Chinese banks carve out Middle East role

21 September 2016

Chinese funds support billions worth of projects in the UAE and Egypt

Chinese banks are playing a growing role in financing projects in the Middle East, supporting Chinese contractors and developers winning work in the Middle East.

The focus has been power and construction in the UAE, Egypt and Iran.

Dubai’s $3.4bn coal-fueled Hassyan independent power project (IPP) recently reached a financial close with 22 per cent of its equity and 78 per cent of its debt provided by Chinese institutions. Joint developer Harbin International brought the Chinese funds on board.

Other pipeline power deals include Dairutt IPP and two coal plants in Egypt, and Dubai’s 800MW solar photovoltaic plant.

China is also offering bilateral loans to the Egyptian government, as well as $3bn in finance for the new Capital City project, to be partially built by China State Construction Engineering Corporation (CSCEC).

In Dubai, private company Skai Holding secured $300m of finance from a group including the Industrial and Commercial Bank of China (ICBC), for two hotels on the Palm. ICBC had previously extended a $201m loan, supporting the main contractor CSCEC.

The Saudi Electricity Company is also benefitting from Chinese trade finance from ICBC, the most active Chinese lender in the region, and the largest bank in the word by assets.

Some of these projects are part of the Silk Road initiative, which aims to develop Asian and East African infrastructure to boost Chinese trade.

But more often, Chinese institutions are following the successful Japanese strategy of supporting contractors and developers with finance to help them win contracts.

This drives exports and foreign work while the domestic market is slowing.

While Chinese banks do not offer the very low interest rates Japanese lenders can, contractor finance makes all the difference in the current GCC projects market. Cash-strapped clients are trying to maximise funding options, so Chinese bidders have an extra advantage.


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