Chinese President Xi Jinping shakes hands with Egyptian President Abdel Fattah al-Sisi during a visit to Cairo in 2016. Photo: EPA
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https://scmp.com/news/china/diplomacy/article/3161705/china-buckles-its-belt-and-road-ambitions-suez-investments Diplomacy
China buckles in its belt and road ambitions with Suez investments
- Chinese companies are tapping into opportunities to set up industries with access to markets in the Middle East and Europe
- China is biggest user of Suez Canal, where more than 10 per cent of global trade passes every year
The China-Egypt Teda Suez Economic and Trade Cooperation Zone. Photo: Handout
About 120km (75 miles) east of Cairo near the Suez Canal lies one of the biggest concentrations of Chinese investments in Egypt – part of the Belt and Road Initiative, President Xi Jinping’s trade and infrastructure development plan.
Most of the massive investments are concentrated in the Suez Canal Economic Zone, made up of six ports and four industrial estates, which has attracted many businesses making building materials, high-voltage equipment, machinery and petroleum equipment.
Within the zone, China has built a 7.34 sq km (3 sq miles) industrial estate known as Teda City, short for the China-Egypt Teda Suez Economic and Trade Cooperation Zone.
From their manufacturing hub at Teda, Chinese companies are tapping into the opportunities that come with the belt and road project, setting up industries to serve markets in the Middle East and Europe, through the Suez Canal.
More than 10 per cent of global trade – 18,000 ships every year – goes through the Suez Canal and China is its biggest user. The waterway connects the Mediterranean to the Red Sea and is the shortest sea link between Asia and Europe, Beijing’s biggest market.
The scale of the Suez Canal’s importance was underlined in March when Ever Given, a 200,000 deadweight-tonne ship carrying 20,000 containers, got stuck in the waterway on its way from China to Rotterdam.
The blockage, which lasted for six days, held up trade valued at more than US$9 billion per day, according to data from Lloyd’s List.
Observers say China has significantly increased its investment in Egypt since President Abdel Fattah al-Sisi came to power in 2014.
According to the China Africa Research Initiative at Johns Hopkins University’s School of Advanced International Studies, the country received US$4.95 billion in loans from China between 2015 and 2019, compared with around US$332 million between 2002 and 2014.
The Teda Suez is a joint venture funded by Tianjin Teda Investment Holding Co and the China-Africa Development Fund.
The first phase of Teda Suez, completed in 2014 with an area of 1.34 sq km, has attracted 85 enterprises with a cumulative investment of more than US$1 billion, creating US$1.2 billion output value and some 4,000 local jobs, according to the Advisory Council of the Belt and Road Forum for International Cooperation.
The council, which was established in 2018 as a non-profit, is an international policy advisory body that offers intellectual support to the Belt and Road Forum. Its membership includes former prime ministers, academics and experts from global organisations, including the World Bank.
In a report released last week, the council singled out the contribution of Chinese companies to the growth of the economic zone, and for creating jobs in the North African country.
“China-Egypt Teda Suez Economic and Trade Cooperation Zone was shown as an example of the contribution made by belt and road projects to advance local growth,” it said.
The council noted that Chinese company Jushi Group – the world’s largest fibreglass manufacturer – had set up its Egypt operation at Teda Suez, with a production capacity of 200,000 tonnes. China and the US are the largest producers of the material.
With a total investment of more than US$600 million, Jushi Egypt has not only achieved an annual output value of over US$220 million and an annual export value of about US$200 million, but also provided more than 2,000 local jobs, the council said.
Another flagship enterprise at Teda Suez named in the report is XD-EGEMAC, a joint venture between Egypt’s EGEMAC and XD Group from China, and the first to manufacture high-voltage equipment, up to 550 kilovolts, in the Middle East and Africa.
The council said the operation had so far built 18 substations and achieved sales revenue of nearly US$100 million in 2019.
Teda Suez’s second phase, which started in 2016 for US$230 million, has attracted eight enterprises in relevant industries, bringing in about US$200 million investment.
According to the zone’s development plan, it aims to attract about 150 enterprises with an overall investment of US$2 billion, and create 30,000 to 40,000 local jobs, the council noted.
03:17
Why is Egypt’s Suez Canal so important?
Wei Jianqing, China-Africa Teda Investment’s executive general manager, has said there are plans to expand the zone to include new industries, such as solar and wind power equipment for green development.
He was speaking to state news agency Xinhua in September, at the second China-Africa Economic and Trade Expo in the central Chinese province of Hunan.
Wei said in the next five years, “we will upgrade the zone into a green modern industrial town featuring perfect infrastructure, complete supporting service systems, a complete industrial chain, and sustainable development”.
John Calabrese, who teaches international relations at American University, said it appeared that China viewed Egypt “among MENA countries … as being especially well suited to serve as a manufacturing hub, from which to tap into African and Mediterranean markets”.
“Chinese companies have been flocking to Egypt for that very purpose,” said Calabrese, who is also a director of the Middle East-Asia Project at the Middle East Institute in Washington.
China regarded the Suez Canal as one of several “critical maritime conduits” for the successful implementation of the Maritime Silk Road, he said. Two others are the Strait of Hormuz, between the Persian Gulf and the Gulf of Oman, and the Bab Al Mandab, between Yemen on the Arabian Peninsula and Djibouti and Eritrea in the Horn of Africa.
“Interestingly, all three can be considered passageways of economic or strategic opportunity, as well as vulnerability,” Calabrese said.
Chinese construction contracts and investment in the Suez zone – as well as, for example, in the UAE’s Khalifa Industrial Zone – were “indicative of Beijing’s aim of gaining a foothold for state-owned and private Chinese companies”, he said.
The intention, according to Calabrese, is “so they can feed products into local markets, re-export and/or assemble products for distribution across the wider region and into Europe”.
Degang Sun, a professor at the Centre for Middle Eastern Studies, Fudan University in Shanghai, said Egypt’s location at the crossroads of the Mediterranean and the Red Sea, connecting Asia and Africa, had made the “Egypt Teda Suez Economic and Trade Cooperation Zone … a model of win-win cooperation between China and the Middle Eastern, Arab and African countries”.
He added that al-Sisi’s administration was proactive in attracting Chinese investments, including in the new capital of Cairo, as well as the Teda Suez Economic and Trade Cooperation Zone.
In addition to their industrial zone interests, Chinese companies are involved in many other Egyptian projects, including the building of a new central business district in the country’s New Administrative Capital – part of a massive development by the China State Construction Engineering Corporation (CSCEC).
“Unlike some developing countries conducting censorship on Chinese investment in megaprojects due to US pressure, Egypt does not want to politicise Chinese investment, and it does not want to choose sides between the US and China,” Sun said.
“Egypt has become a pioneer in the high-quality BRI.”