Chinese Firms Brave Uncertainty in Egypt to Gain a Foothold in Middle East

Chinese companies have continued to flood the Egyptian market while others are steering clear of the country during the early days of its Democracy. Yet, this is not the first time China has entered a speculative market; similar actions have been taken with Angola, Libya, and Sudan because of the prospect of gaining valuable resources, such as fuel, for China’s rapidly growing economy. New York Times. China’s motive is “to gain a strong foothold in a key African market positioned at the juncture of three continents.” New York Times. China’s foothold would come with Egypt’s access to the Suez Canal and its “preferential trade agreements with Europe, Africa and the Middle East.” New York Times.

The Chinese would also gain access to an inexpensive labor force, a large concern when “[a] lot of Chinese manufacturers are under pressure to lower costs,” according to Chen Lin, the commercial counselor at the Chinese Embassy in Egypt. New York Times. The benefits of the relationship would not be unilateral. With the increase of investments from China, Egypt is able to receive inexpensive construction bids proposed by some of China’s largest firms. The construction contracts would be funded by concessional loans; which are “loans offered to the poorest countries with lower interest rates and longer repayment periods than typical or standard market or multilateral loans.” http://www.brettonwoodsproject.org/glossary/item.shtml?x=344934

Egypt’s President, Mohamed Morsi, traveled to China this week; showing that despite past problems between the two countries both are serious about moving forward together.

The questions are what effects will China’s infusion of capital and labor into Egypt have on the world market? And, what effects, if any, will China and Egypt’s partnership have on America’s debt with China?

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