Beijing Wants to Build a New Cairo

Credit where credit is due: China’s plans for its One Belt, One Road (OBOR) infrastructure initiative are nothing if not ambitious. According to Nikkei Asian Review, Chinese state firms are finalizing a formidable, $20 billion project to construct a new capital for Egypt:

A project by Chinese state companies to help build a new capital for Egypt is back on track after running aground earlier in a dispute over contract terms.

The Egyptian investment and housing ministries have begun talks to finalize an agreement with Shanghai-listed developer China Fortune Land Development under which the company is to invest up to $20 billion to build an upmarket residential district, an industrial zone, schools, a university and recreational centers in the new capital, along with supporting infrastructure, according to a statement issued by the investment ministry on May 15. Officials estimate the final agreement could be reached by year-end, with construction beginning the following month.

China Fortune and fellow state company China State Construction Engineering signed preliminary agreements with Egyptian authorities in early 2016 to develop parts of the as-yet unnamed city about 60km east of Cairo.

Of course, tentative agreements are a far cry from tangible investments, and this has the potential to turn into a massive boondoggle. Some Egyptians are already warning of a real estate bubble in the area selected for the new capital, and there is plenty of reason to remain broadly skeptical about China’s OBOR projects, as Christopher Miller has explained in these pages.

Caveats aside, though, the Egyptian project does tell us something about the scope of China’s ambitions, and why Cairo might be eager to play along. Beijing’s motivations with OBOR have always been both geopolitical and mercenary, with an aim to expand the ranks of countries that are friendly to (and dependent on) China, while exporting the excess capacity of its industrial sector. The Egyptian project kills both birds with one stone, helping to grow China’s foothold in the Middle East while deploying the capabilities of its industrial firms to foreign markets.

And from Cairo’s perspective, Beijing must look like a tempting benefactor these days. Egypt’s economy has been seriously struggling of late, and help from the IMF has been contingent on painful and politically unpopular economic reforms. President Sisi has been trying to change the conversation by investing in infrastructure mega-projects to stimulate growth. With that aim in mind, China surely looks like an appealing partner with its supposedly “no-strings-attached” credit line.