Against the backdrop of the restructuring of the global industrial chain and dramatic changes in geo-trade rules, Chinese enterprises are ushering in a critical shift in their overseas investment landscape. Morocco, which once relied on its advantages as a bridgehead between Europe and Africa and attracted a large number of Chinese investments to build factories all year round, has continued to cool down. Oman, located in the Arabian Peninsula and guarding the Strait of Hormuz, has become a new hot spot for Chinese investment in new energy, new materials, modern agriculture, and infrastructure industries. With Zhongke Electric suspending the 5 billion yuan Moroccan lithium battery anode project and increasing the 8 billion yuan integrated production base in Oman as a landmark event, a large number of industrial capitals have successively adjusted their overseas investment plans. Abandoning Motorola and investing in Afghanistan has become a new trend for Chinese investment overseas. Behind this is the all-round ebb and flow of the two countries' business endowments, geographical layout, industrial costs and the depth of bilateral cooperation.

1. Geographical dividend differentiation: European market barriers are rising, and Oman is a global multilateral hub

In the early years, Chinese investment gathered in Morocco. The core logic was to rely on the free trade agreement between the country and the EU to enter the European market at low cost through North Africa and avoid trade tariff barriers with China. However, in the past three years, trade protectionism has risen in Europe and the United States. EU carbon tariffs, new energy anti-dumping investigations, and frequent revisions of rules of origin have continued to reduce the policy dividends of Morocco’s OEM exports. The investment logic of relying on Morocco to radiate Europe has been under constant pressure, and geopolitical uncertainty has increased sharply. The long-term unresolved geopolitical dispute over Western Sahara and occasional geopolitical frictions in North Africa have further increased the geopolitical risk control costs for Chinese companies in their long-term operations.

On the contrary, Oman has a unique global shipping location. It is adjacent to the Persian Gulf and the Arabian Sea. It guards the Strait of Hormuz, the global energy chokepoint. Sohar Port and Duqm Port connect the four core consumer markets of the Middle East, Southeast Asia, the east coast of Africa, and South Asia, escaping the market trap of relying solely on Europe. Chinese investment in Oman can not only connect with the massive downstream demand for petrochemicals and new energy in the Middle East, radiate to the emerging manufacturing markets in Southeast Asia to the east, and open up trade channels for resource countries in East Africa to the south, forming a layout that fully covers the Asian, African and European multilateral markets, and getting rid of the passive situation of being kidnapped by the single trade rules of Europe and the United States. At the same time, Oman has long pursued a neutral foreign policy, has extremely low risk of spillover from geopolitical conflicts in the Gulf, and has a stable domestic social environment, making it a scarce safe investment base in the turbulent Middle East.

2. Disparity in fiscal, taxation and equity policies: Oman’s free trade zone has surpassed Morocco in terms of profit concessions, and investment costs have been significantly optimized.

Tax cost is the core indicator for calculating the return on investment of industries going overseas. Oman has widened the gap with Morocco by virtue of its extremely preferential free trade zone tax system. In national free trade zones such as Sohar and Duqm in Oman, manufacturing companies can enjoy corporate income tax exemptions for 5 years, which can be extended up to 15 years. Imported equipment and raw materials required for production are fully exempt from tariffs. Foreign-invested enterprises can remit cross-border profits without restrictions without foreign exchange controls. The national standard corporate income tax is only 15%. At the same time, Oman has signed double taxation avoidance agreements with more than 50 countries, including China, to avoid the risk of cross-border repeated taxation at the source. In 2019, Oman's new foreign investment law was implemented. Most industries such as manufacturing and new energy have fully liberalized 100% foreign ownership, and completely canceled the old rules that forced local guarantors to participate in shares. Chinese-funded enterprises have complete independent control over equity, production and operation decisions, eliminating joint venture disputes and equity constraints.

On the other hand, Morocco has opened up access to wholly foreign-owned enterprises, but tax incentives are fragmented and short-term. Free trade zone exemption and reduction policies have been tightened year by year, and the threshold for preferential tariffs on industrial land and imported auxiliary materials continues to rise. Intuitive comparison from the project implementation cost: Zhongke Electric's original 100,000-ton lithium battery anode project in Morocco has a total investment of 5 billion yuan, and the investment cost per 10,000 tons of production capacity is 500 million yuan; the total investment of the 200,000-ton integrated project in Oman is only 400 million yuan, and the unit cost is directly reduced by 20%. The advantages of large-scale production are highlighted. At the moment when industry profits are thinning, cost advantages have become the key to Chinese investment. In addition, the cost of infrastructure consumables and factory buildings in Morocco is relatively high, and industrial supporting spare parts are mostly imported. The comprehensive cost of building factories is generally more than twice that of domestic ones, which continues to increase production, operation and maintenance costs.

