When Egyptian President Abdel Fattah El-Sisi said during a speech to military students that Egypt supports the “One China” policy and “this is a ‘constant’ principle in Egypt's foreign policy”, he knew that these statements were a tribute to the words of Chinese President Xi Jinping, who said, “China attaches great importance to developing China-Egypt relations, and both sides should maintain close high-level exchanges, and support each other on issues concerning respective core interests.”
Before El-Sisi came to power in Egypt in 2014, Cairo had established ties with China for technology transfer, investment growth, geopolitical importance for China's exports to Africa. Cairo was more quickly attracted to China and established a deep relationship with Beijing. El-Sisi’s passion for China is clearly evident from his visits. Since El-Sisi took office as the sixth president in June 2014, he has visited China more than six times and met with President Xi Jinping seven times. His first trip took place in December 2014, six months after coming to power, and he signed more than 25 bilateral agreements. In contrast, former president Hosni Mubarak visited China only seven times during his 30-year rule.
China-Egypt relations have deepened and entered into a kind of strategic partnership. Trade, investment, the Belt and Road Initiative (BRI), loan allocation and financial support, and cultural and military endeavors are the subjects of bilateral cooperation between each other. Future cooperation plans could include e-commerce, artificial intelligence, and space technologies, which may raise alarm from China's traditional allies.
Unlike other Middle Eastern partners of China, the strategic relations between China and Egypt are not based on the sale of oil and energy, but in a broader perspective, geopolitical calculations shape these relations, and in the meantime, trade is one of its components.
During the last 26 years, the exports of China to Egypt have increased at an annualized rate of 15.1 percent, from $464 million in 1995 to $18.1 billion in 2021. Similarly, Egypt's exports to China have grown at an annual rate of 19.2 percent over the same period, rising from $12.2 million in 1995 to $1.17 billion in 2021.
Economic cooperation and bilateral trade have been strongly welcomed by China. This trade benefits China, and in 2021, Egypt had a $17 billion deficit with China. However, in 2020, China was Egypt's largest trading partner in terms of imports, followed by the U.S., Saudi Arabia, and Germany.
Along with trade, the geopolitical situation of Egypt and its economic importance for China have made Beijing very interested in investing in this country.
Chinese investment in Egypt has dramatically increased during the past 10 years. In 2017, China rose to become the sixth-largest investor in Egypt. A report from the Arab Investment and Export Credit Guarantee Corporation states that between 2013 and 2019, China invested US$28.5 billion in the Arab region and created 23,930 jobs, making Egypt the recipient of the most jobs overall – most of them created by China. More than 140 Chinese businesses have made investments in Egypt.
An interesting point to note is China's perspective of Egypt as a strategic element in China's infrastructure and trade projects such as BRI and Maritime Silk Road. In addition, Egypt is a leading country in the Islamic and Arab world and the gateway to Africa. For this reason, Beijing is more inclined to invest in Egypt's infrastructure than other economic activities that may bring profit sooner. Chinese investment in Egypt has been mostly focused on industrial projects (55 percent), construction (20 percent), and services (12 percent).
China is one of the major investors in the construction of the Iconic Tower, the electric train project, and a major part of the business district of The New Administrative Capital of Cairo through financing and labor. The construction of this administrative capital began in March 2015, 45 km from Cairo. It was supposed to be completed in the middle of 2023 at a cost of $59 billion and host 5 million Egyptians. In 2017, China was going to invest 11.2 billion dollars in this city. Since March 2018 the China State Construction Engineering Company (CSCEC) has been working on the administrative capital of the business district.
The Suez Canal is another geostrategic point of interest for China to invest in Egypt. This waterway is the sea gateway to Eastern Europe and connects the Mediterranean Sea with the Red Sea and the Indian Ocean. The Suez Canal has long been China's main shipping route for goods to Europe. The Suez Economic and Trade Cooperation Zone (SETC-Zone) is an investment opportunity for China and serves as a key project for the BRI due to its location and logistics capabilities.
