Identifier
Created
Classification
Origin
10CAIRO115
2010-01-21 15:41:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Cairo
Cable title:  

China's Economic Presence in Egypt

Tags:  ECON EINV ETRD EG CH 
pdf how-to read a cable
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UNCLAS CAIRO 000115 

SENSITIVE
SIPDIS
DEPARTMENT FOR NEA/ELA

E.O. 12958: N/A
TAGS: ECON EINV ETRD EG CH
SUBJECT: China's Economic Presence in Egypt

REF: 09 CAIRO 2120; 09 CAIRO 2156; 10 CAIRO 65

UNCLAS CAIRO 000115

SENSITIVE
SIPDIS
DEPARTMENT FOR NEA/ELA

E.O. 12958: N/A
TAGS: ECON EINV ETRD EG CH
SUBJECT: China's Economic Presence in Egypt

REF: 09 CAIRO 2120; 09 CAIRO 2156; 10 CAIRO 65


1. (SBU) Key points:



-Despite recent growth in bilateral trade and pledges to increase
investment, China's economic relations with Egypt remain fairly
modest.



-Chinese investment in Egypt is not focused solely on profits, but
rather on building and maintaining a Chinese presence in Egypt and
Africa.



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Chinese Economic Ties with Egypt are Growing, But...

-------------- --------------




2. (SBU) On January 13, EconOffs met with Cao Jiaching, the
Commercial Minister-Counselor at the Chinese Embassy in Cairo.
Jiachang characterized Chinese-Egyptian economic relations as "very
good," and noted that Chinese trade and investment ties with Egypt
have grown steadily since 2004. Jiaching said that bilateral trade
amounted to $5.5 billion in 2009, with the balance of trade heavily
skewed towards Chinese exports. He added that Chinese investment
has reached $500 million in Egypt, and said that China's goal is to
double its investment to $1 billion by the end of 2012. (NOTE: The
GOE's Minister of Investment recently stated that the amount of
current Chinese investment is closer to $300 million).




3. (U) Chinese-Egyptian economic cooperation was on full display in
November 2009, during the China-Africa Summit in Sharm El-Sheikh.
Egyptian Prime Minister Ahmed Nazif and his Chinese counterpart
signed 4 MOU's on improving trade, investment, customs, and
cultural ties, and Egyptian Minister of Finance Mahmoud Mohiedden
announced the opening of the first Chinese bank in Egypt (refs. A
and B). The two countries also celebrated the nascent
Chinese-Egyptian economic zone in Ain Sokhna, one of six special
Chinese economic zones in Africa whereby land has been set aside
for Chinese companies to build factories and infrastructure.
Jiachang told us that the Chinese zone in Ain Sokhna does not enjoy
duty-free privileges like designated free zones in Egypt, but that
the Chinese government provides special incentives for companies to
invest in it.



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...Overall Chinese Investment is Modest

--------------




4. (SBU) While Chinese investment is growing, the current $500
million invested in Egypt is much smaller than Chinese FDI in many
other African countries, and represents less than 1% of Egypt's
total stock of FDI. Moreover, Jiachang told us that China has not
invested in Egypt's oil and gas sector, which accounts for the
majority of Egypt's FDI. (Note: while no Chinese oil exploration
companies are active in Egypt, Jiachang tells us that there are 5-6
Chinese oil service companies working here.) Instead, Chinese
investments are concentrated in the manufacturing and service
sectors.




5. (SBU) Jiachang noted that Chinese companies are attracted to
Egypt in part because of its strong market access, low costs of
doing business, and its improving investment climate (ref. C).
However, he termed Egypt's legal requirement that companies employ
no more than 10% foreigners a "big problem," suggesting that it
keeps Chinese companies from employing enough high-skilled workers

in Egypt.



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Maintaining a Chinese Presence is the Goal

--------------




6. (SBU) Jiachang said that Egypt is not a major target of Chinese
investors, but that Chinese companies are establishing a foothold
in Egypt in part because the government of China is encouraging its
business community to go to Africa. Egypt is not great for
investment, Jiachang said, but China feels "has to do something" to
maintain a presence.



--------------

Comment

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7. (SBU) The attitude of Chinese investors towards Egypt is that of
a lukewarm embrace: Companies see the potential for profit, but
fears of inefficiency -- as well as the existence of more
attractive developing countries in which to invest -- keep the size
of overall investments in Egypt low. The modest Chinese investments
in Egypt appear to be driven more by a desire for a Chinese
presence in a key African market than by the attractiveness of
Egypt as a destination for FDI.
SCOBEY