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China Signs Investment Deals Worth Nearly $18B With Egypt

  • Reuters

Chinese President Xi Jinping, left, visits the parliament in Cairo, Egypt, Jan. 21, 2016.

Chinese President Xi Jinping, left, visits the parliament in Cairo, Egypt, Jan. 21, 2016.

China signed investment and aid deals worth billions of dollars with Egypt during a visit by President Xi Jinping on Thursday and expressed support for Cairo's efforts to maintain stability, which have included a crackdown on dissent.

Xi arrived in Egypt on Wednesday on the second leg of a Middle East tour that signals China's push for greater influence in a region that provides vital oil supplies.

The visit, just before the Jan. 25 anniversary of the 2011 uprising that ousted Hosni Mubarak, is seen in Egypt as a vote of confidence in President Abdel Fattah el-Sissi's administration, whose human rights record has attracted criticism elsewhere.

Xi praised Egypt's efforts to strengthen its economy during talks with Sissi, who has warned his critics not to hold protests on Monday.

"China supports Egypt's efforts to maintain stability, develop the economy and improve livelihoods, and ... play an even greater role in international and regional affairs," Xi said, according to China's foreign ministry.

Egypt has struggled to spur economic growth since the 2011 uprising ushered in political instability that scared off tourists and foreign investors, key sources of foreign currency.

Heralding a new era of closer political and economic ties, officials from the two countries signed 21 deals at a ceremony in Cairo that could ramp up Chinese investments in the most populous Arab country.

The deals span several development and infrastructure investments, including the first phase of a new Egyptian administrative capital announced last year, a $1 billion financing agreement for Egypt's central bank and a $700 million loan to state-owned National Bank of Egypt.

As military chief, Sisi ousted Egypt's first democratically-elected president, Mohamed Morsi, in 2013 after mass protests and launched a campaign to crush Morsi's Muslim Brotherhood, the country's oldest Islamist movement. In doing this he won the backing of wealthy Gulf Arab countries who oppose the group.

Since then Egypt has largely relied on billions of dollars in aid from Saudi Arabia and the United Arab Emirates to keep its economy afloat, but an oil price slump has raised doubts over how far the OPEC producers can maintain such support.

Billions in Investments

In a speech to the Cairo-headquartered Arab League, Xi also outlined multi-billion-dollar investment plans for the wider Middle East.

China would dedicate $15 billion in special loans to boost industrial production in the region, $10 billion in trade credit for joint energy projects and another $10 billion in soft loans, Xi said.

China would also set up funds with the UAE and Qatar worth a total $20 billion to invest in conventional energy. It will extend its contracts to buy oil from the region and dedicate $300 million to helping train police, Xi said.

He did not elaborate, but the scale of the plans on offer signal a growing Chinese commitment to the Middle East.

China, the world's second biggest economy, relies on the Middle East for oil but has tended to leave regional diplomacy to the other four permanent members of the U.N. Security Council, the United States, Britain, France and Russia.

It has however been trying to get more involved, especially in Syria, and recently hosted Syria's foreign minister and opposition officials.

Xi arrived in Egypt from Saudi Arabia and will head next to Iran. While Xi was in Riyadh, China signalled its support for Yemen's government, which is fighting an Iran-allied militia, and repeated a call for a peaceful settlement in Syria.

Speaking earlier at a joint news conference, Sissi, who visited China in 2014, said economic and military cooperation had developed quickly to reach unprecedented levels.

"We discussed in our consultations the need to redouble our common efforts in various bilateral and international areas to combat the danger of terrorism and extremism," Sissi said.

In the same news conference, Xi said 32 Chinese companies were now working in Egypt's Suez Canal economic zone, investing more than $400 million and these figures would rise to 100 firms and $2.5 billion with the next phase of the project.

China and Egypt are also planning 15 projects in electricity, infrastructure and transport with investments that could total $15 billion, Xi said.

China's $1 billion central bank loan could help bolster foreign reserves, which have more than halved since 2011 as it battles to defend the currency against downward pressure, while longer-term investments could help create much-needed jobs.

Mindful that economic discontent helped to unseat two presidents in the last five years, Egyptian security forces have arrested several activists and shut down cultural spaces in recent weeks to prevent protests as the anniversary approaches.