China’s growing economic presence and impact in the Maghreb states

By Moroccan journalist Taib Biygautane, first published by Dispatchword. This report was produced as a result of North Africa Journalism Reporting Grants provided by the Africa-China Reporting Project in partnership with Inkyfada, for journalists from North Africa to conduct investigations on North Africa-China relations.

The presence of the People’s Republic of China (PRC) in Africa, and Sub-Saharan regions in particular, has been the subject of significant academic research and media coverage over recent decades. North African and Maghreb states, however, have received relatively less attention due, in part, to the relatively low Chinese investments. This report explores some aspects of PRC‘s involvement in North Africa. With a particular focus on Algeria, Morocco, and Tunisia as case studies, and examines the economic presence and impact of PRC in these states as a whole and in their local communities.

Before delving into this endeavor, it is important to briefly explore the history of contemporary Chinese-Maghreb relations, as well as PRC’s grand geopolitical and economic strategy within which its presence in this region falls.

  1. China-Maghreb relations

The onset of contemporary Chinese diplomatic relations with Algeria, Morocco, and Tunisia can be traced to the decolonization period in Africa in the late 1950s and early 19600. During this period, PRC’s presence in Africa was generally in the form of ideological and military support of African independence movements. It was not until the early 2000s onward that PRC began to demonstrate a stronger interest in trade and investment in North Africa.

Algeria, Morocco, and Tunisia are all characterized by a multitude of geographic and economic features that render them attractive markets to PRC. Maghreb states are positioned at the crossroads of Africa, Europe, and the Arab world, thereby rendering them unique partners, economically, strategically, politically, and culturally. The proximity of Maghreb countries to these diverse markets is especially important to China and to its Belt and Road Initiative (BRI) (see below). Morocco, for instance, is regarded as “a gateway to North Africa,” states David Wang, president of MIE Groups, a company specialized in organizing professional exhibitions in the Middle East and Africa to promote Chinese companies and exports in the region. China’s interest in Morocco, Wang notes, stems from the latter’s free trade agreements with Europe and the US, thereby providing China with more access to these markets through Morocco. Additionally, these Maghreb states’ populations of nearly 100 million constitute a significant market for Chinese products.

Of these three Maghreb countries, Algeria enjoys the oldest and strongest diplomatic, economic, and security relations with China, as evidenced by Algeria’s status as the only Maghreb country that has elevated its relations with China to a Comprehensive Strategic Partnership (CSP), signed in 2014. The CSP is an advanced level in bilateral relations achieved after strong economic and cultural relations, and political trust have been developed. The foundations of robust Algerian-Chinese relations were first marked by China’s recognition of Algeria’s independence in 1958, making it the first non-Arab country to do so.

Morocco, as is the case with other North African countries, is actively pursuing more ambitious economic relations with China as part of its economic diversification policy, while at the same time maintaining strong ties with its traditional European and Middle Eastern partners.

For instance, in his 2016 speech at the Morocco-GCC Summit in Riyadh, Moroccan King Mohammed VI noted that “[t]hough it remains committed to its strategic relations with its allies, Morocco has … sought to diversify its partnerships at political, strategic and economic levels.” Mohammed VI also stressed that “Morocco is free in its decisions and choices, and is not the exclusive preserve of any country; it will continue to honor the commitments it makes to its partners, and the latter [referencing the PRC] should not think that their interests will be affected.”

King Mohammed VI’s visit to China on May 11, 2016, was an important milestone in Chinese-Moroccan relations as it resulted in a strategic partnership agreement between the two countries, which was translated into 15 public-private partnership agreements in various fields involving Chinese and Moroccan companies.

“The strategic partnership will be a turning point for Morocco’s development. Morocco is willing to enhance cooperation with China in various fields,” said Mohammed VI.

Tunisia’s economic and trade ties with China, although experiencing some notable growth in recent years, are still extremely low on the whole; this is due in part to Tunisia’s relatively small market.

Like Morocco, Tunisia is committed to strengthening economic relations with China in order to diversify its economic and trade exchanges, which are still heavily oriented toward Western Europe. As Yahia H. Zoubir (2020) notes, “Morocco and Tunisia are not critical to China’s interests, but both seek its investment for their development, in part to offset their dependence on Western powers.”

China can perform an important role in expediting Tunisian infrastructure development projects.

  1. PRC policy in North Africa

PRC’s policy of “non-interference” in the internal political affairs of other states characterizes its relations with African states. This is one of the key factors that render China an appealing economic partner to many African countries. Further, as noted earlier, Maghreb states find in China a strong economic partner that can aid them achieve economic diversity and, subsequently, offset their dependency on Europe.

