Egypt welcomes Chinese support as oil prices continue to plummet

20 January 2016

China has announced a number of financial commitments ahead of the President Xi’s visit to Cairo on 21 January

China’s support to Egypt is timely as the decline in oil prices raises question marks over the GCC’s ability to continue offering financial support.

The most recent development is news that Egypt is set to receive a $1.6bn loan from China given directly to the Central Bank of Egypt in order to boost the country’s foreign reserves.

China is also expected to sign contracts for three large infrastructure projects with major Chinese firms, worth a total value of about $10bn, with President Abdul Fatah al-Sisi on the morning of 21 January. Egypt also plans to borrow $1bn in concessional loans from a Chinese bank to finance sanitation networks.

These deals follow a memorandum of understanding (MoU) that was signed in September 2015 for China State Construction Engineering Corporation to take over part of the New Capital project.

Unlike politically driven support from the GCC, China’s interest in Egypt is part of a vital economic strategy from Beijing as it looks to alleviate pressures from a slowing economy.

China’s economy grew by 6.9 per cent in 2015, compared with 7.3 per cent last year, marking its slowest growth in 25 years. As such, the Chinese will be keen to tap into markets with a similar demographic to Egypt as it aims to diversify its risks and boost its manufacturing.

Egypt’s population and desperate need for funds to press ahead with infrastructure and construction schemes means China is able to offer the support required in hope, and at times, with the conditions that Chinese firms are preferred.

In what seems like a win-win situation for both parties, Chinese investment is a welcomed addition to a growing portfolio of GCC funds, international financial institution support and foreign direct investment Egypt needs to start implementing the ambitious plans laid out last year.

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