China - Egypt trade corridor (2024)

In 2014, the two countries signed a strategic partnership agreement, promising cooperation in defense, technology, economy, counter-terrorism, and fighting cybercrime.

During China’s President Xi Jinping’s visit to Egypt in 2016, 21 more agreements were signed, including for U.S.$15 billion of Chinese investment in various projects.

Egypt’s economy is projected to grow by 3.0% this year and 4.4% in 2025 according to the International Monetary Funds’ (IMF) latest April 2024 World Economic Outlook update. ¹

The growth projections were made before the country secured in March an agreement to more than double the IMF aid to U.S.$8 billion, which may help unlock new investments and boost export sectors.

From 2018 to 2019, Egypt attracted approximately U.S.$28.5 billion in Chinese investments, becoming the largest recipient of Chinese investment in the Arab world, according to the Arab Investment and Export Credit Guarantee Corporation.

Chinese investment in Egypt has been mostly focused on industrial projects with a 55% share, construction with 20%, and services with 12%, according to the report.

As of February 2023, there were more than 2,000 Chinese firms in Egypt. Investments from these companies are worth U.S.$8 billion in total, with investments in sectors as varied as fiberglass, home appliances, textiles, food processing, and animal feed.

In addition, China is estimated to have injected between U.S.$16 billion and U.S.$20 billion into the Egyptian economy in the form of loans, investments and development projects, according to The Tahrir Institute for Middle East Policy (TIMEP). ³

China is ready to deepen cooperation with Egypt in various fields including economic and social construction, import more high-quality products, and encourage more Chinese enterprises to invest in the country, Chinese Foreign Minister Wang Yi said in January. ⁴

Egypt is North Africa’s biggest market, with a population of over 100 million that has been expanding by 2.1 percent on average over the past decade, according to the World Bank. The opportunities for Chinese investors are numerous.

Infrastructure and construction projects in new Egyptian cities have drawn particular attention from Chinese investors, mainly in Egypt's new administrative capital near Cairo and the Suez Canal Economic Zone.

China's mega investments, mainly in Egypt's new administrative capital near Cairo and the Suez Canal Economic Zone, help boosting the Egyptian economy, the country’s Finance Minister Mohamed Maait said.

Construction Engineering Corporation (CSCEC) to build a new administrative capital east of Cairo, dominated by the 385-metre-high Iconic Tower, the tallest in Africa. ⁵

The U.S.$3 billion skyscraper is one of 20 buildings the Chinese company, together with a number of Egyptian construction firms, is building in the capital’s business district.

Some 15 Chinese firms took part in construction of Egypt's first electrified light rail transit, a U.S.$1.2 billion project connecting the New Administrative Capital, whose first 70km phase out of total 103km was inaugurated in 2022.

The aid package from the IMF has included a new framework, however, to slow down infrastructure spending including projects that have so far operated outside regular budget oversight, which may impact Chinese investments in the sector.

The Suez Canal Economic Zone (SCZONE) stands out as a strategic point of interest for China to invest in Egypt as the man-made water artery, which accounts for some 12% of the world’s trade, has long been its main shipping route for goods to Europe.

A showcase of the BRI partnership, the SCZONE attracted more than 140 companies and investment of over U.S.$1.6 billion by July 2023^{. 6}

With an overall sales revenue exceeding U.S.$2.5 billion, businesses in the zone have provided more than 5,000 direct jobs and 36,000 employment opportunities in related industries.

In March 2023, Hong Kong’s Hutchison Ports invested U.S.$700 million in two Egyptian ports, bringing the company’s total investment in the country to over U.S.$1.5 billion.

China is Egypt’s biggest importer, with U.S.$17.2 billion in 2022, or 21.6 percent of total imports, slightly down from nearly U.S.$18.0 billion a year earlier, according to the United Nations Comtrade database on international trade. ⁷

The IMF deal is expected to stimulate the whole trade corridor, giving a boost to both exports and imports between the two nations. ITC projections for 2027 show exports potential of U.S.$19.6 billion between China, including Hong Kong, and Egypt.

The main export sectors where the Chinese companies from the mainland could benefit are the electronic equipment, machinery and electricity as well as chemicals with estimated exports gaps of U.S.$2.7 billion, U.S.$1.6 billion and U.S.$636 million, respectively, according to the ITC.

In the opposite direction, the Egyptian businesses could focus on exports of precious metals, plastics and rubber as well as chemicals to China with estimated exports gaps of U.S.$130 million, U.S.$84 million and U.S.$69 million, respectively, the ITC says.

Over time, Chinese investments in Egypt have evolved from mainly focusing on contracting and infrastructure to manufacturing.

Last year, Chinese smartphone maker Vivo launched production of its devices in its new U.S.$20 million, 11,000 square-meter factory near Cairo.

At the same time, China’s OPPO is investing U.S.$20 million to build a new facility to manufacture 4.5 million smartphones annually for the Arab and African markets. ⁸

In January, Chinese company Vanward started the construction of a new U.S.$12 million, 26,000 square-meter factory in China-Egypt TEDA Suez Economic and Trade Cooperation Zone to manufacture household appliances and heat exchangers. ⁹

In April, a Chinese consortium expressed its interest in establishing an integrated textile manufacturing city in Egypt with U.S.$300 million worth of investments. ¹⁰

The foundation stone for a new U.S.$146 million Xin Xing factory for iron castings was laid at the SCZONE in the same month. The plant aims to produce high-pressure flexible cast pipes with an annual capacity of 250,000 tonnes. ¹¹

Such export-oriented investments across several sectors are expected to boost Egypt’s exports helping fulfill its ambition of becoming a regional export hub.

In addition to promising sectors such as retail, agriculture, desalination, manufacturing, healthcare and telecommunications, the government’s strong support for renewables is paving the way for green-minded Chinese businesses.

According to its Integrated Sustainable Energy Strategy (ISES 2035), the government has set targets for renewables to make up 42 percent of the country’s electricity mix by 2035, based on rapid solar and wind deployment.

A study by the International Renewable Energy Agency (IRENA) estimates that Egypt could supply as much as 53 percent of its electricity mix from renewables by 2030, double current expectations. ¹²

Egypt ranked as number seven among top developing economies by international investment in renewable energy with a 14% share in the total project value of U.S.$45.8 billion between 2015 and 2022, the UNCTAD report says.

In December, the Egyptian government signed a memorandum of understanding (MOU) with China Electric Power Equipment and Technology Company to develop a 10-gigawatt solar energy project.

The project is expected to produce about 29,784 gigawatt-hours of clean energy annually, helping reduce carbon dioxide emissions by around 14 million tons. ¹³

A month earlier, the SCZONE signed U.S.$15.6 billion in agreements with Chinese partners for 11 manufacturing and green hydrogen projects, which are expected to create around 9,000 jobs. ¹⁴