China’s rapidly growing economic interest in the Maghreb is fueled by its grand strategy of expanding its network of trade and investment globally.

The establishment of the Forum on China-Africa Cooperation (FOCAC) in 2000 and the China-Arab States Cooperation Forum (CASCF) in 2004 marked the official outset of gradually growing Chinese economic engagement in North Africa in particular and Africa in general.

China’s trade exchanges and infrastructure and construction projects in the general region of North Africa have substantially increased in volume following the announcement of the Belt and Road Initiative (BRI) in 2013, as shown in the sections below.

Officially inaugurated in 2015, the BRI is an ambitious Chinese transcontinental development and investment project that aims to connect the continents of Asia, Europe, and Africa, and, consequently, maximize trade and investment opportunities. The BRI seeks to “establish and strengthen partnerships among the countries along the Belt and Road, set up all-dimensional, multi-tiered and composite connectivity networks, and realize diversified, independent, balanced and sustainable development in these countries,” according to the 2015 official outline of the project.

The BRI encompasses the “Silk Road Economic Belt,” which focuses on land routes that connect Asia and Europe, and the “21st Century Maritime Silk Road,” which refers to sea routes that connect the three continents.

Figure 1: The Belt and Road Initiative (BRI)

Source: www.beltroad-initiative.com

Source: www.beltroad-initiative.com

Figure 2:

Source: www.merics.org

Source: www.merics.org

Approximately 138 countries are currently part of the BRI, 17 of which are from the Middle East and North Africa (MENA). China has openly expressed its desire to make the MENA a key component of the BRI. In his CASCF opening speech in 2014, PRC President Xi Jinping made note of the relatively low investment and commercial exchanges between China and the MENA region and the potential these markets have:

“In 2013, China’s imports from Arab nations amounted to $140 billion, accounting for a mere 7 percent of its annual import value over the next five years; its outward foreign direct investment in Arab nations totaled $2.2 billion, only accounting for 2.2 percent of its annual outward foreign direct investment over the next five years. The gap signals potential and opportunities. China is prepared to support Arab states in increasing employment, advancing industrialization and pushing economic development.”

Effectively, following the announcement of BRI in 2013, China’s investments in the MENA countries dramatically increased from roughly $77.45 billion between 2005 and 2012 to $120.64 billion between 2013 and 2020.

In 2016, China published its China’s Arab Policy Paperwhich articulates its main China-Arab cooperation strategy. It proposes a “1+2+3” Cooperation Pattern to MENA relations that renders “energy cooperation as the core, infrastructure construction and trade and investment facilitation as the two wings, and three high and new tech fields of nuclear energy, space satellite and new energy as the three breakthroughs.” Maintaining its Five Principles of Peaceful Coexistence (Respect for Sovereignty and Territorial Integrity; Mutual Non-aggression; Non-interference in Each Other’s Internal Affairs; Equality and Mutual Benefit; and Peaceful Coexistence.), China’s Arab Policy Paper lays out a range of areas for potential cooperation with Arab states, following a win-win approach; some of these areas are explored below.

  1. PRC economic presence and impact in the Maghreb states

Investment and trade

PRC’s total investments in the selected Maghreb states between the years 2005 and 2020 is approximately $26 billion, most of which in Algeria; PRC invested nearly $24 billion in Algeria alone, with roughly $ 2.3 billion in Morocco and only $110 million in Tunisia.

It is worth noting that a large portion of these investments was made only in recent years, following the inauguration of the BRI.

These figures, however, remain considerably low compared to China’s heavy investments of $304.05 billion in a majority of Sub-Saharan countries during the same aforementioned timeframe. These investments were directed primarily at infrastructure and construction projects.

Regarding trade, PRC has undoubtedly rendered itself a major trade partner with Maghreb countries. Algeria is the region’s main Chinese importer, while Europe remains the dominant export destination for all Maghreb countries due to geographical proximity and deeply-rooted historical and political ties. 

It is worth pointing out that there is a significant trade deficit between Maghreb states and China that impacts the former negatively and benefits the latter positively. For instance, in 2017 and 2018, China succeeded in ranking itself as Algeria’s top import partner with an 18% and 17% market share, respectively, leaving Algeria’s traditional European partners, such as France, in secondary positions. However, concerning exports, China is not even on Algeria’s list of the top ten export partners. This stark imbalance leaves Algeria at a disadvantage and renders China with a significant trade surplus.

