinese firms to invest in US companies or to buy American technology in such cutting-edge areas as robotics, artificial intelligence and virtual reality.
Earlier this year, the United States nearly drove Huawei’s biggest Chinese rival, ZTE Corp., out of business for selling equipment to North Korea and Iran in violation of US sanctions. But Trump issued a reprieve, possibly in part because US tech companies are major suppliers of the Chinese giant and would also have been scorched. ZTE got off with paying a $1 billion fine, changing its board and management and agreeing to let American regulators monitor its operations.
The US and Chinese tech industries depend on each other so much for components that “it is very hard to decouple the two without punishing US companies, without shooting ourselves in the foot,” said Adam Segal, cyberspace analyst at the Council on Foreign Relations.
Dean Garfield, president of the US Information Technology Industry Council trade group, said innovation by US companies often depends utterly on product development and testing by Chinese partners, not to mention component suppliers.
British Telecom said this week that it would stop using Huawei equipment in its 5G network, the BBC reported, and US lawmakers have lobbied Canada’s prime minister to freeze out the Chinese supplier. New Zealand and Australia already have. Other, less wealthy nations are concerned less about spying and more about low prices, which play to Huawei’s advantage.
Both Huawei and ZTE have not only been barred from use by US government agencies and contractors; they have also been mostly locked out of the American market. A 2012 report by the House Intelligence Committee report urged US businesses to avoid their products and called for blocking all mergers or acquisitions involving them.
And nearly a year ago, AT&T pulled out of a deal to sell Huawei smartphones.
“There is ample evidence to suggest that no major Chinese company is independent of the Chinese government and Communist Party — and Huawei, which China’s government and military tout as a ‘national champion’ is no exception,” Sens. Mark Warner, D-Virginia, and Marco Rubio, R-Fla., wrote in October to Canadian Prime Minister Justin Trudeau. They urged him to keep Huawei off Canada’s next-generation network.
Priscilla Moriuchi, a former East Asia specialist at National Security Agency now with the cybersecurity firm Recorded Future, said both ZTE and Huawei are wedded to China’s military and political leadership.
“The threat from these companies lies in their access to critical Internet backbone infrastructure,” she said.
“No matter what happens in the short term, (the arrest of Huawei’s CFO) is a symptom of a long-term technology clash,” said Derek Scissors, a China specialist at the conservative American Enterprise Institute. “We’re not going to deal that away in 90 days.”
Scissors said he doubts that China will change its tech policies. Beijing must develop innovative technologies to keep its economy growing as its labor force ages and it confronts a huge stockpile of debt. Yet its political and economic system — which promotes inefficient state-owned companies at the expense of nimbler private ones — discourages innovation.
“I don’t see a way out of this,” Scissors said.
Likewise, Rod Hunter, an international economic official in President George W. Bush’s White House and a partner at law firm Baker McKenzie, said, “I’m skeptical that the Chinese are going to want to say ‘uncle.’ ” US and Chinese officials are “trying to tackle a problem that is going to take years, maybe a decade, to resolve.”
Why Huawei arrest deepens conflict between US and China
Why Huawei arrest deepens conflict between US and China
- Washington has been pushing other countries not to buy the equipment from Huawei, arguing that the company may be working stealthily for Beijing’s spymasters
- British Telecom said this week that it would stop using Huawei equipment in its 5G network, the BBC reported, and US lawmakers have lobbied Canada’s prime minister to freeze out the Chinese supplier
Saudi PIF on track to reach $2tn in AuM, 2nd-largest globally by 2030
RIYADH: Saudi Arabia’s Public Investment Fund is set to be ranked second among the world’s sovereign wealth bodies by 2030 with $2 trillion in assets under management, according to monitoring organization Global SWF.
A report from the firm forecasts PIF will more than double its current AuM value of $925 billion by the end of the decade, and rise from its 2024 ranking of sixth among global state-owned investor funds.
