Saturday, November 10, 2007

Egypt and China Forge Economic Ties

Source: Financial Times: Egypt and China in investment deal

Egypt and China have reached an agreement to set up a five square kilometer industrial zone in the Suez area. Egypt hopes to attract $2.5 billion in Chinese investment from this deal. To attract foreign investments, Egypt has marketed its strategic location, trade agreements with foreign countries in Europe, Africa, the Middle East, and the United States, and its cheap energy and labor costs. In addition, the new deal highlights China’s increasing economic ties to Africa and China’s increasing global economic control.

Companies in the zone are expected manufacture textiles, gas and oil pipes, electronics and car and car components. The zone will provide Chinese companies with an export hub for Europe, the Middle East, and Africa. The marketing seems to have worked. This is the first manufacturing zone the Chinese government has supported in the area.

The new zone, however, has its critics. Some argue that China is taking advantage of African resources and adding to the competition of African industries. In response, supporters extol the advantages of the industrial zone, such as job creation for Egyptians.

China and Egypt have increased the number of exports between countries. In 2007, Chinese exports to Egypt total $2.9 billion, a 50% increase from 2006, and Egyptian exports to China total $164 million, a 23% increase from 2006. China hopes to use Egypt to capitalize on markets, such as Europe, with which Egypt has connections. Within the next six years, China is expected to become Egypt’s biggest trading partner, surpassing the United States (trade totaled $6.7 billion in 2006).

For Discussion:
In June of 2000, China released a list of 225 projects within China which are open to foreign development and investment. The hope was to draw outside investment and technology into the central provinces of China. This effort shows a history of China desiring greater economic contact with other countries. See China Unveils 225 Western Development Projects. With China's most recent partnership with Egypt, is China bending toward a capitalist system and will a more democratic China become a possibility because of the global opportunities for China?

1 comment:

Anonymous said...

I think that on the whole, the industrial zone Egypt plans to open with the help of the Chinese is a potentially positive development. It also may be an indication that China ay be shifting its strategy of focusing its investments in Africa almost exclusively in extractive industries. Investing in Egypt does not have the same negative images as investing in the Sudan. As well, Egypt has more technical capacity to benefit from an indistrial zone than many of the African economies south of the Sahara. The thing to watch out for are the popssible consequencies for the local Egyptian, relatively weak industrial firms in in the same or similar industries. Naturally, Egypt must do its homework and watch its back! This is not a free ride!