Expanding China's Economic Ties

Henry Srebrnik, [Summerside, PEI] Journal Pioneer
 

In January, Chinese President Xi Jinping visited Saudi Arabia and Egypt, as well as Iran. The central object was to promote the Belt and Road Initiative, which will revive the ancient Silk Road. 

“Since China and Saudi Arabia forged diplomatic ties 26 years ago, our relationship has developed by leaps and bounds, with mutual political trust deepening continuously and rich results in co-operation in various fields,” Xi said upon his arrival in Riyadh. 

“I believe that my visit will be a friendly trip with fruitful achievements, thus conducive to lifting our co-operation in various fields to a new level,” he added.

China is the world’s largest oil importer and gets more than half of its crude from the region. Saudi Arabia has been China’s biggest supplier, and bilateral trade reached $69.1billion in 2014.

Xi and King Salman inaugurated an energy research centre in Riyadh and opened the Yasref oil refinery, a joint venture between Saudi Aramco and China’s Sinopec.

The official Saudi Press Agency reported that the two companies signed a framework agreement for strategic co-operation and that the Saudi and Chinese governments had signed a memorandum of understanding to build a high-energy nuclear reactor.

In Egypt Xi, together with Egyptian President Abdel Fattah al-Sisi, inspected the China-Egypt Suez Economic and Trade Cooperation Zone, which is near the Suez Canal and 120 kilometers away from Cairo.

 The first phase, already completed, is an international industrial base which covers industrial projects, including processing and manufacturing, logistics, protective tariff, technological development, commerce and trade, and modern services. 

Xi said that 32 Chinese companies were now working in the economic zone, investing more than $400 million, and these figures would rise to 100 firms and $2.5 billion in the second phase of the project, creating about 40,000 jobs for Egyptians.

“China supports Egypt’s efforts to maintain stability, develop the economy and improve livelihoods,” Xi stated. 

Officials from the two countries signed 21 deals at a ceremony in Cairo, including a $1 billion financing agreement for Egypt’s central bank and a $700 million loan to the state-owned National Bank of Egypt for financing medium and small projects.

China and Egypt are also planning 15 projects in electricity, infrastructure and transport with investments that could total $15 billion, Xi added. 

Four months earlier, President Sisi had visited Beijing and emphasized just how seriously Egypt’s new government is about deepening ties with China. The China State Construction Engineering Corporation agreed to build and finance part of a new administrative capital that will be built to the east of Cairo. 

Sisi’s government expects the project to cost $45 billion over the next five to seven years. When finished, it will include government agencies and the president’s office as well as a new airport.

China is now Egypt’s largest trading partner, with bilateral trade worth $11 billion. Like many of China’s trading partners, however, Egypt is concerned about just how imbalanced that trade is. 

Egyptian Trade and Industry Minister Mounir Fakhry Abdel Nour told the Xinhua News Agency that Chinese exports to Egypt account of $10.5 billion out of that $11 billion. 

“We are working hard to increase our exports to China and urge for opening the Chinese markets for our industrial and agricultural exports,” Nour remarked, and also said that Egypt would seek to encourage more Chinese investment. 

In December 2014, during an earlier trip to China by Sisi, China and Egypt upgraded their relationship to a “comprehensive strategic partnership” and a number of projects were announced, including the construction of a power plant in Suez Province and a new electric rail project to link Tenth of Ramadan City in Sharqia to Cairo.

To facilitate economic cooperation in the Middle East and elsewhere, in 2014 China founded the Asian Infrastructure Investment Bank (AIIB) as a counterweight to the U.S.-dominated World Bank. Egypt and Saudi Arabia are both founding members.