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FM AMEMBASSY ALGIERS
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INFO RUCNMGH/MAGHREB COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0363

C O N F I D E N T I A L ALGIERS 000123 
 
SIPDIS 
 
DEPT FOR AF/RSA LMAZEL, NEA/RA, NEA/MAG 
 
E.O. 12958: DECL: 02/11/2020 
TAGS: PREL PGOV PTER ASEC ELAB ECON ETRD CH AG
SUBJECT: CHINA'S IMPACT AND RISKS IN ALGERIA 
 
REF: STATE 10152 
 
Classified By: Ambassador David D. Pearce; reasons 1.4 (b) and (d). 
 
¶1. (C) SUMMARY: China's footprint in Algeria is primarily 
commercial and focused on construction contracts for major 
infrastructure projects.  China provides no development or 
other forms of assistance.  There are more than 40,000 
Chinese nationals living in Algeria.  Chinese firms have a 
stake in billions of dollars worth of infrastructure 
projects, as well as small but growing interests in the 
hydrocarbons sector.  This has raised the profile of the 
Chinese community in Algeria and exposed it to terrorist 
threats and social friction.  Publicly, Algerian officials 
praise their cooperation with China, but a leading Algerian 
diplomat privately voiced concern to USG officials that China 
views Africa primarily as an export market for Chinese goods 
and as a source for raw materials.  There is no significant 
U.S.-China collaboration in Algeria, and Embassy sees no 
potential areas for such cooperation beyond informal 
exchanges of views, primarily on security.  END SUMMARY. 
 
China's Commercial Footprint in Algeria 
--------------------------------------- 
 
¶2. (U) China's engagement with Algeria is primarily 
commercial and focused on securing contracts for Chinese 
firms for Algeria's increasingly large and numerous 
infrastructure projects.  Chinese commercial ties with 
Algeria have expanded steadily since 2001.  An influx of 
Chinese workers began in 2004 as part of a partnership 
agreement between the two governments for China to provide 
labor for large infrastructure projects carried out by 
Chinese firms.  Local press accounts indicate that China has 
received approximately USD 15 billion in construction 
contracts since 2000. 
 
¶3. (U) Chinese companies have the reputation of submitting 
very low bids (made possible because of inexpensive imported 
Chinese labor) and of completing projects on time.  Chinese 
firms supply the majority of workers for Algeria's massive 
East-West highway project, a USD 11.4-billion dollar contract 
awarded jointly in October 2006 to the China International 
Trust and Investment Company (CICTC), the China Railway 
Construction Company (CRCC) and the Japanese contractor 
Cojaal.  The China Civil Engineering and Construction 
Corporation (CCEC) has three contracts valued at USD 2.1 
billion to build rail networks in western Algeria.  Chinese 
crews are also building a 750-kilometer water pipeline from 
In Salah to Tamanrasset, a USD 2-billion dollar project 
slated for completion in 2010.  In 2009, China was the 
largest exhibitor at Algeria's 42nd annual Trade Fair with 
141 firms represented, marking the first time France did not 
provide the most exhibitors.  China's strong showing fueled 
editorials in the local press claiming that China was the 
dominant force in Algeria's economy as other foreign 
investors were withdrawing over concerns about restrictive 
investment rules introduced last July.  In August 2009, 
Arabic-language daily "El Khabar" estimated that 567 
Chinese-owned companies now operate in Algeria, including 220 
import/export firms. 
 
Investment Still Modest 
----------------------- 
 
¶4. (U) Chinese investment in Algeria, by contrast, amounts to 
a modest USD 850 million, mostly in the hydrocarbon sector. 
The China National Petroleum Corporation (CNPC) has invested 
USD 350 million in contracts dating from July 2005, including 
a stake in the natural gas condensate refinery in Skikda.  In 
October 2009, Sinopec was among four bidders considered for 
designing a new oil refinery in Tiaret.  In December 2009, a 
consortium that includes the China National Offshore Oil 
Corporation (CNOCC) won a bid to develop the Hassi Bir Rekaiz 
field located in the Berkine basin.  Production potential is 
estimated at 130 million cubic meters of oil.  Meanwhile, 
Sinopec also has a USD 500-million investment in the 
Zazaitine oil field in Algeria's deep south. 
 
Some Growing Pains 
------------------ 
 
¶5. (C) China's commercial activities in Algeria have raised 
the profile of the Chinese community at large.  Visiting 
Chinese MFA officials told us in August 2009 that more than 
40,000 Chinese nationals reside in Algeria, mostly temporary 
laborers.  We hear anecdotally there are Chinese shop owners 
in Algiers, some of whom have learned Arabic in order to 
speak with their customers.  Algerian officials privately 
state similar figures.  In December 2009, Labor Minister 
Tayeb Louh said Chinese workers accounted for 45 percent of 
all foreigners working in Algeria.  There have also been 
complaints from labor unions that Chinese projects employ far 
more imported Chinese workers than Algerians.  However, there 
have also been complaints of unfair labor practices against 
Algerians that Chinese companies do employ. 
 
