Money sent home by Chinese companies from the Middle East surged seven-fold in the first six months of the year, underscoring the deepening relationship between the UAE and the world's second-largest economy.
The data came from Industrial and Commercial Bank of China (ICBC) Middle East, as its profits doubled in the region.
The regional arm of China's biggest bank said the value of yuan-denominated corporate remittances surged by more than 600 per cent, while the volume of transactions increased by 150 per cent.
China has risen to become the UAE's fourth-biggest trading partner in recent years as oil trade has swelled and Chinese firms flocked to the Dragon Mart shopping emporium in Dubai, which houses almost 4,000 businesses. Nakheel, the mall's developer, is aiming to double the size of Dragon Mart to cope with heavy visitor traffic.
The surge in remittances came as ICBC in the Middle East reported pre-tax profits of US$36 million (Dh132.2m) during the first half of the year, compared with $14m during the same period last year.
The bank did not provide nominal values for its yuan remittances but its trade finance activity almost tripled to $4.36 billion from $1.52bn for the same periods.
ICBC Middle East will attempt to grow its presence in the Middle East as its profits from the region accumulate, said Tian Zhiping, the bank's Middle East chief executive. "We remain very positive on the growth prospects for the Middle East and we are committed to increasing our active support for the region's economic growth, particularly in the areas of infrastructure development, high-technology and energy," he said.
ICBC's total assets in the region, including loans, grew to $6.06bn for the first half, up from $2.66bn a year earlier.
Financial services companies in the UAE have courted Chinese companies in an effort to cash in on bilateral trade flows.
Banks including Standard Chartered, HSBC and Dubai's Mashreq have offered yuan-denominated accounts to companies dealing with China as the Dubai International Financial Centre attempts to establish itself as a yuan clearing hub. More than $53bn was remitted by Chinese citizens globally during 2010, according to data from the World Bank.
China is currently attempting to internationalise the yuan to serve as a credible alternative to the US dollar or the euro. However, progress has been gradual as a result of a desire not to trigger capital flight or a sudden destabilising burst of speculative investment.
The UAE's links with China have grown further following a visit by the Chinese premier Wen Jiabao to Abu Dhabi in January.
Union National Bank was first to enter the Chinese market with an office in Shanghai in 2009 and it was recently joined by Emirates NBD and National Bank of Abu Dhabi, which both opened offices in China this year.
Emirates NBD became the first bank to issue yuan-denominated bonds, also known as "dim sum" bonds, selling 750m yuan worth in March.
Abu Dhabi's Aabar Investments has signed a $2bn deal with China State Construction Engineering Corporation to develop 30 properties in the capital.
Other Arabian Gulf states have also built links with China, the world's second-biggest consumer of oil. These include Qatar, which took a 22 per cent stake in Citic Capital, a Chinese investment bank, through the Gulf state's sovereign wealth fund.
Despite ICBC's surging profits in the region, recent economic data suggest China's economy is decelerating. The country's government reduced its growth target from 8 per cent to 7.5 per cent this year.
Since the start of the year, the yuan has lost 0.9 per cent against the US dollar, also reducing its strength against Gulf currencies that are dollar-pegged such as the UAE dirham and the Saudi riyal.
"Putting on the brakes worked far, far too well [for China]," said Neil Mellor, a currency strategist at BNY Mellon. "I think the yuan is headed downwards."
The HSBC Flash China Manufacturing Purchasing Managers' Index (PMI) fell to 47.8 this month compared with 49.3 a month earlier, hitting a nine-month low.
A PMI reading of more than 50 signals expansion; below 50 signals contraction.
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