China, the world's largest economy, has become an economic model in modern times, having achieved its tremendous economic growth through tapping its material and human resources rather than occupation, dominance and looting of other countries, as was the pattern with other, Western, powers.
China has maintained such growth through policies befitting each phase. Under Mao Tse-tung, the communist revolutionary who was the founding father of the People's Republic of China, Beijing focused on heavy industries, economic and political rules for national independence, self-sufficiency and enriching the Chinese individual through quality health, education and scientific research systems.
While the Chinese economy started from scratch after the republic was founded in 1949 following a long struggle with Japanese fascism and the lingering civil war, growth rates were significantly high until the mid-1960s.
Growth rates remained good even between 1965 and 1980, with a gross domestic product of 6.4 percent annually despite all the crises the country was going through, namely its Cultural Revolution.
Compare this with a 2.7 percent GDP in the USA, 3.7 percent in high-income countries, 5.4 percent in low-income economies and 6.1 percent for mid-income economies during the same period (World Bank's World Development Report 1990, pg. 212-213.)
Under China's leader Deng Xiaoping and his successors, China witnessed the highest levels of economic openness, boosting its GDP and exports through significantly high saving and investment rates.
Beijing successfully drew enormous foreign investment, namely in high-tech industries, while keeping the reins on the technology sphere for those seeking to enter the vast Chinese market. Beijing entered other countries' markets in a correct, cooperative way relying on its competitive abilities not on power, occupation and dominance as was the case with Western empires.
Since 1980, the Chinese economy has recorded significant growth rates of over 10 percent annually on average for three decades, becoming the world's second-largest economy and the biggest normal goods and high-tech commodity exporting country.
During the global financial crisis of 2008-9, the Chinese economy acted as an engine pulling the global economy out of the crunch by using an enormous commercial surplus built up over 25 years.
Under current Chinese President Xi Jinping, the Chinese economy has moved up to be the world's largest, in terms of measuring GDP based on purchasing power parity, and boosted its position to become the world's biggest export and trade power.
The Chinese currency has been added to the IMF's Special Drawing Rights (SDR) basket and become a major currency in international transactions.
With its strong, buoyant economy, China launched its One Belt, One Road initiative, aiming to open new trade links for Chinese firms based on peaceful cooperation and respect for other countries' sovereignty and in line with the balance of competitive capabilities
The plan is for a “new Silk Road" to boost international trade, a project that has gained value due to the enormous disparity in the economic, political and military powers of countries participating in it which left no room for disputes, occupation or ascendancy over others.
Such a strategy has made the initiative an example of peaceful cooperation, justice, equality and free choices of relations between countries.
In contrast stands the European criminal tendency since the 16th century to occupy other countries, destroy their social and political fundamentals, loot their resource and humiliate their people.
While the end of this destructive era, except for in a few pockets, came in the third quarter of the last century, the US had revived it again in the 20th century when it invaded Grenada as it opposed the democratic elections there.
It proved once again that it has long exploited democracy as a pawn to blackmail other countries, given its long-time alliance with fascist regimes whenever it served its interests.
This vile, obsessive invasion policy was once again revived by the criminal invasion of Iraq in 2003 that culminated with the occupation of this great Arab country, the destruction of the state and the building of a political system based on sectarian and ethnic quotas to eventually destroy the country's social structure.
Arab countries have also since 2011 seen interventions by NATO, led by the US, culminating in the polarisation of Libya.
Meanwhile, the intervention in Syria by the West and regional allies of sectarian and ethnic regimes seeks to destroy the country with hordes of barbarian terrorists.
But Syria has however continued to stand strong, thanks to the Arab Syrian Army (or so it has been called since the unity between Egypt and Syria), Russia's support, and the Chinese stance that backs the unity of Syria and opposes military interventions there.
China's One Belt, One Road initiative seems to be in line with what Egypt plans for its international economic ties, ie to be built on peaceful, just and equitable cooperation. This raises the question of the possible Egyptian-Chinese economic cooperation in a just manner that serves the people of both countries.
Egypt's GDP close to $1 trillion
Egypt's GDP in 2015 stood at $330.78 billion on current exchange rates, and $996.6 billion when based on purchasing power parity.
