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DE RUEHEG #0115/01 0211541
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R 211541Z JAN 10
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 0019
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 0001
RUEHEG/AMEMBASSY CAIRO

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. 
 
 
 
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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