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    Greater China
     Jun 21, '13

China discovers the Mediterranean
By Pietro Longo

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing.

Fernand Braudel, maybe the most important historian of the Mediterranean region, wrote that "the Mediterranean is not a border, but a place for trade".

This sentence is true for all the METR countries (Middle East, Europe, Turkey, Russia) but also for those far countries, like China, which have strong interests in the Mediterranean. The so-called Arab Springs and the Chinese penetration in the region challenge the position of those analysts who theorized the shift of the fulcrum of trade routes toward the "East". As the United

States, the unique long-standing superpower of the post-Cold War era, has gradually withdrawn from the Mediterranean, according to these readings, it follows a loss of centrality of the whole region.

Doing business across the Mediterranean is still relevant for some of the "rising powers", such as China. The pride of China's fluvial trade and exchanges started centuries before Western kingdoms sought to explore and exploit the world. Still, the rise of Westernized warships and sea power was made possible because of Chinese navigational innovations.

Even today, China's economic power lies in maritime trade and, then, in Chinese long projection eastward and westward. Maritime trade secures China with everything the country needs for its economic growth, especially oil and energy sources. But maritime trade is also important for trading goods, acquiring new markets. China and the Mediterranean are linked by two reasons: oil and markets. Keeping stability in the region and in its fluvial corridors are, then, crucial points for the Chinese strategy towards the Middle-East.

During the China-MENA (Middle East, North Africa) Forum held in Dubai in April 2012, the Minister of Higher Education and Scientific Research of the UAE, Sheikh Nahyan Mubarak Al Nahyan, said that relations between China and MENA countries are expected to grow, given the presence of strong convergent interests.

The relationship that China is building with MENA counties depends on the high rate of Chinese economic growth, penalized by the spread between domestic supply and demand for energy (gas, oil and natural resources). For their part, Arab countries find it convenient to buy Chinese consumer goods and also machinery and technologies which are essential to trigger local development strategies.

China has surpassed the United States in consumption of oil and, according to the latest estimates, its needs amount to 6.2 million barrels per day (bpd). Trade between China and the MENA countries (including Iran) grew by 37% between 2003 and 2007 and by 21% between 2007 and 2011, reaching a peak of US$263 billion. This was partly achieved through replacing European supplies but also by pushing local producers out of business (such the textile sector in Morocco).

In some Mediterranean countries, imports from China have increased rapidly, especially in oil-producing nations. China is the second-largest exporter to Algeria and Libya, above Italy and Germany.

China is also leading the exports from these countries, currently held by France in Algeria and by Italy in Libya. Given their lower per capita income, Mediterranean countries' imports from China have not grown as much as in Gulf countries but, in any case, the growth of Chinese exports has been significant and fast, starting with textiles and other low price consumer goods and then moving to advanced products like consumer electronics, telecommunications, and vehicles.

Algeria imports considerable volumes of vehicles from China and its presence in this sector is particularly relevant in Egypt. The development of economic relations has not been limited to trade. The role Chinese construction companies play is also very important, particularly in Algeria where they were awarded the major share of infrastructure contracts.

Among the MENA countries, China's key partners are Gulf Cooperation Council (GCC) countries, Egypt, Sudan and Algeria.

The Gulf area is particularly important as, currently, China imports 35% of its oil needs from the GCC while the United Arab Emirates alone absorb about 40% of Chinese products exported to MENA (for a value of $32 billion per year). By 2015, it is estimated that China and UAE will exchange goods and services for nearly $100 billion.

Egypt is a key country because of the passage of the Chinese cargo ships through the Suez Canal. Today, it is estimated that only 60% of the Chinese maritime traffic passes through the Red Sea, while the remaining part reaches the European ports, such as Rotterdam, sailing around Africa. Since this route is a much more expensive in terms of time and costs, the improvement of China-Egypt relations could open new opportunities with respect to the transit of Chinese cargo for the shortest route.

A wise way to follow this improvement could be the so-called "relocation strategy", that is creating industrial facilities for transportation in the MENA region, in order to free China from the danger of the crisis of overproduction and to facilitate recipient countries that can lessen the dependence on import-export economies, producing goods by themselves.

Pursuing this strategy on in May 2012, the China-Arab States Cooperation Forum held its fifth Ministerial Conference in Tunisia. During the conference, Yang Jiechi, Chinese foreign minister, spent a lot of words on how to deepen strategic cooperation and promote common development with Arabs. In April 2013, the Egyptian government signed an investment agreement with Chinese TEDA corporation to develop part of a joint industrial zone near the Suez Canal.

Since the revolution, sources close to the Muslim Brotherhood elite say Egypt seeks cooperation with BRICS because of the strong will to turn Suez from a passage for sea traffic that brings in $5.2 billion annually to an investment zone that would in time bring in $100 billion.

Egyptian President Mohammad Morsi and Chinese President Xi Jinping agreed in Durban on April 27, 2013, to move forward their strategic cooperative relations.