Security Threats 
---------------- 
 
¶6. (C) Chinese workers have been exposed to acts of violence 
arising from the threat of terrorism in Algeria.  Chinese 
workers were caught in a June 2009 ambush 100 miles southeast 
of Algiers by al-Qa'ida in the Islamic Maghreb (AQIM) that 
killed 24 gendarmes and at least one civilian as they 
escorted the workers to a job site.  RSO sources told us that 
approximately 40 Chinese workers were treated in a nearby 
hospital for burns sustained during the attack.  Shortly 
after the ambush, press reports speculated that AQIM might 
target Chinese interests in Algeria in response to China's 
July 2009 crackdown on the Uighur Muslim community in 
Xinjiang province.  However, Embassy believes that the 
attacks on convoys of Chinese workers occurred because their 
movements were predictable and always accompanied by security 
forces, which are the main target of AQIM. 
 
¶7. (U) A somewhat negative profile of China has risen among 
the Algerian public as well.  Two Islamist parties, the 
Movement for Society and Peace (MSP - part of the governing 
coalition) and Ennahda, last year sent delegations to the 
Chinese embassy to voice their concern over the treatment of 
the Muslim Uighur community in China.  This was followed by 
Algeria's Higher Islamic Council publicly denouncing the 2009 
crackdown.  These political moves provoked little reaction 
from the Algerian public, but tensions between Algerians and 
Chinese escalated several weeks later after a string of 
clashes between the two communities in the Algiers 
neighborhood of Chenaoua, which translates to "Chinese 
people" in Algerian dialect. 
 
¶8. (C) Following the June 17 AQIM attack, a delegation from 
China's Ministry of Foreign Affairs arrived in Algiers in 
late July 2009 to discuss the security threat for Chinese 
nationals in Algeria and, we believe, to smooth over social 
tensions that flared up in Algiers.  Algerian and Chinese 
officials gave little comment on the substance of these 
meetings, using public statements to underscore the 
cooperative nature of Algerian-Chinese relations and China's 
"confidence" in the Algerian government's response to 
security matters.  During an August 10, 2009, meeting at the 
Embassy, Chinese officials asserted that AQIM has not 
directly targeted Chinese interests in North Africa, but 
there was rising concern about collateral damage and the risk 
to China's growing commercial presence. 
 
Algeria's Perspective on China in Africa 
---------------------------------------- 
 
¶9. (U) China and Algeria regularly exchange diplomatic 
visits.  Most recently, Chinese Foreign Minister Yiang Jiechi 
was in Algiers January 10 - 11, 2010 to conclude an economic 
cooperation agreement and a judicial assistance agreement, 
according to press reports. 
 
¶10. (C) Algerian Minister of State for African and Maghreb 
affairs Abdelkader Messahel commented on China's unique 
relationship with Africa during a briefing for a visiting 
Capstone delegation in August 2009.  Messahel explained that 
China's history with Africa was generally positive.  China 
has no colonial past in Africa and assisted many African 
nations during their liberation movements, he said.  China, 
he continued, also offered African partners access to vast 
resources and has agreed to finance many cultural and social 
development projects.  Furthermore, Messahel stressed, China 
approached its cooperation with African nations without 
political preconditions.  They do not interfere in internal 
matters, he said. 
 
¶11. (C) However, Messahel indicated that Africans recently 
have realized that there may be limits to their openness with 
China, and that unfettered commercial access could strain 
cooperation.  China, he said, viewed Africa primarily as a 
market for Chinese goods and a source for raw materials. 
African countries, including Algeria, want more 
industrialization and knowledge transfer to accompany foreign 
investment activities.  With this goal in mind, Messahel 
stated, Algeria needed to consider carefully the value-added 
of all its foreign partners, including China.  Embassy notes, 
however, that Algeria has taken the same line with foreign 
investment in general. 
 
Potential for U.S.-China Collaboration 
-------------------------------------- 
 
¶12. (C) China's overwhelmingly commercial approach to 
Algeria, which puts it in competition with U.S. firms, leaves 
little area for the U.S. and China to coordinate action here. 
 China provided some development assistance to Algeria 
decades ago -- mainly health sector assistance following 
Algerian independence.  A primarily political relationship 
dominated by Non-Aligned Movement solidarity long since gave 
way to a relationship based on China's interest in commercial 
contracts.  Algeria's energy exports to China are a small 
fraction of the amounts sent to Europe and the United States. 
 Chinese investment remains low compared to U.S. and European 
investment.  U.S.-China collaboration in Algeria has been 
limited to informal sharing of views on security matters. 
For now, Embassy sees opportunities for collaboration as 
limited to informal exchanges, primarily on security. 
Competition between U.S. and Chinese firms will continue to 
dominate the U.S.-China relationship toward Algeria. 
 
Comment 
------- 
 
¶13. (C) Algerian government and society regard China's 
presence with ambivalence.  On the one hand, the government 
has hitched the success of many high profile infrastructure 
projects to Chinese firms that offer low cost contracts and a 
supply of experienced and low-cost labor willing to work 
around the clock to meet completion deadlines other 
contractors are unable to promise.  Although some Algerian 
business contacts complain that corruption and poor 
craftsmanship often go hand in hand with China's business 
approach, Algerian authorities would be hard pressed to limit 
the inflow of Chinese workers for fear of driving up costs 
and causing delays on key government projects.  Ordinary 
Algerians appreciate low-cost products but resent Chinese 
influence over their economy and the competition for scarce 
jobs posed by cheaper Chinese laborers.  Algerian sociologist 
Nacer Djabi told an Embassy LES that Algerians admire the 
work ethic and expertise Chinese workers demonstrate, but are 
suspicious of the Chinese community's reclusiveness, leading 
him to conclude that, "In the end, it's hard to say whether 
the Chinese are totally welcome in Algeria." 
PEARCE