There is also a substantial difference between China and Algeria in terms of the nature of imports and exports. Most of Algeria’s imports from China are machines, electronic equipment, and textile, whereas China’s 2.76% of imports from Algeria in 2018 were mainly in refined & crude petroleum.

Similar to Algeria, China is absent on Morocco’s top export destinations. Further, Morocco’s main import products from China revolve around electronics and machines followed by textile, while Morocco’s 0.92% exports to China in 2018 were mainly in minerals followed by metals. 

With a near 10% market share, PRC was Morocco’s third import partner in 2017 and 2018, coming behind Spain and France.

Tunisia as well has China ranking third on its main import partners list in 2017 preceded by Italy and Spain, while being absent in any of its chief export destinations. This trade deficit with China was one of the chief contributors to Tunisia’s general trade imbalance in 2018, which constituted $1.8 billion out of $6.6 billion.

Infrastructure development and construction

PRC’s role in major infrastructure development and construction projects in Africa and the MENA regions, in general, and in the relevant three Maghreb countries, in particular, has rapidly increased in recent years, in the wake of the BRI.

However, China’s share of projects in the general region of North Africa is relatively low compared to other parts of Africa. As figure 3 shows, PRC’s share of project activity in North Africa in 2018 was the lowest at 12.8% in project building, 3.7% in project funding, and 0.9% in project ownership, with a considerable number of 109 projects in total. Nevertheless, the role these projects perform in accelerating infrastructural development in Maghreb states remains evident. 

Figure 3:

: Deloitte Africa Construction Trends

Source: Deloitte Africa Construction Trends: www2.deloitte.com

Algeria

In Algeria, for instance, China has played a key role in funding and/or constructing some of the major infrastructure projects in the last several years.

Some of these major projects include the El-Qantas railway tunnel, the longest in North Africa and the second-longest in Africa, mainly built by the China Railway Construction Corp along with its Turkish partner Ozgun Construction during the period between 2011 and 2018. Located 100kms west of the Algerian capital Algiers, the tunnel is composed of two separate tube lanes, 7,346 and 7,335 meters long.

In terms of its direct impacts on local communities, the project is reported to have generated over 4,100 jobs for the locals. This railway tunnel also helps reduce the four-hour travel time between Algiers and Oran by half.

Another major project is the Djamaa El Djazair (the Great Mosque of Algiers), the biggest mosque in Africa, with the highest minaret in the world standing at 265 meters. Its total construction cost of nears $2.2 billion, dramatically exceeding the original $800 million estimated budget. Designed by the German firms KSP Jürgen Engel Architekten and Krebs & Kiefer International and built by China State Construction Engineering Corporation, Djamaa El Djazair opened to the public in October 2020 after eight years of construction work. Built on an area of 200,000m², the mosque can host over 120,000 worshipers. The Great Mosque also has a museum, a library, a research center, among various other facilities.

The East-West Highway, another project, is advertised by the Algerian government as one of the largest construction works in the world, stretching roughly 1,216 kilometers, with an initial estimated cost of $11.2 billion financed by the Algerian government; however, that cost jumped to $13 billion according to Algeria’s Minister of Public Works Abdelkader Kadi in a 2015 statement. Construction work started in 2009 and mostly completed by 2016, by two main partners; the Chinese CITIC Group (formerly known as China International Trust Investment Corporation), along with the China Railway Construction Corporation, and the Japanese Consortium COJAAL, were responsible for the Eastern section of the project (contract canceled late in 2014 and replaced by China’s CITIC in 2017). The project created over 100,000 jobs in a variety of relevant sectors.

The Algiers Opera House is another prominent recent project in Algeria that was built with the aid of China. After over two years of construction by the Beijing Urban Construction Group (BUCG), with a Chinese government donation of $40 million, the Algiers Opera House opened its doors to the public in 2016.

Morocco

The recent developments in Chinese Moroccan relations have resulted in important infrastructure and industry-related projects that promise to help energize Moroccan job market and industries.

In the energy sector, China played a role, alongside European and Saudi partners, in building Morocco’s Ouarzazate Solar Power Station, an ambitious solar power plant, regarded as “the world’s largest concentrated solar power farm.” In 2015, Chinese Shandong Electric Power Construction Corporation III (SEPCO3) began construction work on NOOR II and NOOR III, the second and third phases of the Ouarzazate Solar Power Station. Combined, these two stations have the capacity to produce over 360-MW (megawatt) of energy.

