Oil supplies focus of China's Hu visit to Saudi Arabia

China and Saudi Arabia on Tuesday vowed to deepen their strategic friendly ties, work together to tackle the global financial crisis, but securing long-term energy supplies for the giant Chinese economic machine dominated the agenda as China's President Hu Jintao made his second visit to the oil powerhouse.

Travelling with a large entourage of Chinese officials and executives, Hu was greeted at Riyadh airport by Saudi King Abdullah for a three-day visit which underscores the growing importance of the relationship between the world's biggest oil exporter and its most populous country.

"Saudi Arabia is the biggest oil exporter to China. We value the role it plays and look forward to strengthening cooperation in this field," Chinese foreign ministry spokeswoman Jiang Yu said earlier.

The visit will also mark the growing investments by Chinese companies in Saudi non-energy sectors, and their interest in taking part in the Saudi government's massive infrastructure development program.

Saudi officials announced during the visit that a Chinese company had won a contract to build a $1.8 billion monorail to carry pilgrims around the Islamic holy city of Mecca.

Saudi Arabia is the biggest oil exporter to China. We value the role it plays and look forward to strengthening cooperation in this field

Jiang Yu, Chinese foreign ministry

Strategic oil

China has made up about one-third of the world's incremental oil demand since 2003, although expansion is braking quickly as a global recession saps demand from the buyers of China's goods.

But Riyadh, in talks for a stake in another Chinese refinery, appears happy to bet on the rising giant's long-term appetite.

"Both of those two players had fairly extreme positions of strength, but I think despite changes in the markets their relative strength hasn't changed much," said Jeff Brown, chief economist at the FACTS Global Energy Group.

Saudi Arabian shipments of crude to China rose nearly 40 percent last year, and made up a full fifth of the foreign oil burnt by the world's number two consumer.

Steady imports by China have partly compensated for lower supply by Saudi Arabia to oil majors and the United States, where record prices over the summer, an economic slowdown and the global financial crisis have taken a toll on oil demand.

And China's troubled relationship with other suppliers means the ties are likely to strengthen. It is still haggling with Russia over oil and gas prices, and its ventures into Africa have been weighed down by problems ranging from Western activism to spiraling prices demanded by some African suppliers.

Both countries were stressing their increasing cooperation in fields like health, science and education, and they were expected to sign several accords on trade and other cooperation.

Both of those two players had fairly extreme positions of strength, but I think despite changes in the markets their relative strength hasn't changed much

Jeff Brown, FACTS Global Energy Group

Expanding ties

During the airport greeting, Hu introduced to King Abdullah 12 Chinese schoolchildren, survivors of the May 2008 earthquake in Sichuan province that killed or left missing 87,000 people.

The children offered the king their thanks for his donations in support of the victims and Abdullah gave the children gifts, the official SPA news agency said.

Chinese news agency Xinhua, quoting an official statement released at the start of the visit, said talks between Hu and Abdullah would focus on China-Saudi ties as well as "global and regional issues of common concern, including ways of addressing the international financial crisis."

China's trade with Saudi Arabia has more than doubled since 2005, rising 65 percent last year alone to reach $41.8 billion, as oil and gas prices skyrocketed and the Chinese economy required more fuel to keep expanding.

China is also interested in getting a share of Saudi Arabia's massive $120 billion, five-year plan of investments in industry, education and infrastructure, and in providing workers to the manpower-hungry Middle East country.

Chinese officials say there are 62 Chinese companies operating in the kingdom with nearly 22,000 workers on their payrolls, 15,800 of them Chinese. Chinese companies have submitted bids to take part in projects for roads, railways, power generation, port development and other areas.

Chinese embassy spokesman Yuan Yuan said telecom giant Huawei
Technology has become the largest supplier of telecommunications for
the more than two million hajj pilgrims to Mecca each year in cooperation with Saudi Telecom Company.

To mark China's growing business presence in Saudi Arabia, Hu was expected to make a visit on Wednesday to Riyadh Cement, which
has contracted China's Sinoma International Engineering to expand
its cement production lines.

On Wednesday, Hu will also meet Gulf Cooperation Council Secretary General Abdulrahman Hamad al-Attiyah to discuss trade liberalisation measures, according to the Chinese embassy.

Africa next

Hu will leave Riyadh on Thursday morning for Mali, Senegal, Tanzania and Mauritius. It will be his fourth visit to Africa as Beijing looks to secure oil and mineral supplies from the continent.

China's drive to secure natural resources from African states -- including those spurned by the West such as Sudan -- has attracted much attention around the world.

But assistant Chinese foreign minister Zhai Jun insisted that Hu's visit to Africa -- his fourth since he came to power in 2003 -- and China's interest in the continent was not dominated by oil or natural resources.