Category Archives: Greater China

China and Egypt: New Suez Silk Road

Charles Small holds an MSc in International Relations from the London School of Economics and Political Science (LSE), focusing on the relations between China and the Middle East. He speaks Arabic and Mandarin, and has worked in both China and Egypt. For a free consultation, email Charles at: charles@csmall.co.uk


China’s President Xi Jinping is visiting Cairo on 19-20 January in his first visit to the region. The visit is expected to see infrastructure deals signed, and provision of much-needed foreign exchange to Egypt’s banks.

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Much can be said of history. Chinese officials will talk of the six decades of relations between the two countries, rich cultural heritage of both nations, and the alignment of interests in the international sphere. Relations between China and Egypt are collegiate. The 1999 ‘strategic cooperation agreement’ between the two countries was upgraded in 2014 to a ‘comprehensive strategic partnership’. Egypt was a founding member of China’s Asian Infrastructure Investment Bank (AIIB), and the two participate in both the China-African Cooperation Forum and the China Arab-Cooperation Forum.

Egypt’s President Abdel Fattah Sisi is keen on building relations with the world’s second largest national economy, having visited China twice in 2015, and Egypt was one of only 17 countries to send troops to a Chinese military parade celebrating the 70th anniversary of the end of WWII. Symbolic events such as these help bolster the legitimacy of the Chinese state, and are a key pillar of maintaining domestic stability. That President Sisi recognises the importance of the domestic audience to China shows an deep understanding of the needs of the world’s largest emerging economy.

Egypt’s location straddling the Suez Canal makes it a key strategic partner for China. The recent expansion of the canal and implementation of a two-way section will ease the flow of Chinese goods to Western markets, and the Suez Canal Economic Zone presents opportunities for Chinese companies seeking a foothold by the Mediterranean.

What matters most to Egypt is what China can bring to the table. The visit is likely to include signing of multi-billion dollar agreements on key national infrastructure, including construction, energy and transportation.

Foreign Exchange Needed in Egyptian Banks

On the trip, President Xi is expected to sign off on a loan of US$1 billion to the Central Bank of Egypt, US$700 million in finance for the National Bank of Egypt Al-Ahly, and a further US$100 million loan to Banque Misr.

Egypt has struggled to attract foreign exchange reserves of late, in part due to the ongoing slump in tourism. Transfers of money from Egypt to China via Western Union have reportedly been curbed in order to prevent importers from bypassing capital controls imposed on Egyptian banks. The Central Bank is reportedly carrying out a policy of rationing, prioritising the import of essential goods over luxuries and limiting the dollar amounts of deposits. This has caused importers problems in opening letters of credit and clearing cargoes. While the Chinese loans will not solve Egypt’s structural problems, they will provide both foreign exchange, and multiplier effects on Egypt’s economy.

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President Xi is also to visit Iran and Saudi Arabia on his Middle Eastern tour.

Interested in China’s role in the Middle East? Get in touch for a free consultation by emailing Charles at:
charles@csmall.co.uk

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