According to projections from the institute, PIF’s AuM in 2030 will represent 10.5 percent of the global sovereign wealth funds’ total assets, which are set to reach $19 trillion, as it rises from sixth place
Diego Lopez, founder and managing director at Global SWF, said: “Capital attracts capital — so international financial institutions are attracted in partnering with a player with such a huge balance sheet and role in the economic development.”
According to the report, to achieve its ambitious goal of reaching $2 trillion by 2030, the PIF will depend on a combination of strategies. These include oil revenue allocations, which refer to the portion of the Kingdom’s oil earnings transferred to the PIF, debt issuance, and returns generated from its investments.
“Saudi Arabia needs to make its capital base sustainable, diversified and resilient to lower levels of oil prices,” Lopez told Arab News.
“That means raising debt, as PIF has been doing, and eventually raising equity through subsidiaries that can act as asset managers — we see this working very well in Abu Dhabi with Mubadala Capital, Lunate, etc,” he added.
According to the report, the PIF’s 10-year annualized return from 2013 to 2022 stood at 6.9 percent, outperforming the sovereign wealth fund average of 5.7 percent annually.
In 2024, the global economy showed resilience despite geopolitical risks and market uncertainties, with global GDP growth projected at 3.2 percent, slightly improving to 3.3 percent in 2025, according to the OECD.
The International Monetary Fund forecasts a subdued five-year outlook of 3.1 percent, reflecting weaker growth in China, Latin America, and the EU. Developed markets are facing slower growth due to tightening monetary policies, while developing economies maintain greater stability.
Central banks, led by the US Federal Reserve, began easing rates in 2024, responding to reduced inflationary pressures. According to the report, as the global economy adapts, sovereign wealth funds are increasingly focused on capital preservation and stimulating foreign direct investment, with those in the Middle East and North Africa region entering a new phase of growth.
Saudi Arabia offers robust economic expansion fueled by diversification initiatives and ambitious mega-projects like NEOM, the Red Sea Project, and Qiddiya.
PIF’s investments are strategically positioned to capitalize on these high-growth areas, making it a gateway for investors seeking exposure to dynamic emerging market opportunities.
GCC sees greater international attention
According to the report, global sovereign wealth funds have, for the first time, surpassed $13 trillion in assets under management, with capital heavily concentrated in two key regions — the Gulf Cooperation Council, holding 38 percent of the total, and Southeast Asia at 10 percent.
Interest in these powerful global investors remains strong, the report said, drawing heightened international attention to the GCC, a region with fewer than 60 million residents.
Previously named the “Region of the Year” by Global SWF, the GCC has seen a wave of global asset managers and bankers establishing local offices to capitalize on burgeoning opportunities. According to the report, the GCC-Southeast Asia axis is expected to continue driving growth across the sovereign wealth landscape.
PIF represented 7.11 percent of MENA’s sovereign wealth funds’ AuM, with assets totaling $925 billion.
Leading the rankings is Abu Dhabi Investment Authority at $1.11 trillion, followed by Kuwait Investment Authority with $969 billion.
Global sovereign wealth fund investments totaled $136.1 billion across 358 transactions in 2024. The “Oil Five” — ADIA, ADQ, PIF, QIA, and Mubadala — maintained their dominance, together accounting for 60 percent of the total investment value, amounting to $82 billion. As a result, they secured positions among the top 19 dealmakers of the year.
This marks a significant rise from $74 billion in both 2023 and 2022, $41 billion in 2021, $39 billion in 2020, and $28 billion in 2019, reflecting the accelerating investment momentum of these sovereign wealth giants.
While some Gulf sovereign wealth funds leaned toward emerging markets, including their domestic economies, developed markets remained the dominant choice for most global sovereign investors.
Saudi Arabia’s PIF, Abu Dhabi’s ADQ, and Qatar’s QIA exhibited a preference for emerging markets, reflecting their strategic focus on regional and high-growth economies.
