In August 2025, at the Abu Dhabi Capital Group headquarters, Xiaoku Technology founder He Wanyu signed a joint venture agreement with Abu Dhabi Capital Group (ADCG) CEO Abu Bakr Al Khoori. This "desert handshake" marked a strategic breakthrough as the first Chinese AI company to establish a joint venture platform with UAE royal capital.

"The Middle East market is not a technology dumping ground, but rather an experimental field for ecological co-construction," He Wanyu stated.

The Middle East is currently experiencing an AI investment boom. Saudi Arabia's Public Investment Fund (PIF) announced plans to invest $72 billion over the next five years in artificial intelligence infrastructure. The UAE plans to increase AI's contribution to GDP to 14% within a decade, while Qatar has launched a $5 billion specialized fund to attract global AI companies.

This oil capital-irrigated desert is becoming a new pivot point for Chinese AI companies navigating geopolitical uncertainties. He Wanyu believes "the next five years represent a golden period for Chinese AI to break into the Middle East."

She explained that the region is at the peak of digital transformation, with the UAE's vision plan emphasizing AI's role in smart cities and sustainable development, while Saudi Arabia's "Vision 2030" focuses on industrialization. However, beneath the enthusiasm, the market is fraught with hidden risks, with many companies falling into the "technology-for-market" trap.

Xiaoku Technology's joint venture model with ADCG attempts to provide a referenceable path for Chinese AI companies through a "technology, capital, local ecosystem" triangular model. For instance, Abu Dhabi royal capital provides land reserves and government project access, breaking down "non-market competition" barriers. Distributed data architecture ensures 100% sensitive data local storage, avoiding sovereign compliance risks. Modular technology output retains core intellectual property while meeting localization requirements.

**Q: ADCG, as Abu Dhabi royal capital, chose to establish a joint venture with Xiaoku Technology rather than simply purchasing technology. From a capital perspective, how does this model maximize benefits for both parties? Does the joint venture have regional technology exclusivity rights?**

**He Wanyu:** From a capital perspective, the joint venture model offers much greater strategic depth than pure technology procurement services. It allows both parties to share risks, resources, and returns, maximizing benefits.

For ADCG as a royal-backed capital group, they are not merely investors but strategic partners. Through the joint venture, they can integrate Xiaoku Technology's AI capabilities in urban development and construction, along with our Chinese partners and supply chains, into the local ecosystem. This helps ADCG achieve a leading position in global construction technology and provides technical and service support for their subsidiaries like real estate developer IMKAN, avoiding technology dependency risks that pure procurement might bring.

For Xiaoku Technology, the joint venture provides ADCG's macro strategic vision, local resources, and financial support, accelerating our globalization process. The model ensures deep application of Xiaoku's core construction technology in the region while preserving our technological autonomy, avoiding potential intellectual property losses from pure technology sales.

Regarding regional technology exclusivity, the joint venture agreement does stipulate preferential usage rights for certain technologies in the UAE and designated Middle East regions, but not absolute exclusivity. This is a reciprocal arrangement ensuring the joint venture has priority in applying Xiaoku technology to local projects while allowing Xiaoku Technology independent operation in other global markets.

**Q: Besides capital, what irreplaceable local resources does ADCG specifically provide?**

**He Wanyu:** ADCG's local resources far exceed pure financial support and are crucial for Xiaoku's Middle East market entry.

First is the royal relationship network: ADCG's close ties with Abu Dhabi Emirate leadership opens doors to government and royal-led major projects, such as smart city and infrastructure development initiatives.

Second, land reserves and real estate resources: ADCG's subsidiary IMKAN is a renowned boutique real estate developer in Abu Dhabi with rich land reserves and project pipelines. These resources provide practical application scenarios for the joint venture.

ADCG also provides policy and market access through their diversified investment portfolio across the Middle East and North Africa region, bringing cross-regional cooperation opportunities for Xiaoku Technology.

**Q: The Middle East has strict data sovereignty requirements. How does Xiaoku Technology balance cross-border data flow with local compliance in the construction AI field? Do you need to reconstruct your technical architecture? What percentage of investment goes to local R&D?**

**He Wanyu:** The Middle East, especially the UAE, has strict data sovereignty requirements including data localization storage and cross-border transmission controls. Xiaoku Technology's practice in construction AI is based on compliance-first principles.

We employ distributed data architecture ensuring sensitive data (such as project design data) is stored on local servers, while only transmitting necessary anonymized or aggregated data for global AI training. This complies with the UAE's Personal Data Protection Law (PDPL) and data sovereignty regulations.

Technically, Xiaoku doesn't need complete reconstruction, only localization adaptation. We've deployed local cloud servers supporting data isolation and encrypted transmission, avoiding cross-border flow risks while maintaining AI engine efficiency.

Currently, our localization R&D investment represents about 30% of total investment, mainly for algorithm optimization and compliance testing by our Abu Dhabi team. This includes cooperation with local regulatory agencies ensuring our "Xiaoku AI Cloud" and "Real Estate Digitization Solutions" products meet regional standards and construction codes.