3. Resource endowment adapts to the new track of Chinese investment: The advantages of energy raw materials adapt to the new energy industry layout

At present, the main force of Chinese investment overseas has shifted from traditional textiles and auto parts to high energy-consuming, raw material-dependent industries such as new lithium battery materials, green hydrogen energy, fine chemicals, and modern desert agriculture. The compatibility of the resource endowments of the two countries has undergone a fundamental reversal.

Oman is rich in oil and gas resources and wind and solar renewable energy. Petrochemical by-products are lithium battery anodes and core raw materials for chemical materials. Local materials can greatly reduce the cost of cross-regional transportation of raw materials. The vast desert has abundant land resources and low land prices, which is suitable for large-scale development. The contiguous construction of lithium-ion battery integrated factories is also in line with the implementation of desert soil improvement and water-saving planting projects by domestic bio-agricultural enterprises. Agricultural enterprises such as Guangdong Huahong Biotech have successively given up their plans to launch in North Africa, and landed in Oman to carry out modern agricultural cooperation. This is a typical epitome. Relying on Oman's "2040 National Vision", the country is fully promoting the implementation of the green hydrogen industry, supporting wind and solar power generation with cheap green electricity resources, perfectly matching the low-carbon production needs of new energy manufacturing, and in line with the low-carbon transformation trend of the global industrial chain.

Morocco is short of oil and gas resources, and industrial production energy is highly dependent on imports. Electricity prices and raw material costs are rising year by year. Land and plains are scarce, high-quality industrial land resources are tight, and bidding costs are high. It is difficult to undertake large-scale integrated new energy projects with Chinese investment of hundreds of thousands of tons. The original industrial advantages of being suitable for light industry and automobile assembly have quickly expired in the wave of new energy investment.

4. China-Arab bilateral cooperation continues to deepen, policies are implemented, and the dividends from cooperation with Morocco are diminishing.

China and Oman established a strategic partnership in 2018, deeply integrating the "Belt and Road Initiative" with Oman's 2040 development plan. Oman officially listed China as its largest economic and trade partner, and introduced targeted investment policies at the national level to target Chinese investment. New energy and infrastructure companies have opened exclusive industrial parks, cheap industrial land, and green channels for approval. Sohar Free Trade Zone and Duqm Special Economic Zone have become the core carriers for the implementation of Chinese-funded projects. Government administrative approvals are handled in one stop, significantly shortening the project implementation cycle. In recent years, there have been frequent high-level economic and trade interactions between the two countries, and the cooperation frameworks in energy, infrastructure, and manufacturing have continued to expand. China has been Oman's largest trading partner for many years in a row. The official business docking mechanism is mature. Chinese companies can enjoy supporting services from the commercial departments of both countries when they land. The policy continuity is stable and predictable.

Although Morocco is both a signatory country along the "One Belt and One Road", domestic employment pressure and fiscal deficit problems have become prominent in recent years. Labor policies and environmental protection regulations have been adjusted frequently. Labor localization requirements have continued to increase, and enterprise labor management costs have increased. Administrative policies have lacked continuity, and digital economy and industrial support policies have fragmented. It has become more difficult to cash in investment promotion preferential policies. Many early-stage Chinese companies have faced the problem of shrinking subsidies and rising compliance costs.

5. Rational Dialectic: It is not that Morocco has completely lost ground, but that Chinese investment has chosen the best in globalization.

It needs to be viewed objectively. The investment value of Morocco will not be completely eliminated by abandoning Motorola and investing in Afghanistan. Relying on the advantages of the EU Free Trade Agreement, Morocco is still suitable for small and medium-sized light industry and automobile supporting companies that deeply explore the European market. It will not completely withdraw from the list of Chinese investment overseas in the short term. The gradual shift of Chinese capital to Oman is essentially a globalization strategy driven by the iteration of domestic industries: low-end production capacity traditionally exported to Europe is gradually being cleared, high-end manufacturing such as new energy and new materials is opening up for globalization, and the switching of industrial tracks is driving the migration of investment destinations.

From a mid- to long-term perspective, as the integrated trade between East and Africa accelerates, Oman continues to implement supporting policies for investment promotion, and China-Arab economic and trade cooperation continues to deepen, the agglomeration effect of Chinese investment in Oman will continue to amplify. Morocco will return to the segmented track and deeply explore the European and African market segments. This capital migration is not only a proactive choice by Chinese enterprises to adapt to changes in global trade and optimize the global supply chain, but also a true reflection of the restructuring of the regional economic and trade pattern under the "One Belt, One Road" framework.