Egyptian exports were worth $26.7 billion in 2014 and imports recorded $68.2 billion in the same year.
The trade deficit meanwhile was estimated at $41.5 billion, according to IMF data (IMF, Direction of Trade Statistics Yearbook 2015, pg. 212). Egypt is an importer of capital services and an exporter of tourism and transport services.
Egypt's current account deficit stood at $18.7 billion in the 2015-16 fiscal year.
Official data show that unemployment currently stands at 12.5 percent, an estimation significantly lower than the true figure.
Annual urban consumer inflation reached 14.1 percent in September.
China on top of global economy with a $1,575 billion difference
China's gross domestic product based on purchasing power parity recorded $19,522 billion in 2015, compared to the $17,947 billion of the USA in the same year, a $1,575 billion difference. China's GDP at current exchangerates stood at $10,866 in 2015, compared to $17,947 billion.
China’s gross national product (equal to GDP plus any income earned by residents from overseas investments minus income earned within the domestic economy by overseas residents) recorded $17,967 on PPP in 2014, up $144 billion from that of the US that hit $17,823 billion in the same year. China’s GNP on current exchange rates stood at $10,970 while that of the US was $17,612 billion.
While China’s economic growth has slowed to 6.5 percent at the present time from the average 10 percent between 1980 and 2014, it still accounts for double the 2.5 percent economic growth of the United States.
This qualifies the Chinese economy for a swifter increase in GDP than the US in only a decade even if exchange rates of the US dollar and Chinese yuan remain the same, and despite estimates that the yuan will gradually rise to balance its purchasing power value in Chinese markets against the dollar’s purchasing power in American market.
China the largest trade power with exports surpassing the USA by $900 billion
In 2014 China became the world’s largest export economy, with $2.4 trillion of exports of commodities in 2014, as opposed to US exports of commodities of $1.5 trillion in the same year, according to IMF's Direction of Trade Statistics Yearbook 2015.
In 2014 China seized the world's biggest share of high-tech exports, worth $558.6 billion, with Germany coming second with $199.7 billion worth of high-tech exports and the US in the third place with $155.6 billion, according to World Bank data.
Despite decades-long competitive excellence, the Chinese economy's competitiveness in normal goods is slumping compared to other modern booming economies like India, Vietnam, and other states in south Asia, where labour and material costs are lower than those of China.
China is balancing such market changes by giving a special focus to high-tech industries and using trade surpluses in direct investment in big, open markers linked to free zones and with low labour production costs to guarantee sustainable competitiveness in such markets.
It is a measure to preserve foreign markets even through local investment and production in these markets, something that makes China’s need for investment and production in several countries, mainly Egypt, essential to make use of Cairo’s openness to the world and in turn preserve its competitiveness in other markets.
Average propensity to export (the ratio of exports to GDP) was worth 33.1 percent in 2000, 44.8 percent in 2005, declined to 30.8 percent in 2010 and fell further to 32.2 percent in 2014. The data shows that China’s strong presence in foreign markets is made through high competitive investments in developing countries to leverage low cost of workforce and material to access other markets around the globe.
This makes the Egyptian market of great significance for direct Chinese investments and vice versa, something that mirrors strong Egyptian-Chinese mutual interests.
Chinese exports climbed by 152 percent from 2000 to 2005, by 82.7 percent from 2005 to 2010, and by 31.7 percent from 2010 to 2014, according to IMF data (Direction of Trade Statistics Yearbook) and the World Bank (World Development Indicators).
Egyptian industries that could draw Chinese investment
Chinese investment in transformative industries is of mutual benefit for both Chinese and Egyptian firms.
Benefits are even greater in strategic industries and large-sized, heavy-weight goods; these include cars, tractors, trains, petrochemicals, tyres, cement, paper, gypsum, marble, stones, iron and steel, ships, fertilisers, glass, solar power equipment, agricultural and fisheries, salt and others.
Likewise, investing in industries such as electronics, appliances and mobile phones can be effective and lucrative for both sides.
