Partnership between Algeria and China accelerates economic growth and infrastructure expansion

In 2018 Algeria and China celebrated their 60th anniversary of diplomatic relations, a particularly notable achievement considering China has recently become the number-one source of Algerian imports. “The two countries are pioneers that have made history in many areas in the expansion of China-Arab ties,” China’s minister of foreign affairs, Wang Yi, said in a statement at the China-Arab States Cooperation Forum (CASCF) in early July 2018.

In Business

Chinese companies have been coming to Algeria for a long period of time, but ties have multiplied and strengthened in recent years. China’s Belt and Road Initiative has started to yield results: companies from the eastern giant are building a trade and infrastructure network in Africa, and are now able to play a participating role in developing Algeria in conjunction with relevant government planners.

Algeria’s relationship with China mirrors that of the broader continent. African and Chinese trade in 2017 was over three times higher than US and African trade. Chinese foreign direct investment (FDI) to Africa increased by 130% between 2011 and 2016 and currently stands at $53bn. Algeria is the third-largest recipient of Chinese FDI with $2.5bn, coming behind only South Africa ($6.5bn) and the Democratic Republic of Congo ($3.5bn), and ahead of Nigeria, Zambia and Zimbabwe. Particularly, Chinese interest in Algeria is evident in infrastructure. China participates in multiple mega-projects across Algeria, such as the great mosque of Algiers, the East-West Highway and aerospace. The most recent infrastructure-related project in Algeria to be awarded to China is a phosphate plant in the Tebessa region. The deal, worth $6bn, is expected to generate almost $2bn per year, according to Sonatrach CEO, Abdelmoumen Ould Kaddour. In a statement, Ould Kaddour said that the plant is slated to open in 2022 and will create 3000 jobs.

China has also made strategic advances in ICT infrastructure, and both ZTE and Huawei have gained significant market shares. In late 2016 Huawei was awarded an eLTE broadband trunking project for the Houari Boumediene Airport in Algiers. The project marks the first time an eLTE system has been implemented in a commercial airport facility in Africa.

In late 2018 it was announced that another five industrial and port infrastructure projects were to be carried out in partnership between public Algerian companies and Chinese firms in the fields of commercial vehicle manufacturing, electronics, mining and maritime transport infrastructure. The projects fall under a cooperation agreement signed in 2016, and aim to boost production capacity in engineering, railway, iron, steel and petrochemicals, among others.

Algeria has also seen recent success in its manufacturing industry. Shaanxi Automobile Holding Group, a state-owned truck manufacturer in China, started selling its products in Algeria in 2007, when the market was dominated by European brands. According to reports by local media, the Chinese firm now controls approximately 70% of the local market.

Two-way Road

Increased cooperation between China and Africa has benefited both parties. In the majority of cases, Chinese companies acted as investors and Algerians were the recipients of those investments. However, the trend is likely to shift as Algerian firms increase their stakes in the Chinese market.

In early November 2018 Algeria participated in the China International Import Expo, which aimed for China to widen its market by importing products and services worth more than $10trn within five years. There were 14 Algerian companies that took part in the event, offering an extensive range of products.

While Algerian businesses have not had much success in entering the Chinese market thus far, the country could potentially offer easier access to Algerian companies than some Western markets, opening a large number of opportunities for the Algerian manufacturing industry (see Industry & Mining chapter).