Chinese finance institutions immerse into Egypt’s economy, pump dollars into market

Shaimaa Al-Aees
10 Min Read

China is the largest international partner to Egypt, representing 10% of the Egyptian commercial market. The trade exchange between Egypt and China amounted to $13bn in 2015, an increase of 11% compared to 2014 and the highest value reached between the two countries, according to Egyptian Trade Plenipotentiary Minister and Head of the Economic and Trade Office at the Egyptian embassy in China, Ayman Ali Osman.

Osman said the balance of trade is still in China’s favour due to the superiority of Chinese exports to Egypt, which amounted to $12bn in 2015, compared to $10.5bn in 2014.

The most significant Chinese exports to Egypt are mobile phones, cloth, mixtures of steel, and garments. Egyptian exports to China are concentrated in a limited number of tariff items, such as marble, granite, lubricants, citrus fruits, cotton, steel ore, and oil exports (petroleum oils).

Osman said that the total Chinese investments in Egypt amounted to EGP 6bn in 2015.

Total Egyptian exports to China reached $1.116bn during 2015.

Info-graph by Abduallah Hussein
Info-graph by Abduallah Hussein

Business Insider issued a report on the size of global markets, which showed that China is the world’s second largest market after the United States and it alone holds 14% of the global trade volume.

The initial projections of the report indicate that China will exceed this rate of 20% by 2020 and will occupy the first place instead of the United States.

Chinese Central Television (CCTV) International said that Egypt intends to present the Suez Canal Area Development Project during its participation in the G20 summit scheduled to be held in the Chinese city of Hangzhou.

CCTV added that 86 Chinese companies have invested more than $1.1bn in the Suez Canal area.

The Egyptian General Authority for Investment (GAFI) announced that China is ranked 24th in terms of investments in Egypt. There were 1,152 Chinese companies making investments in Egypt in 2015—compared to 35 companies in 2005. The size of investments totalled approximately $506m.

Chinese finance institutions have paid great interest in the Egyptian market during the current period, making them one of the most important foreign exchange resources injected into the Egyptian economy.

Daily News Egypt highlights the potential projects in Egypt that would be financed by main Chinese finance institutions, including China-Africa Development Fund (CADFund), the Export-Import Bank of China (China Exim Bank), the Asian Infrastructure Investment Bank (AIIB), and the Silk Road Fund.

CADFund to develop projects in Suez Canal zone

In an exclusive statement to Daily News Egypt, executive director of TEDA Investment Holding Company, an industrial developer in the Suez Canal Area Development Project (SCZone), li Daixin said that his company obtained funds worth approximately $100m from CADFund.

In January, a delegation from CADFund visited the SCZone and expressed at the time a desire to finance projects in the region.

Chinese president Xi Jinping announced an increase in CADFund’s capital to $10bn instead, up from $5bn.

In February, the Chinese embassy in Cairo issued a report regarding a China-Africa cooperation plan for 10 key areas—manufacturing, modern agriculture, infrastructure and cooperative finance, green development, investment, trade facilitation, poverty reduction, social welfare, public health, and the relationship between people, security, and peace.

The Chinese Central Bank announced that the CADFund is ready to promote industrial projects and investments.

Jinping said that China will provide $60bn in funding support to promote the announced 10 key areas.

This amount includes $5bn in grants and interest-free loans, and $35bn of preferential loans and export credits, in addition to $5bn additional capital to CADFund. Furthermore, China will provide a special loan for the development of small- and medium-sized enterprises (SMEs) and cooperative financing for promoting productive capacity of China and Africa, with initial capital worth $10bn.

China Exim Bank to fund electricity, sewage projects  

The China Exim Bank is an important Chinese finance bank in Egypt as it is interested in granting credit facilities in the Egyptian market.

China Gezhouba Group Corporation (CGGC) announced that it is negotiating with the China Exim Bank for a loan of $1bn to carry out sewage works for 264 villages in the governorates of Menoufiya and Gharbeya.

Tebian Electric Apparatus (TBEA) submitted a loan request for $400m to establish an electricity plant with a 350 MW capacity.

China Exim Bank was founded in 1994 as a state-owned bank of the Chinese government located in Beijing. The bank has more than 20 branches with one branch overseas.

AIIB to fund infrastructure projects

AIIB was founded through a Chinese initiative to finance infrastructure projects in the Asia-Pacific region, with an authorised capital of $100bn and initial capital of $50bn. The bank is headquartered in Beijing.

A large number of experts believe that AIIB is a potential competitor to the International Monetary Fund and the World Bank, which are dominated by the US. The AIIB is to invest in infrastructure and consists of 57 member states. The AIIB establishment agreement was signed on 29 June 2015.

Egypt officially joined the AIIB as a founding member in April 2015. The bank allows Egypt to take advantage of the huge potential financing to fund development and infrastructure projects.

In August, Prime Minister Sherif Ismail issued a decision to appoint the finance minister as the Egyptian governor to the AIIB, with the minister of international cooperation appointed as deputy governor.

Minister of International Cooperation Sahar Nasr said in previous statements that the bank will provide the member states, including Egypt, support for many of their major national projects that need external financing.  It is proposed that the AIIB will provide $10bn to $15bn in financing to infrastructure projects annually.

Silk Road Fund to connect Asian economies

The Chinese president Xi Jinping promised to provide $40bn to help Asian countries improve trade ties in what is called the “Silk Road” in an effort to support Beijing’s ambitions as a regional leader.

Silk Road Fund will finance infrastructure projects and cooperation in industry and finance to link Asian economies.

The road passes through 65 countries, penetrating the continents of Asia, Europe, and Africa, to link the East Asia economic region with Europe’s advanced economies from another side. A large number of countries are located between these two regions. The focus of the Silk Road’s economic belt is to activate the corridors between China and Europe through Central Asia and Russia, and the corridors between China and the Gulf and Mediterranean areas through Central Asia and western Asia.

In January, the Chinese president visited Egypt to enhance economic relations between the two countries. During the visit the two parties signed memoranda of understandings (MOU), with the two presidents signing 12 agreements of the 20 in total. These agreements included a Silk Road agreement, an agreement on technological and economic cooperation, an agreement regarding the development grant to Cairo for 2016/2018, and a finance agreement amounting to $1bn between the China Development Bank (CDB) and the Central Bank of Egypt (CBE). They also signed a finance agreement of $700m between the CDB and the National Bank of Egypt (NBE), agreements on financing electricity projects in Hamraween on the Red Sea coast, and four conditional agreements for financing Cairo Capital.

As an outcome of the Chinese president’s visit, 15 projects were announced with the participation of 100 Chinese companies and the mobilisation of Chinese investments worth $15bn. Furthermore, 21 MOU were signed for cooperation in electricity, trade and civil aviation, science and technology, communication, and space exploration.

China also pledged to grant Egypt aid worth $180m to help provide for the foreign exchange reserves, in addition to loans worth $7.1bn to SMEs.

Chinese president Xi Jinping announced a two-state interdisciplinary cooperation agreement for five years in light of the comprehensive strategic partnership between the two countries that was initiated during Al-Sisi’s visits to China in December 2014 and in September 2015.

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