The five-pronged approach is the core content in advancing the Belt and Road Initiative, of which financial integration is an important part that has attracted much attention. China and the UAE are both major financial countries. The financial integration between the two countries will not only contribute to their economic development of the two countries and the progress of the world, but also deepen their bilateral strategic relationship.
The banking industry of the two countries has become the basis for financial cooperation. As early as 2008, Industrial and Commercial Bank of China (ICBC) set up a branch in the UAE, followed by China Construction Bank (CCB), Agricultural Bank of China (ABC) and Bank of China. The four major state-owned banks mainly provide financial services such as financing, loans and guarantees to enterprises in China and the Middle East. Their participation has greatly promoted the financial cooperation between China and the UAE, and even the whole region. Banks in the UAE, such as Emirates NBD and National Bank of Abu Dhabi, have also actively opened representative offices in China.
The UAE's sound and open financial environment facilitates foreign investors. The UAE has a relatively sound and well-established financial system. Its banks enjoy high flexibility, of which deposit and loan businesses develop rapidly. Its financial services are mainly distributed in Dubai and Abu Dhabi, with Dubai International Financial Center (DIFC) and Abu Dhabi Global Market (ADGM) respectively. ADGM has a representative office in Beijing, China.
China has made remarkable achievements in financial opening, and there is still room for its development in the future. After China joined the World Trade Organization (WTO), it has no longer focused on attracting foreign capital when advancing financial opening-up, but has combined "going global" and "bringing in" strategies in pressing ahead this process. This effort aims to greatly improve the service level and competitiveness of the financial sector, gradually push forward the reform of interest rate marketization and exchange rate formation mechanism, and continuously improve the convertibility of capital accounts. China will continue to liberalize its financial sector further. By 2020, the country will scrap the foreign ownership limit in the financial sector.
Local currency swap agreement facilitates bilateral trade and investment. In 2012, the People's Bank of China (PBOC) and the Central Bank of UAE signed a local currency swap agreement of 35 billion yuan/20 billion UAE dirhams, which was renewed in 2015 and 2019 respectively, with the same amount. Meanwhile, in 2016, the PBOC officially named ABC's Dubai branch as the UAE's yuan clearing bank. The branch officially opened in May 2017. It will not only help the capital flow, financial stability and economic development of both sides, but also promote the wide use of yuan in trade and investment, payment and settlement, market transactions and other fields between the two countries and open up new space for deepening financial cooperation between the two countries.
The UAE actively participates in financial cooperation under the Belt and Road Initiative. The UAE is one of the founding members of the Asian Infrastructure Investment Bank (AIIB). The share capital subscribed by the UAE in the AIIB is 1.21 percent, and Abu Dhabi Fund for Development (ADFD) is responsible for the affairs in the AIIB. The UAE government believes that AIIB's support for infrastructure projects can bridge the infrastructure gap between Asian countries and help promote economic development and employment in the region.
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