It is located in the Northwest Gulf of the Suez Economic Zone in eastern Egypt, and the golden triangle of Asia, Africa, and Europe and was founded in 2008. After more than a decade of development and construction, it has become a critical platform for China-Egypt economic and trade cooperation. So far, 102 enterprises have settled in the zone. The zone has attracted over $1.2 billion of actual investment, and its total sales value exceeded $2.5 billion, creating more than 30,000 new jobs.
In addition to cooperation between China and Egypt in trade and economy, the two countries also cooperate in the field of defense and military. China participated in the Egypt International Defense Exhibition in November 2021 with its most advanced equipment. In May 2023, after the war in Ukraine and the reduction of Russian arms sales to Egypt, Cairo started negotiations to buy China's hi-tech J-10c fighter jets. Furthermore, From 2012 to 2014, China shipped eighteen ASN-209 unmanned aerial vehicles (UAVs) to Egypt; from 2017 to 2018, ten Wing Loong-1 drones arrived in Egypt, and in 2018, an agreement was reached with the Arab Republic on the supply of Wing Loong-2 drones.
In the last decade, China has made great efforts to increase its soft power and cultural activities in Egypt. With cultural interactions, public diplomacy can be deepened and entered into people's hearts.
Focusing on the shared history of the two countries was the primary tool and the oldest cultural activity of China in Egypt. For example, when Chinese Premier Zhou Enlai and Egyptian President Gamal Abdel Nasser met for the first time in 1955, the idea of a shared claim to civilization quickly became a mainstay of how the Chinese and Egyptian governments communicated with one another. Also, when Chairman Mao Zedong accepted the credentials of the first Egyptian ambassador to Communist China in 1956, he did so by proclaiming that China and Egypt were the homes of the oldest cultures in the world. Celebrating their ancient pasts was a way for two nations with different political systems and only a sporadic historical cultural contact to find common ground.
Part of China's cultural activities in Egypt is diligently conducted by its embassy in Cairo. The Chinese Embassy in Egypt holds extensive meetings with Egyptian political parties to form a wide network of relations with different political groups. China is mainly trying to host the education of political and executive staff as managers and future leaders of Egypt by holding training programs on a large scale. Over the past four years, more than 1,100 training programs have been organized by government institutions with China, in which more than 4,000 Egyptian government officials participated. Furthermore, the establishment of the Confucius Institute at Cairo University in 2007 should not be overlooked, which plays a significant role in teaching the Chinese language and spreading Chinese culture among members of society, particularly Egyptian students and scholars.
Challenges and obstacles
Although China-Egypt relations are expanding and both countries are satisfied with this partnership, difficulties in maintaining these ties, especially in Egypt, have made the relationship’s development challenging.
The first and most important concern in the relationship between the two countries is the dissatisfaction of Egypt's traditional allies, the West and the U.S., with the strategic partnership between the two countries. Egyptian society has been greatly impacted by China’s extensive propaganda over the past ten years against the U.S. presence. For example, China uses the role of the U.S. and Israel in supporting Ethiopia's dam (Grand Ethiopian Renaissance Dam (GERD)), which is known as a national threat to Egypt's water resources, to question the objective facts, but Beijing's active role in supporting this dam is ignored.
China has given $1.2 billion to build electrical power lines from the dam to Ethiopian cities, and has spent an additional $1.8 billion for Ethiopia to expand its renewable energy resources. Chinese companies like Sinohydro have also played a leading role in the building process for the dam. Nevertheless, these facts are noticeably absent from Egyptian media.
China's position in the Egyptian public’s mind has improved as a result of these propagandas. According to a poll conducted by the Washington Institute in November 2022, 64 percent of Egyptians consider relations with China more significant than those with the U.S. (58 percent). Almost half of the Egyptian public (47 percent) agree with the following statement, “We cannot count on the U.S. these days, so we should look more to Russia or China as partners.” This rate has increased by ten points since it was first asked in November 2021, when only 37 percent agreed.