PIF investments
According to the report, a significant factor driving the PIF’s growth is its projected boost in domestic spending to $70 billion annually by 2025.
The fund’s investment strategy is focused on high-growth sectors, including infrastructure, digitalization, AI, and renewable energy.
Among the top 15 largest global investments by sovereign wealth funds in 2024 was PIF’s $3 billion acquisition of a 51 percent stake in Saudi Arabia’s TAWAL and $2.16 billion of a 40 percent stake in Selfridges in the UK.
Other significant investments for the PIF include a 15 percent stake in Heathrow Airport for $1.8 billion.
According to the institute, the largest deals are consistently pursued by a select group of funds known for their substantial firepower and risk appetite. This group includes the top 10 spenders, with the GCC’s “Big 5” leading the way.
Mubadala emerged as the leading sovereign investor in 2024, deploying $29.2 billion across 52 deals, a 67 percent increase from the previous year. It was followed by GIC at $26.6 billion, CPP with $21.1 billion, PIF at $19.9 billion, and ADIA at $17.1 billion.
PIF has also ventured into artificial intelligence and space, co-investing in Databricks and launching Neo Space Group to advance Saudi Arabia’s satellite industry.
These initiatives reflect the fund’s commitment to positioning Saudi Arabia as a leader in global digital and technological innovation.
PIF saw a 24 percent decline in its US equity portfolio, the report said. At the beginning of 2024, the fund sold shares in 18 companies worth nearly $13 billion, including pandemic-era investments like gaming giant Activision Blizzard, cruise leader Carnival, and entertainment company Live Nation, which yielded strong returns.
According to Lopez: “The sale of the listed equities was about monetizing a huge upside from their purchase during covid, rather than about decreasing the overseas portfolio.”
The expert noted the importance to recognize that while PIF’s domestic portfolio may be growing relative to its international holdings, the overall assets under management continue to expand, with significant investments being made outside the Kingdom.
PIF has also made significant investments in the electric vehicle sector, despite facing challenges with earlier ventures.
In 2019, PIF divested from Tesla but doubled down on Lucid Motors, placing a major bet on the EV manufacturer.
This strategic move has required substantial funding, including $2.8 billion in 2024 alone. Despite the financial commitment, PIF remains focused on its long-term vision for Saudi Arabia, supporting Lucid’s growth with a manufacturing facility in King Abdullah Economic City.
In January, Lucid Motors became the first global automotive company to join the Kingdom’s “Made in Saudi” program, reinforcing the country’s push to strengthen its industrial capabilities.
The program also supports Vision 2030’s goals of attracting investments, boosting non-oil exports, and creating sustainable jobs, while positioning Saudi Arabia as a hub for innovation and manufacturing in the EV sector.
PIF’s debt financing
On Jan. 6, PIF announced the completion of its inaugural $7 billion murabaha credit facility, supported by a syndicate of 20 international and regional financial institutions.
This Shariah-compliant financing structure is part of the fund’s medium-term capital raising strategy, aimed at diversifying its funding sources to support transformative investments both globally and within Saudi Arabia.
According to another report published by Global SWF in January, PIF’s use of debt financing mirrors a growing trend among sovereign wealth funds and public pension funds, which have raised around $700 billion over the past two decades.
Despite strong credit ratings from Moody’s and Fitch, PIF faces pressure from surging domestic investment in giga-projects like NEOM and Qiddiya, with annual funding needs expected to rise from $40 billion in 2023 to $70 billion by 2025.
Sustaining investor confidence will depend on its ability to manage financial obligations and execute Vision 2030 goals.
While markets currently support PIF’s sovereign-backed debt, delays or disruptions could strain resources and affect its ambitious agenda, making its financing strategy critical for both national economic transformation and global sovereign investment trends.
However, PIF’s diversified funding strategy, coupled with its ability to attract global partnerships, positions it as a transformative force capable of reshaping Saudi Arabia’s economic future and reinforcing its role as a leading driver of global investment innovation.
