For centuries, Bahrain and China have trading with each other along the ancient Silk Road.

In the past, Bahrain traded pearls, dates, and copper, and imported silk and musk from China. Today, China has reinvigorated its interest in Bahrain and the broader GCC through its One Belt One Road (OBOR) strategy.

The initiative redirects China's overcapacity and capital overseas. The Economist Intelligence Unit estimates that by 2020, the largest share of GCC exports, valued at $160 billion, will go to China. GCC trade with China grew more rapidly between 2010 and 2013 than any other significant trade partner, at a rate of 30 percent for exports and 17 percent for imports.

“Bahrain has been a trading outpost along the old Silk Road connecting the Gulf to the world for thousands of years, and the history of this long trading relationship between Bahrain and China can be found at many of the archaeological sites around the kingdom,” said Khalid Al Rumaihi, chief executive of the Economic Development Board.

Chinese presence in Bahrain and the GCC

A large number of leading Chinese companies have already established operations in Bahrain, such as Huawei. Bahrain hosts Huawei’s Middle East headquarters. They currently have 500 employees and have invested $28 million in the Bahrain office.

Dragon City, a 115,000 square meter Chinese megamall in Bahrain with more than 780 shops, is looking to raise the profile of Chinese goods in the GCC. These businesses range from wholesalers, retailers, to restaurants and cafes, attracting most of its visitors from across the border in Saudi Arabia.

Bahrain isn’t the only GCC country with an appetite for Chinese trade. In 2010, a Chinese contractor won the bid to construct the Mecca Railway, a project that will solve the issue of bus transportation during Hajj season. This investment has created jobs for almost 30,000 Saudi nationals.

Chinese manufacturing, in particular, has set the global benchmark in the last few years. Their efficiency in production will likely become a mainstay in the Bahraini market. Bahraini businesses will enjoy those ripple effects, while also empowering consumers with a broader set of choices.

Access to Chinese supply chains

Yasin Aboudaoud, the COO of Chinese hardware accelerator commercial distribution at Brinc, agrees that a connection to China for local manufacturers can have invaluable benefits for costs, time, and quality.

The introduction to the region of an accelerator like Brinc would revolutionize the GCC startup ecosystem. Cracking into hardware manufacturing in China could encourage innovation in hardware development and the connection could also nudge local businesses to adapt, engage in knowledge transfer, and ultimately raise their standards.

The Made in China 2025 effort, drawing direct inspiration from Germany’s Industry 4.0 plan, promotes innovation and transformation powered by smart manufacturing, which is closely aligned with smart procurement.

McKinsey estimates the global Internet of Things (IoT) market to be worth up to $33 trillion by 2025. Aboudaoud sees huge potential for IoT hardware in the region.

Particularly within the GCC’s healthcare industry, current epidemiological trends are driving IoT spending by healthcare providers. According to IDC Health Insights, IoT spending by healthcare providers across the Middle East and Africa region were expected to surpass $500 million last year, and increase at a compound annual growth rate of 18.7 percent between 2016 and 2020.  

Although Bahrain is not yet home to up-and-coming hardware startups, developments in the ecosystem make it a strong contender for foreign startups looking to reap the benefits of China’s re-emerging silk road trade policy.

“Investing in startups that have bundled with an accelerator like Brinc is like an insurance policy,” Aboudaoud said, adding that generally a hands-on approach by entrepreneurs in the hardware space had translated into success stories.

Building shared interests

China has always had a rich history in manufacturing, from toys to electronics. Bahrain stands to benefit from the Asian giant through heavy investments in IoT infrastructure, that will fuel procurement and supply chain growth.

Through China’s Internet Plus initiative, trade policies and bilateral relationships between Bahrain and China will be reinvented.

Feature image via Wikimedia Commons.