**Q: Middle Eastern countries differ significantly (such as Saudi Arabia's industrialization needs vs UAE's smart city preferences). When replicating Xiaoku's ABC model from Abu Dhabi to Saudi Arabia and Kuwait, what are the biggest technical adaptation bottlenecks? Do you need to customize algorithms for each country?**

**He Wanyu:** Middle Eastern countries indeed have significant differences: the UAE focuses more on smart cities and sustainable living, while Saudi Arabia emphasizes industrialization and large-scale infrastructure. When replicating our ABC model, the biggest technical adaptation bottleneck is differences in local regulations and environmental factors. For example, Saudi Arabia's extreme climate requires algorithm optimization for heat-resistant materials, while Bahrain, as a small island nation with shallow marine sedimentary environment dominated by carbonate rocks, requires more structural foundation considerations.

Xiaoku doesn't need to completely customize algorithms for each country but employs modular design. The core AI engine remains universal, with peripheral modules adjusted according to local needs, such as integrating Saudi Arabia's industrialization standards or the UAE's green building codes. This reduces adaptation costs while ensuring model scalability.

**Q: Other companies have established laboratories with UAE universities to cultivate local talent. Does Xiaoku plan to replicate this path? In the "technology-capital-local ecosystem" triangle model, which corner is the key fulcrum for scalable replication?**

**He Wanyu:** Xiaoku indeed plans to establish laboratories through cooperation with UAE universities to cultivate local talent. This aligns with our globalization strategy. We've already entered the Dubai Future Foundation AI Center and are considering joint construction AI laboratories with institutions like the American University of Sharjah.

In the "technology, capital, local ecosystem" triangle model, local ecosystem is the key fulcrum for scalable replication. It includes talent cultivation, cultural adaptation, and community integration. While technology and capital are important, only by embedding in the local ecosystem can sustainable growth be achieved.

**Q: What advice do you have for other Chinese AI companies wanting to enter the Middle East market recently? What risks should they avoid?**

**He Wanyu:** As a pioneer in the Middle East market, I have several suggestions based on practical experience.

First, start with strategic partnerships rather than isolated advancement. Xiaoku's joint venture model with ADCG is one exploration: choosing partners with local royal capital or well-known institutional backgrounds can quickly open market doors and provide policy support and resource integration.

Second, focus on localization strategies, including establishing local branches and recruiting local talent. This not only helps with compliance but also enhances cultural adaptability.

Third, focus on vertical domain pain points. The Middle East is vigorously promoting smart cities, green sustainability, and infrastructure digitalization. Chinese AI companies should customize solutions for these needs.

Regarding risks to avoid, these include data compliance and privacy risks. The Middle East has strict data sovereignty requirements, and cross-border data flows can easily cause problems. I recommend advance localization data storage and encryption testing.

**Q: If the UAE adjusts its China technology policy due to international pressure, what contingency plans does Xiaoku have? Are you considering diversifying risks through Hong Kong subsidiary structures?**

**He Wanyu:** If the UAE adjusts its China technology policy due to international pressure, Xiaoku has pre-established multi-layered contingency plans to ensure business continuity.

First is market diversification: Xiaoku won't over-rely on a single country and has already laid out pilot projects in other Middle East markets like Saudi Arabia.

Second, deepening technology localization: We would accelerate local server deployment and algorithm independence, such as developing backup modules within our Abu Dhabi team.

Third, partnership buffering: Through joint venture platforms like ADCX with royal enterprises, our Middle East company will seek policy exemptions or adjust cooperation models as a local entity.

Regarding Hong Kong company structure, Xiaoku has indeed considered and partially implemented this to diversify risks. Hong Kong's neutral status and mature legal framework make it an ideal international operations hub for handling technology exports, intellectual property management, and capital flows.

**Q: Based on Xiaoku's experience, what non-technical capability is most easily underestimated in the Middle East market?**

**He Wanyu:** Based on Xiaoku's practical experience in the Middle East, many Chinese companies easily underestimate non-technical capabilities that often determine project success rather than pure technical advantages.

The most easily underestimated capabilities include customer relationship maintenance. In the Middle East, especially the UAE and Saudi Arabia, customers have enormous influence, and most powerful customers have royal backgrounds. The government also leads major projects through royal capital groups. Connections with such groups directly affect opportunity acquisition.

Local labor law adaptation is another area. The UAE has strict labor quotas and welfare regulations. Underestimating this leads to compliance fines or team instability.

**Q: Do you recommend that later entrants go overseas in alliance form? How can Chinese AI companies avoid going it alone?**

**He Wanyu:** I strongly recommend Chinese companies go overseas in alliance form, which is more efficient and sustainable than going it alone. The Middle East market has high barriers that are difficult for single companies to overcome regarding all risks and resources.

Key steps for Chinese AI companies to avoid isolation include: building ecosystem alliances by choosing complementary partners; sharing risks through joint investment or subcontracting models; and sharing experiences by establishing industry associations or forums.

**Q: Do you agree that "the next five years represent a golden period for Chinese AI to seize Middle East discourse power"? What are your reasons?**

**He Wanyu:** I completely agree with this view based on several key reasons.

First, the Middle East is at the peak of digital transformation, with the UAE's vision plan emphasizing AI's role in smart cities and sustainable development, while Saudi Arabia's "Vision 2030" focuses on industrialization. These needs highly match Chinese AI's cost-effectiveness and technological maturity.

Second, Middle Eastern capital is reducing dependence on Western technology and turning to diversified partners. Chinese companies can quickly embed through joint venture models to fill gaps.

Third, market momentum. Chinese technology companies have deep competitive advantages and can effectively transplant domestic models and technologies to the Middle East region.

However, this window is limited and affected by international pressure, making the next five years crucial for capturing market share.