Oil Updates — crude jumps on concerns about more sanctions on Russia and Iran
LONDON: Oil prices surged on Friday and were on track for a third straight week of gains as traders focused on potential supply disruptions from more sanctions on Russia and Iran.
Brent crude futures gained $2.50, or 3.3 percent, to $79.42 a barrel by 3:48 p.m. Saudi time, reaching their highest in more than three months. US West Texas Intermediate crude futures advanced $2.39, or 3.2 percent, to $76.31.
“There are several drivers today. Longer term, the market is focused on the prospect for additional sanctions,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Short term, the weather is very cold across the US, driving up demand for fuels.”
Ahead of US President-elect Donald Trump’s inauguration on Jan. 20, expectations are mounting over potential supply disruptions from tighter sanctions against Iran and Russia while oil stockpiles remain low.
This could materialize even earlier, with US President Joe Biden expected to announce new sanctions targeting Russia’s economy before Trump takes office. A key target of sanctions so far has been Russia’s oil industry.
The US weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe have also been hit by extreme cold and are likely to continue to experience a colder than usual start to the year, which JPMorgan analysts expect to boost demand.
“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by ... demand for heating oil, kerosene and LPG,” they said in a note on Friday.
Meanwhile, the premium on the front-month Brent contract over the six-month contract reached its widest since August this week, potentially indicating supply tightness at a time of rising demand.
Inflation worries are also delivering a boost to crude oil prices, said Saxo Bank’s Hansen. Investors are growing concerned about Trump’s planned tariffs, which could drive inflation higher. A popular trade to hedge against rising consumer prices is through buying oil futures.
Oil prices have rallied despite the US dollar strengthening for six straight weeks, making crude oil more expensive outside the US.
SABIC, Almarai, SEC able to absorb fuel price hike: S&P Global
RIYADH: Major Saudi companies, including chemical company SABIC, dairy firm Almarai, and Saudi Electric Co., are well-positioned to handle the impact of higher fuel and feedstock prices introduced on Jan. 1, according to a new report.
Released by capital market economy firm S&P Global, the analysis reveals that those corporates will be able to absorb the marginal increase in production costs by further improving operational efficiencies as well as potentially via pass-through mechanisms.
This came after Saudi Aramco increased diesel prices in the Kingdom to SR1.66 ($0.44) per liter, effective Jan. 1, marking a 44.3 percent rise compared to the start of 2024. The company has kept gasoline prices unchanged, with Gasoline 91 priced at SR2.18 per liter and Gasoline 93 at SR2.33 per liter.
Despite the hike, diesel prices in Saudi Arabia remain lower than those in many neighboring Arab countries. In the UAE and Qatar, a liter of diesel is priced at $0.73 and $0.56, respectively, while in Bahrain and Kuwait, it costs $0.42 and $0.39 per liter.
“For SABIC and Almarai, the increase in feedstock prices will not affect profitability significantly. In the case of utility company, SEC, additional support will likely come from the government if needed,” the report said.
The capital market economy firm projects that SABIC will continue to outperform global peers on profitability.
“We don’t expect the rise in feedstock and fuel prices to materially affect profitability, since the company estimates it will increase its cost of sales by only 0.2 percent,” the report said.
It further highlighted that SABIC is considered a government-related entity with a high possibility of receiving support when needed.
The report also underlines that Almarai anticipates an additional SR200 million in costs for 2025, driven by higher fuel prices and the indirect effects of increased expenses across other areas of its supply chain.
“We believe Almarai will continue focusing on business efficiency, cost optimization, and other initiatives to mitigate these impacts,” the release stressed.
With regards to SEC, S&P said that an unrestricted and uncapped balancing account provides a mechanism for government support, including related to the higher fuel costs.
“We believe any increased fuel cost will be covered by this balancing account,” the report said.
The study further highlights that the marginal increase “could significantly affect wider Saudi corporations’ profit margins and competitiveness.”