The growing role of China in Egypt has caused concern for the U.S., and in cases where Chinese companies are actively involved in 5G technology, Washington has protested and requested the termination of Egypt's collaboration with them. China's presence in Egypt leads to influence in North Africa (such as military presence in Djibouti), strengthening of China's economy as a result of the leading role of Egypt and the Suez Canal in the BRI, and jeopardizing investment and the role of the U.S. in Egypt's economic and political affairs. According to the report of Egyptian Prime Minister Mostafa Madbouly, the cumulative amount of U.S. investments in Egypt in the fiscal year 2021/22 has reached $24 billion; only in the fiscal year 2020/21, has the U.S. invested $9 billion in Egypt.
If Egypt wants to continue working with China, it must play a balancing role between Washington and Beijing. Cairo must be careful not to find itself in a situation where it has to choose between the U.S. and China. It is definitely challenging for Cairo to take on such a role.
Egypt's accumulated and increasing borrowing from China is Cairo’s next concern. Egypt's gross public debt reached its highest level since 2000 due to the dire economy and the halving of the value of the Egyptian Pound (EGP) since the Russian attack on Ukraine in February 2022.
The International Monetary Fund (IMF) predicted that Egypt's gross public debt will reach 92.9 percent of its GDP this year. From this sum, the country’s total external gross debt is predicted to account for 50.2 percent of the GDP, up from 37.3 percent the previous year. If reached, it would also become the highest in 20 years. The government is expected to dedicate EGP 690 billion ($22.3 billion) of its 2022/23 budget for repayments of its debts.
In this situation, China continues to provide various loans to Egypt. China is Egypt's fourth-largest creditor with outstanding debts of nearly $8 billion, which is about 5 percent of Egypt's $155.7 billion debt. Egypt continues to take loans from China and it is not clear whether it will be able to repay its debts to China in the future. This will result in China's economic dominance over Egypt.
Finally, China's interest in the Suez Canal could provoke the sensitivity of Egypt's partners. China is the largest user of the Suez Canal, where more than 10 percent of world trade — 18,000 ships per year — passes through the Suez Canal. Beijing is also the largest investor in the SETC-Zone. The Suez Canal is a suitable waterway for the transfer of 60 percent of the goods that China sends to Europe.
China has become increasingly interested in Southeast, Central, and Eastern Europe and has expanded its economic influence in the form of the BRI and the 17+1 format. The European Union (EU) is concerned about this influence. The EU believes that China's presence in Eastern Europe can exacerbate governance shortfalls, undermine political and economic stability, and complicate the EU's ability to reach a consensus on key issues. As a gateway to China’s economic influence in Eastern Europe, Egypt could face difficulties from EU concerns, which could put pressure on Egyptian officials to limit China’s access to the Suez Canal.
The cooperation between China and Egypt is classified into three areas: economic, geopolitical and new technologies, and it is expected that despite some issues in the relations between the two countries, these ties will only get stronger.
Economy: China has invested millions of dollars in Egypt since the beginning of the new century, and Egypt is most interested in investments made in its infrastructure. Egypt under the leadership of El-Sisi is operating in accordance with reality. The construction of the new administrative capital, the urban train project, and dozens of economic projects, which, although has put additional pressure on Egypt's economy, according to El-Sisi, his means of legitimacy in the eyes of public opinion is the construction of multi-billion-dollar mega projects.
The second case is the role of the army in the country’s economy. Currently, the army is active as a contractor in many economic projects in Egypt. In fact, the economic activities of the army are seen as a sign of the support and loyalty to El-Sisi.
The United States and some other Western countries object to the role of the Egyptian army in the economy. This position is adopted by the International Monetary Fund, as well. From its part, China refrains from meddling in the internal affairs of any country and is not concerned with the issue. In 2022, China, which pledged to invest $400 billion over the next ten years in Muslim countries, announced that it would “align” its BRI spending with Egypt's Vision 2030 development scheme.
The main problem in this regard is the decline in China's economic growth. Data shows China's economy grew just 0.8% in the June quarter, down from 2.2% in the first three months of 2023. It is expected that the decrease in economic growth will cause less Chinese investment, but the China-Egypt relationship will continue to be strong.
