Jilted!

In late January his royal highness Abdullah bin Abdul Aziz, Custodian of the Two Holy Mosques and king of Saudi Arabia, summoned to his presence 50 of his kingdom's leading business and government figures. "I am very proud of you, our business community," he beamed, one of them recalled. "Our businessmen are credible, honest. I am very proud."

The venue: Not Riyadh but a state guest house in Beijing. Just hours earlier King Abdullah had met with Chinese President Hu Jintao, capping a three-day mission that saw Saudi executives and their Chinese counterparts lay the groundwork for more investment flows and trade between their countries. In choosing China as one leg of his first foreign trip, the ruler of the world's biggest oil producer had sent a loud message: China and Saudi Arabia, each on the lookout to land new trading partners and become less dependent on the U.S., had found each other.

Already the numbers tell a striking story of courtship. Two-way trade between Saudi Arabia and China, mostly oil, increased by 60% last year, passing the $14 billion mark, nearly nine times the figure six years ago. That compares with $28 billion in two-way trade between Saudi and the U.S.

Both have good reasons to hook up--Saudi has oil and China badly needs it--but the U.S. isn't making either feel as welcome here. In January President Bush's "addiction" speech called for reducing America's dependence on Middle Eastern oil. Then there was the recent Dubai Ports imbroglio, in which opponents played the security card to force the company to drop plans to run operations at six U.S. ports. And protectionists are putting the kibosh on some Chinese investments in this country, notably the short-circuited takeover of Unocal.

What might this mean for the U.S.? Less willingness by Saudi Arabia to pump more oil to restrain price increases for American consumers. China, after all, will be standing by with an open checkbook for oil at any price. And China, for its part, will have another market for its goods. For now, Saudi Arabia is not protesting the rapid growth of China's exports or demanding currency adjustments.

Saudi tycoon Abdulrahman Abdullah Al Zamil, chairman of Riyadh conglomerate Zamil Group, reflects this view. The President's talk "is a message to us that this region does not need to trade with you," he says. "Therefore, I think we should really plan our policies, our production, based on that assumption. I would rather produce 9 million [barrels a day] at $90 a barrel than 12 million at $55 a barrel."

Saudi Arabia supplies 15% of America's oil imports, the third-largest foreign source behind Canada and Mexico, and 17% of China's oil imports.

Zamil Group has its hands in enterprises ranging from food processing and travel services to marketing, public relations and construction. Its publicly traded spinoff, Zamil Industrial Investment, manufactures air conditioners (for General Electric, Sanyo and other multinationals), car batteries (for ACDelco), steel, glass, petrochemicals and plastics. Some 40% of Zamil Industrial's output goes abroad, with 30% of that to Asia.

But Al Zamil is just getting started in Asia, especially in China. He has a sales office on Shanghai's Ling-Ling Road, and he's targeting three sectors in China: red bricks, steel and petrochemicals. On the drawing board: a steel-fabrication plant outside Shanghai that will serve Chinese customers now being supplied by Zamil plants in Vietnam and Saudi Arabia.

"No doubt capital will have to go where the growth is," says Saudi Prince Alwaleed bin Talal, who heads Kingdom Holdings. "So Saudi Arabian money, Gulf money, is going there."

Still, China has a big sales job to persuade buyers that the quality of its products matches competitors'. "Saudi Arabia is a very competitive market, and it requires reliable and quality products--especially machines," says Al Zamil. "I received a very competitive price from China for [red-brick making] machinery. Even though [the price] was 30% cheaper, my partners refused; they said I need German machinery."

The two countries didn't have much of a relationship until 1985, when Saudi Arabia turned to China for ballistic missiles after Washington wouldn't provide them. Still, it took another 14 years before then president Jiang Zemin paid China's first presidential visit to Saudi Arabia. That paved the way for a landmark pact between the Saudi monopoly oil company Aramco and the China Petrochemical Corp., or Sinopec, in 2004.

The most visible signs of the new Sino-Saudi links can be found in Saudi Arabia's shopping malls, increasingly crammed with clothes, shoes and gewgaws with "Made in China" labels. At Riyadh's Kingdom Center Mall, the Learning Center shop was overflowing with toys made, virtually to the last item, in China: for example, $30 Bubble Machines and $80 Baby Born Dolls.

But it's not a one-way street--some Saudi entrepreneurs see the possibility of selling Saudi goods to China. For now, though, one of Saudi Arabia's biggest exports to China may be cash. With $150 billion a year in oil revenues now pouring into the country, Saudi investors are urgently seeking new places to put their sudden wealth to work, such as Hong Kong real estate and Chinese stocks.

The Saudi-Chinese relationship is still in the honeymoon period and could falter over old enmities; Beijing is always antsy about Islamism in its western provinces. But while the U.S. may have been the dominant player for the first part of Saudi Arabia's development, China is clearly angling to share that role in the next part.

PHOTO (COLOR): The U.S. is making each feel a bit less welcome: Chinese President Hu Jintao and King Abdullah of Saudi Arabia at Beijing's Great Hall of the People in January.

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By David A. Andelman