Egypt boasts enormous mineral and stone resources that can offer a solid foundation of growing transformative industries, a potential that could be unlocked by China’s investments, scientific and technical expertise and advanced technology of Chinese firms.
Egypt for example possesses 152 billion tons of clay and 625 billion tons of limestone, two major materials used in the cement industry, which can mainly be found in the governorates of Beni Suef, Sinai, Suez and Al-Wadi Al-Gadid.
Egypt also holds reserves of more than one billion tons of pure gypsum of the highest quality globally which can be found in Sinai, Suez and the Red Sea.
Resources also include one billion tons of phosphate in the Nile Valley north of Edfu; talc in the Red Sea area; black sands in Alexandria, North Sinai and the Red Sea; steel in eastern Aswan and the Red Sea's Safaga area; gold in the Eastern Desert; high-purity glass sand in southwestern Sinai, west of the Gulf of Suez, and in the Eastern Desert; salt deposits on the Red Sea coast, west of Alexandria, in Wadi Natrun, west of the Qattara Depression in Marsa Matrouh, and in Port Said; and tin north of Marsa Alam, among other raw materials.
China could generate great benefits from investment in such sectors in Egypt with the low cost of workforce and raw materials, while sparing transport and insurance costs. The products of such projects can be exported to Arab, African and European markets close to Egypt at a low cost, or sent custom-free to free trade zones linked to Egypt.
China’s direct investment overseas worth $1,010 billion, with Egypt off the map
China's enormous international reserves hit $3,859 billion in 2014, as opposed to $3,331 billion in 2012 and $2,866 billion in 2010 (World Bank, International Debt Statistics 2016, pg. 49).
With a current account surplus of $256 billion in the 12 months until the middle of this year, as shown by The Economist, China's reserves are expected to exceed $4.2 trillion this year.
The lion's share of China's reserves are tied up in investments in different currencies, on top of which is the dollar, with accumulated foreign direct investment of only $1,010.2 billion until the end of 2015, according to the 2016 World Investment Report .
Such investments are more vulnerable to currency market fluctuations, mainly the dollar which has been slumping since the 1960s: for example, from 363 Japanese yen per dollar in the 1960s to 100 yen at present.
While Chinese direct foreign investments have climbed from $74.7 billion in 2011 to 127.6 billion in 2015, China has no presence in the list of top ten countries with direct investments in Egypt in this period.
Beijing continues not to be listed among Egypt's key investors. While Egypt was hit by economic and security turbulence in the years between 2011 and 2013, reports shows that the country had successfully drawn in foreign investments in those past years with no share from Chinese investment befitting the Asian country's direct foreign investment figures or its strong economic ties with Egypt.
Total direct foreign investment in Egypt was worth $50.6 billion between 2011 and 2015, according to a report on the investment climate in Arab countries by the Arab Investment and Export Credit Guarantee Cooperative.
The World Investment Report of 2016 shows that $21.3 billion worth of investments was pumped into Egypt in the same period. China's absence from active investment in Egypt since 2011 places it among the least-supportive countries at a time when Egypt was desperately in need of direct investments to shore up its economy.
It has since then been essential to tackle the challenges facing Chinese investors in Egypt, mainly the crippling bureaucracy.
Dealing in yuan bolsters tourism and Chinese investments in Egypt
Egypt's financial policy is dependent on highly consevative monetary issuance that is dependent on local economic growth and a managed variable exchange rate that match the Chinese market's need without paying attention to calls by the West or the US to increase the yuan exchange rate.
Such policy is the wiser than fixed exchange pricing which takes no account of the economy's needs and subsequently results in a stagnant economy with weaker commercial and investment competitiveness.
It is also wiser than the free-floating policy that leaves the currency's fate in the hands of speculators in a manner that could fuel inflation and destabilise any economy that does not have reserves sufficient to at least cover nine months of imports.
It is a rational trade policy that imposes controls on imports and achieves a balance in the current account, complete sovereignty of national currency, and is an effective way to combat illegal activities that drains the country's free currency credit, including illicit imports of drugs and weapons.
The Chinese yuan exchange rate reached approximately $0.1473 in 2010, $0.1548 in 2011, $0.1580 in 2012, $0.1626 in 2013, $0.1567 in 2015, and around $0.1504 in 2016.