Geopolitics: China's view of Egypt is not just commercial. Egypt is a country of high geopolitical importance in North Africa, which plays a significant role in the Arab and Islamic world. The Suez Canal has given the country's geostrategic weight in Europe and Africa a unique role. Cairo generated just $9.4 billion from the channel in the 2022-23 fiscal year, up 35 percent from the previous year.
Considering the inviolable importance of the Suez Canal for China and Egypt's plan to create a new canal parallel to the existing one to achieve the goal of reducing the transit time from 18 to 11 hours and increasing the traffic of transit ships from 49 to 97 ships, Egypt's geopolitics will become a link to strengthen relations between the two countries.
The problem that the Egyptian authorities may face is the U.S. objection to China's geopolitical presence in Egypt. Washington had previously objected to the economic and technological cooperation between China and Israel, which led to the establishment of a government agency by Benjamin Netanyahu to oversee the foreign cooperation between China and Israel. The news indicates that regarding the normalization of Israel and Saudi Arabia and the request of the Saudi authorities for the support of the U.S., Washington officials have requested Riyadh to reconsider the relations with China. This threat to Egypt may be very near.
New technologies: In recent years, China has had direct cooperation in transferring new technologies to Cairo. Egypt was the first country to receive China's cooperation project on satellite technology outside of China. Additionally, Egypt became the first country to collaborate with Biejing on the large-scale experimental operation of a satellite outside of China.
Unlike the West, China is less strict in transferring new technologies to other countries, and future wealth generation is in investing in such industries. Compared to the U.S. and Europe, Egypt can better cooperate with China in new technologies.
Economic and geopolitical cooperation and investments in Egypt's ailing economy have given Beijing a powerful tool to strengthen its expanding ties with Cairo. As much as it benefits from these relations, Egypt is looking for solutions that will not cause the sensitivity of its traditional Western allies. The biggest challenge for Egypt in the future is the perilous tightrope walk in its relations with China and the West.
 Haisam Hassanein, “Egypt Takes Another Step Toward China,” The Washington Institute, August 19, 2019, https://www.washingtoninstitute.org/policy-analysis/egypt-takes-another-step-toward-china.
 OEC, “China-Egypt Trade,” OEC, 2020, https://oec.world/en/profile/bilateral-country/chn/partner/egy?subnationalTimeSelector=timeYear&dynamicBilateralTradeSelector=year2020.
 Giulia Interesse, “China-Egypt Bilateral Trade and Investment Prospects,” China Briefing, September 5, 2022, https://www.china-briefing.com/news/china-egypt-bilateral-trade-and-investment-prospects-are-bright/.
 Jennifer Gnana, “China to Invest Up to $11.2bn in New Egyptian Capital,” MEED, September 11, 2017, https://www.meed.com/china-to-invest-up-to-11-2bn-in-new-egyptian-capital/.
 National Development and Reform Commission, “China-Egypt Suez Economic and Trade Cooperation Zone Makes Remarkable Achievements,” NDRC, October 29, 2021, https://en.ndrc.gov.cn/netcoo/achievements/202110/t20211029_1302328.html.
 Liu Xuanzun and Deng Xiaoci, “Chinese Weapons, Equipment Win Interest at Egypt Defense Expo,” Global Times, December 2, 2021, https://www.globaltimes.cn/page/202112/1240546.shtml.
 “China in Advanced Negotiations for Major Arms Deals with Egypt and Saudi Arabia,” The New Arab, May 25, 2023, https://www.newarab.com/news/china-advanced-talks-major-saudi-egypt-arms-deals .
 Ivan Bocharov, “Egypt-China Relations at the Present Stage,” RIAC, March 3, 2020, https://russiancouncil.ru/en/analytics-and-comments/columns/middle-east-policy/egypt-china-relations-at-the-present-stage/.