Mohammed VI Tangier Tech City in the Tangiers-Tétouan-Al Hoceima region is another major Moroccan industrial project that involves Chinese companies. Officially announced on March 20, 2017, at a ceremony chaired by King Mohamed VI, this project is expected to impact not only the northern region but also the entire kingdom, according to a statement by the Minister of Industry, Trade, Investment, and Digital Economy Moulay Hafid Elalamy; in this statement, the minister makes reference to the Moroccan 2014-2020 Industrial Acceleration Plan and the strategic role the Moroccan-Chinese Industrial Partnership plays in it.

A 2019 Memorandum of Understanding (MoU), signed between the Tangier Tech Development Company (SATT) and China Communication Construction Company Ltd. (CCCC), including its subsidiary China Road and Bridge Corporation (CRBC), defined the key partners partaking in the development and construction of the Mohammed VI Tangier Tech City.

Upon its completion, the project is expected to create approximately 100.000 jobs and host 200 Chinese companies specialized in a wide array of sectors, from electronics, automotive, and aerospace industries, to textiles and manufacturing, with an anticipated $10 billion of investment to be generated in the first ten years. 

The automotive industry is another essential sector that attracts Chinese investment. PRC’s CITIC Dicastal, a major Chinese producer of automotive aluminum wheels, opened two of its first Africa factories in the Moroccan city of Kenitra in 2019, to supply aluminum parts to the PSA group, one of the two dominant French car manufacturers in Morocco, along with Renault. Generating over 1,200 employment opportunities and incorporating “advanced technology,” CITIC Dicastal’s new Moroccan project is considered to be in accord with Morocco’s strategic industrialization plan.

With its 2005 “Emergence Plan and the National Pact for Industrial Emergence” and the “2014-2020 Industrial Acceleration Plan,” Morocco has sought to accelerate the development of more complex industries like the automotive and aerospace sectors, contributing to the diversification of its export revenue.

As a consequence, the automobile industry (mainly auto-part production and assembly), for instance, has maintained steady growth over the last decade, thereby becoming the first exporting sector in Morocco and the first manufacturer in Africa, with an annual production capacity of 700,000 units.

The COVID-19 outbreak, however, heavily affected automotive production in Morocco, resulting in a 33% drop in vehicle exports in the first half of 2020 alone, though it is beginning to witness a slow recovery.

However, the more significant Chinese impact on Moroccan communities comes from PRC’s Sinopharm vaccine. Morocco had placed an order of 40.5 million doses. As of June 2021, Morocco has received roughly 10 million doses. These vaccine shipments, coupled with substantial shipments of AstraZeneca/Oxford COVID-19 vaccine produced in India, helped fully vaccinate over 8 million Moroccans and provided above 9 million citizens with the first dose. These vaccine shipments are contributing to mitigating the negative consequences of the Covid-19 pandemic and re-energizing local economies and industries, which have been hard-hit by the Covid-19 preventive measures.

Tunisia

Although the Tunisian government has made several attempts to diversify its economy and attract more non-European partners like China, Chinese investment and economic impact in Tunisia is still remarkably low compared to Algeria and Morocco. In terms of trade, this reality indicates that the EU remains the dominant player in Tunisian exports.

Being Tunisia’s third import partner, Chinese products do help energize Tunisian ports and markets, although, as noted previously, the significant trade deficit between the two countries is negatively impacting the Tunisian economy.

Chinese direct investment in Tunisia is also significantly low, representing roughly $4.5 million which, according to a 2018 Tunisian government statement, “remains below the Tunisian aspirations and the real capacities of the Chinese economy.”

The Tunisian government statement also points out that only “ten Chinese companies are based in Tunisia operating primarily in the energy, manufacturing and communications technology sectors (offering 538 jobs).”

These numbers remain incredibly low when compared to EU’s over 4,000 companies in Tunisia as of 2018, with $12 billion of annual revenue.

Conclusion

Judging from this available data, current Chinese economic presence and investments in the selected Maghreb countries, as expressed in large construction projects and free trade zones, generally seems to have positive effects on the local communities in terms of new job opportunities, new infrastructure projects, growing industries, and a wide range of relatively cheap imported consumer products, with no significant and salient adverse effects on the communities. However, the ongoing COVID-19 outbreak has made it difficult to have access to the peoples in the host communities in order to gain a direct sense of their general sentiments on the perceived impacts of Chinese projects and companies in their local communities.

It is important to re-emphasize the fact that the Chinese general presence in the Maghreb region is still significantly low relative to other parts of Africa, or even Europe, Asia, and the Middle East, making Western Europe and the Gulf the more dominant partners in the region.