China Views Egypt as Trading Hub ; While Others Hang Back, Beijing Takes Risk to Gain a Foothold in Africa

By Halime, Farah | International Herald Tribune, August 31, 2012 | Go to article overview

China Views Egypt as Trading Hub ; While Others Hang Back, Beijing Takes Risk to Gain a Foothold in Africa


Halime, Farah, International Herald Tribune


Other investors worry about whether Egypt's new government will fulfill its democratic potential, but Chinese companies are jumping into projects as a way to establish a trading hub.

As other investors flee Egypt because of worries about the country's rocky transition to democracy, Chinese companies are pouring money into Egyptian projects in the hope of gaining access to a huge domestic market and acquiring a base for exports to the Middle East.

China's interest in Egypt is driven by a desire to gain a strong foothold in a major African market at the juncture of three continents. Egypt also has a large labor force that Chinese companies could put to work.

China has invested in other countries in Africa like Angola, Libya and Sudan, with China's need for oil and other natural resources to fuel its growing economy outweighing the political risks of buying in.

Egypt was China's third-largest export market in Africa last year, after South Africa and Nigeria, according to U.N. trade data.

In the clearest sign yet that Egypt is eager to bolster bilateral ties with China, the country's newly elected president, Mohamed Morsi, arrived in China this week to hold talks with his Chinese counterpart, Hu Jintao, and other senior officials.

For Egypt, China's investment drive offers an opportunity to solicit bids on construction projects at low prices. Nabil Abdel Hamid Hassan, the head of the Asia unit at the Ministry of International Cooperation in Egypt, said some projects would receive financing known as concessional loans from Chinese companies, funding with advantageous conditions that few other countries are willing to provide at this time.

"We are now planning to draw up a strategy with China," he said, "and instead of offering some kind of grant, to agree together about a three-to-four-year strategy to specify megaprojects financed and implemented by the Chinese."

During Mr. Morsi's visit, China agreed to lend Egypt $200 million, and deals were signed in agriculture and telecommunications.

Egypt has had a choppy relationship with China. Much of Egyptian industry has come under pressure from low-cost Chinese exports.

Regardless, the Chinese government has not hesitated to court the country, with some of its largest companies wading in. Shanghai Construction, for example, is completing a five-star hotel at a Cairo exhibition center after a Chinese government directive.

The Chinese are attracted to Egypt's big market for low-cost consumer goods and an expansive and relatively inexpensive labor force.

Egypt's large number of preferential trade agreements with nations in Europe, Africa and the Middle East, along with the Suez Canal, one of the world's most important waterways, also make it a prime location, said Chen Lin, the commercial counselor at the Chinese Embassy in Egypt. …

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