 Kyle Haddad-Fonda, “The Rhetoric of ‘Civilization’ in Chinese–Egyptian Relations,” Middle East Institute, August 1, 2017, https://www.mei.edu/publications/rhetoric-civilization-chinese-egyptian-relations.
 Mohamed Maher and Mohamed Farid, “The Growth of Chinese Influence in Egypt: Signs and Consequence,” Fikra Forum, Apr 27, 2023, https://www.washingtoninstitute.org/policy-analysis/growth-chinese-influence-egypt-signs-and-consequences.
 Mohamed Abdelaziz, “In New Poll, Most Egyptians Split on Relations with Foreign Powers,” Fikra Forum, September 9, 2022, https://www.washingtoninstitute.org/policy-analysis/new-poll-most-egyptians-split-relations-foreign-powers-pessimistic-about-domestic.
 Nehal Samir, “Cumulative Volume of US Investments in Egypt Reached $24bln in FY2021/22: PM,” ZAWYA, May 17, 2022, https://www.zawya.com/en/economy/north-africa/cumulative-volume-of-us-investments-in-egypt-reached-24bln-in-fy2021-22-pm-cn007xym.
 “Egypt Approves Budget Amid Privatization Drive, Economic Crisis,” Al-Jazeera, June 14, 2023, https://www.aljazeera.com/news/2023/6/14/egypt-approves-budget-amid-privatisation-drive-economic-crisis.
 Shereif Barakat, “IMF Predict Egypt’s Gross Debt Rising to 92.9% of GDP This Year,” Egyptian Street, May 3, 2023, https://egyptianstreets.com/2023/05/03/imf-predict-egypts-gross-debt-rising-to-92-9-of-gdp-this-year/.
 John Calabrese, “Pakistan and Egypt: China’s Distressed Assets,” Middle East Institute, February 2, 2023, https://www.mei.edu/publications/pakistan-and-egypt-chinas-distressed-assets#_ftn5.
 Erik Brattberg and et.al, “China’s Influence in Southeastern, Central, and Eastern Europe: Vulnerabilities and Resilience in Four Countries,” Carnegie, October 13, 2021, https://carnegieendowment.org/2021/10/13/china-s-influence-in-southeastern-central-and-eastern-europe-vulnerabilities-and-resilience-in-four-countries-pub-85415.
 Chris Devonshire-Ellis, “China Links Belt & Road Initiative Expenditure To Egypt’s 2030 Vision Development Plan," Silk Road Briefing, June 20, 2022, https://www.silkroadbriefing.com/news/2022/06/20/china-links-belt-road-initiative-expenditure-to-egypts-2030-vision-development-plan/.
 Peter Hannam, “China GDP Growth Falls Short of Expectations as Sinking Property Prices Hit Economy,” The Guardian, July 17, 2023, https://www.theguardian.com/business/2023/jul/17/china-gdp-growth-down-economy-june-quarter-gross-domestic-profit.
Tariq Al Fahaam, Hatem Mohamed, “Suez Canal Annual Revenue Hits Record $9.4bln,” ZAWYA, June 22, 2023, https://www.zawya.com/en/markets/equities/suez-canal-annual-revenue-hits-record-94bln-qido3oph.
 “New Suez Canal: Facts and Figures,” SUEZ CANAL, https://www.suezcanal.gov.eg/English/About/SuezCanal/Pages/NewSuezCanal.aspx.
 Kris Mada, “Saudi Arabia Asked to Stay Away from China and Cooperate with Israel if You Want to Get US Nuclear,” KOMOAS, August 11, 2023, https://www.kompas.id/baca/english/2023/08/11/en-arab-saudi-diminta-jauhi-china-dan-gandeng-israel-jika-ingin-raih-nuklir-as.
 Mohamed Zain, “Egypt Becomes First African Nation to Achieve Full Satellite Integration Capability Through China Co-Op,” Business Today, June 25, 2023, https://www.businesstodayegypt.com/Article/1/2667/Egypt-becomes-first-African-nation-to-achieve-full-satellite-integration.
©2023 Trends Research & Advisory, All Rights Reserved.