The S&P data also suggests that additional costs will be reflected in companies’ financials from the first quarter of 2025.
“Saudi Arabia is continuing its significant and rapid transformation under the country’s Vision 2030 program. We expect an acceleration of investments to diversify the Saudi economy away from its reliance on the upstream hydrocarbon sector,” the report said.
“The sheer scale of projects — estimated at more than $1 trillion in total — suggests large funding requirements. Higher feedstock and fuel prices would help reduce subsidy costs for the government, with those savings potentially redeployed to Vision 2030 projects,” it added.
Lenovo to produce ‘Saudi Made’ PCs by 2026 following $2bn Alat deal closure
RIYADH: Chinese tech giant Lenovo is set to manufacture millions of computer devices in Saudi Arabia by 2026, following the completion of a $2 billion investment deal with Alat, a subsidiary of the Public Investment Fund.
First announced in May, the partnership has now received shareholder and regulatory approvals, paving the way for Lenovo to establish a regional headquarters and a manufacturing facility in the Kingdom.
The deal marks a significant step in aligning Lenovo’s growth ambitions with Saudi Arabia’s Vision 2030 goals of economic diversification, innovation, and job creation, the company said in a press release.
The factory will manufacture millions of PCs and servers every year using local research and development teams for fully end-to-end “Saudi Made” products and is expected to begin production by 2026, it added.
“Through this powerful strategic collaboration and investment, Lenovo will have significant resources and financial flexibility to further accelerate our transformation and grow our business by capitalizing on the incredible growth momentum in KSA and the wider MEA region,” Yang said.
He added: “We are excited to have Alat as our long-term strategic partner and are confident that our world-class supply chain, technology, and manufacturing capabilities will benefit KSA as it drives its Vision 2030 goals of economic diversification, industrial development, innovation, and job creation.”
Amit Midha, CEO of Alat, underscored the significance of the partnership for both Lenovo and the Kingdom.
“We are incredibly proud to become a strategic investor in Lenovo and partner with them on their continued journey as a leading global technology company,” said Midha.
“With the establishment of a regional headquarters in Riyadh and a world-class manufacturing hub, powered by clean energy, in the Kingdom of Saudi Arabia, we expect the Lenovo team to further their potential across the MEA region,” he added.
The partnership is expected to generate thousands of jobs, strengthen the region’s technological infrastructure, and attract further investment into the Middle East and Africa, according to the press release.
In May, Lenovo raised $1.15 billion through the issuance of warrants to support its future growth plans. The initiative, which was fully subscribed by investors, signals confidence in Lenovo’s strategic approach and its plans for global expansion.
The investment deal was advised by Citi and Cleary Gottlieb Steen & Hamilton for Lenovo, while Morgan Stanley and Latham & Watkins represented Alat.
Lebanon’s bonds climb as parliament elects first president since 2022
LONDON: Lebanon’s government bonds extended a three-month long rally on Thursday as its parliament voted in a new head of state for the crisis-ravaged country for the first time since 2022.
Lebanese lawmakers elected army chief Joseph Aoun as president. It came after the failure of 12 previous attempts to pick a president and the move boosts hopes that Lebanon might finally be able to start addressing its dire economic woes.
Lebanon’s battered bonds have almost trebled in value since September when the regional conflict with Israel weakened Lebanese armed group Hezbollah, long viewed as an obstacle to overcoming the country’s political paralysis.
Most of Lebanon’s international bonds, which have been in default since 2020, rallied after Aoun’s victory was announced to stand between 0.8 and 0.9 cents higher on the day and at nearly 16 cents on the dollar.
They have also risen almost every day since late December, although they remain some of the lowest priced government bonds in the world, reflecting the scale of Lebanon’s difficulties.
With its economy still reeling from a devastating financial collapse in 2019, Lebanon is in dire need of international support to rebuild from the war, which the World Bank estimates to have cost the country $8.5 billion.