"China", Xi stated during a meeting on the sidelines of the fifth leaders' summit of BRICS countries held in Durban, "accords great importance to Egypt's status and influence as a major Arab, Islamic and developing state". Egypt is now China's fifth-largest trade partner in Africa. In 2009, China was the main foreign investor in Egypt, exerting an important role in supporting economic growth when the country was affected by the decline in European imports and investment.

In 2011, bilateral trade volume stood at $8.8 billion, a 26.5% increase with respect to the previous year. In the same year president Hu Jintao announced his four-point proposal: deepening political relations; promoting trade and economic cooperation; expanding human exchanges; and strengthening multilateral cooperation in international and regional affairs. Moreover China provided Egypt with a $200 million loan, and promised to encourage Chinese entrepreneurs to invest in Egypt.

A third of world trade passes through the Mediterranean. Chinese exports reach the European and American markets by the routes that pass from Suez and then to Gibraltar. Along the route passing south of Africa, rounding the Cape of Good Hope, are transported 12.2 million TEUs (20-foot equivalent units, the standard gauge of container capacity) compared with 15.3 TEU crossing the Mediterranean.

In this perspective, the Mediterranean ports, in Greece, Italy, Spain, but also in the Arab countries, represent important strategic outposts. The port of Piraeus is just one of the links in the chain from China to Europe via the Mediterranean that Beijing is trying to strengthen with success.

Chinese companies invest across all the Mediterranean ports and even in the port of Naples, where the Chinese Cosco has established a joint partnership at 46% with MSC. There is no doubt that Chinese investments have economic logic but there is even less doubt that the economic operations of Beijing have geopolitical implications, in terms of growing Chinese influence in the Mediterranean basin and then the METR area.

Moreover, more influence implies more responsibilities and implications in the internal affairs of recipient countries which is at odds with the non-interference policy implemented by China previously.

The case of South Sudan self-determination exemplifies the increasing involvement of China in MENA political problems. Independence for South Sudan took effect in July 2011.

Sudden troubles between the two parts ranged from defining borders to the management of oil resources, for which China is the main operator, as well as the use of the oil pipeline going northward. Oil terminals are located in Port Sudan on the Red Sea, and they are the only channel to export oil produced in the South. While China has for a long time been a strong supporter of the government in Khartoum, it turned to support the separation between the North and South.

China repositioned itself to maintain good relations with the government of the South, where major oil interests lie. Half of the oil production in Sudan (around 490,000 barrels per day) is exported to China. Most of it is extracted in the South. It is reported also that China has started negotiations with Juba authorities for the construction of a pipeline linking oil fields in the South Sudan with Kenya. This pipeline would free South Sudan from its dependence on the pipelines going to Port Sudan, but it would damage relations with Khartoum, which would lose transit fees on oil produced in the South. This could also affect relations with Egypt, with which Sudan has had longstanding relations.

Without doubt, several factors will play in favor of stronger economic relations between China and the METR area in coming years. First, the slow European recovery from the international economic crisis will encourage Mediterranean countries to diversify their economic relations and further strengthen those with high-growth markets like China. The political changes that followed the Arab Springs will also allow China to increase its range of exports and investment in the Mediterranean region.

Nevertheless, following the political transformation in the region triggered by the government overthrows in Tunisia and Egypt, China will face challenges and dilemmas similar to those faced, for many years, by Western countries. A lesson may however be taken from the recent evolution of Chinese policy in Sudan. China's new policy toward Sudan shows that it prioritizes the defense of its economic interests over the development of its political relations with the incumbent regimes and, if necessary, it disregards principles such as non-interference in internal affairs. This may have repercussions on China's relations with Arab countries which opposed the separation of Sudan.

Another cause of tension, if not a challenge to China's foreign policy in the region, could manifest itself in another country where China's economic interests are important: Algeria. China, as always, upheld the principle of non-interference in other countries' internal affairs, thus opposing the initiative of some states to intervene in the Arab countries.

However, China has also made clear that it would respect that the people in the region had the legitimate right to demand political change, and that it would also support their right to choose a path for development that suits their national conditions. China has always advocated political methods to penetrate the area, avoiding violent implications. If the contagion of the Tunisian and Egyptian revolts reaches Algeria, as the Algerian president has been hospitalized, China might find itself in the middle of multiple challenges.

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing. Articles submitted for this section allow our readers to express their opinions and do not necessarily meet the same editorial standards of Asia Times Online's regular contributors.

Pietro Longo is post-doctoral research fellow at University of Naples l'Orientale. Expert in Law of the Middle East, currently he is involved in the EuSpring project focusing on the empowerment of citizenship rights in the Arab world after the Arab springs. He is also co-Chair at the Italian Center for the Study of Political Islam www.cisip.it

(Copyright 2013 Pietro Longo.)

Egypt gains balance and leverage in China
(Sep 26, '12)



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