Market reorientation: An expanding role for Chinese products and Chinese shoppers

As Dubai’s retail segment continues to grow, the emirate’s connection with its East Asian trade partners is becoming increasingly important. Between 2005 and 2011, the value of direct imports from East and Southeast Asia doubled from Dh58.5bn to Dh116.2bn ($15.9bn to $31.6bn), representing about 26.3% of total direct imports, according to data from the Dubai Statistics Centre (DSC), making the region Dubai’s largest source of direct imports. Free trade zone activity has grown as well. East and South-east Asian imports at free zones were worth over Dh93bn ($25.3bn) in 2011, some 43.2% of the total, according to the DSC.

Within this growing trade relationship between Dubai and Asia, China stands out. On its own, the country accounts for about 9% of Dubai’s foreign trade, according to data from Dubai Customs. Re-exports play a major role in this relationship, with a large portion of Chinese products first passing through Dubai before shipping to their final destinations.

LOOKING EAST: In the realm of retail, especially, the depth of China and Dubai’s trade relations is becoming increasingly clear. Indeed, a growing number of Chinese-made products are filling the shelves of Dubai’s retail outlets, and larger numbers of Chinese shoppers are coming to buy them. Visitors from the country are pushing up bottom lines for retailers and even shaping how companies manage their stores.

Chinese shoppers, for example, represent up to 25% of the luxury goods sold at the Mall of the Emirates, Iyad Malas, the CEO of Majid Al Futtaim group, said in May 2012. Others in the industry say that up to 20% of their customers are from China. Retailers are thus adapting, offering more services for Chinese customers and hiring employees who speak Mandarin. Tourism authorities have taken note as well. To maintain the steady stream of Chinese tourists – and shoppers – to the emirate, the Department of Tourism and Commerce Marketing (DTCM) has been engaging travel agents and other stakeholders in China to forge stronger links. In the first nine months of 2012, 181,180 hotel guests from China visited Dubai, up 31% from 138,389 during the same period in 2011, according to the DTCM.

THE DRAGON RISES: Dragon Mart, a 150,000-sq-metre dragon-shaped market, embodies the growing role of Chinese entrepreneurs in Dubai. The 3950-shop complex opened in December 2004 as the largest centre for Chinese goods outside of mainland China.

Following the market’s initial success, state-owned real estate developer Nakheel announced in June 2012 that it would award about Dh600m ($163.3m) in contracts to build the Dragon Mart’s second phase. Planned additions include more retail and wholesale space, along with a hypermarket, cinema and 3-star hotel. At the time of the developer’s contract announcements, buyers had already acquired 80% of the forthcoming space. Upon completion, the expansion will bring the structure’s total area to 325,000 sq metres.

MONEY TALKS: Perhaps thanks to the growing retail links between Dubai and China, the Dubai International Financial Centre (DIFC) announced in February 2012 that it is aiming to become an offshore centre for Renminbi (RMB) trading, which could help expand overall trade by simplifying transaction processes and lowering costs. It could also attract more Chinese financial institutions to offer services in Dubai.

The Industrial and Commercial Bank of China (ICBC) the world’s largest bank by market capitalisation, already operates its Middle Eastern offices at DIFC. The bank also aims to open retail arms in Dubai, hoping to capitalise on the estimated hundreds of thousands of Chinese expats living in the UAE. The company’s plans for Dubai-based retail banking are part of a larger push to expand its presence in the region. “We are committed to increasing our support for, and involvement with, the long-term economic development of the Middle East,” said Tian Zhiping, chief executive of ICBC Middle East. Stronger financial links would pave the way for smoother transactions, encouraging more entrepreneurs and consumers do business in Dubai – all changes that offer a significant fillip to the emirate’s retail sector.

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The Report: Dubai 2013

Retail chapter from The Report: Dubai 2013

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