Such marginal movements which are in line with the Chinese market's demands are much more stable than other major free currency movements, and therefore explains why the IMF and the World Bank have admitted the yuan into the list of currencies used to settle international payments.
In 2015, the IMF agreed to introduce the yuan into the SDR basket with a weighting of 10.92 percent, and said the changes will apply from 1 October 2016.
The intended weighting is expected to rapidly increase amid a forecast extensive use of yuan in international payments by Chinese traders, who make up the world's largest commercial power with $2.4 trillion worth of exports and $1.6 trillion in imports, making up a total of $4 trillion in 2014, as opposed to a total of $3.74 trillion worth of US imports and exports in the same year ($1.5 trillion of exports and $2.2 trillion of imports) (IMF, Direction of Trade Statistics Yearbook 2015, pg. 2.)
The weighting of the dollar currently stands at 41.73 percent, sterling at 8.33 percent and the euro at 30.93 percent.
Given this development in the international financial system, Egypt may need to accept the yuan in settling payments with China, at least within its available yuan credit.
International data show that Egypt's goods exports to China amounted to $1,164 million in 2014, while imports from China recorded $10,460 million in the same year.
Official Egyptian data meanwhile suggests significantly lower figures of $329 million worth of exports and $7,607 million of imports in the same year (IMF, Direction of Trade Statistics Yearbook 2015, pg. 156, 212).
Regardless of the real value of mutual trade between the two countries, Egypt would benefit and help bolster its ties with China by paying for Egyptian exports in yuan and using export revenues to settle payment of imports from China.
This in turn will help China boost its imports from Egypt's tourism and transport services, given that it won't need to change to a third currency to settle payments. This will also help draw more Chinese investors to the Egyptian market.
With China being a leading member of the BRICS (Brazil, Russia, India, China and South Africa) group, Egypt may also need to ponder using the yuan in its international payments with countries from or outside the association that accept the currency.
This would be an acknowledgement of the new weight of the Chinese currency in the global economy. It would also help put an end to the predatory position of the dollar as a primary global reserve currency exploited by the US to issue banknotes with no production cap or gold standard, seizing the world's commodities and goods in return for papers and relying that all countries are using the dollar to settle international payments due to its heaving weighting in the SDR basket, as mentioned earlier.
Tackling the imbalance in Egyptian-Chinese ties
There is a huge imbalance in Egyptian-Chinese economic relations in favour of China. According to both Chinese and Egyptian data, there is a huge Egyptian trade deficit that reflects this gap.
Chinese data indicate that the Egyptian trade deficit with China amounted to $9,296 million in 2014, while Egyptian data show that the deficit stood at $7,278 million in the same year.
The only means to reach a fair parity and balance in the Egyptian-Chinese economic relations is through Chinese investments and tourism in Egypt. China's direct foreign investment reached $127.6 billion in 2015, nothing of which was directed to Egypt, despite how promising the Egyptian market is and its capacity to accommodate unlimited investments, mainly in the transformative and high-tech industries.
Besides, the Egyptian market is open to the biggest world markets and is linked to free trade areas of the European Union as well as Arab and African countries.
On tourism, the number of Chinese tourists who travelled overseas in 2014 amounted to 98.2 million. Chinese tourism spending has increased ten-fold since 2000 to reach about $138.3 billion in 2014, making up around 10.9 percent of the total global spending on tourism in 2014.
Egypt's share of China's tourists, meanwhile, stood at about 0.1 percent. Despite the long distance and the consequent rise of tourism costs as result, the cost of Chinese tourism to Egypt remains highly competitive, due to the low rates of Egyptian tourism at the time being following the fall of the Egyptian pound against the dollar.
Chinese tourists travel to countries further afield, more expensive and less secure than Egypt, such as France where terrorism has struck at the heart of the capital several times, unlike in Egypt where terrorist attacks occur in remote areas in the border Sinai region.
Chinese authorities and tourism agencies would need to encourage tourism in Egypt. Receiving only 1 percent of Chinese tourists would significantly improve the trade balance between both countries.
In addition, a boost in the transportation of Chinese goods through the Suez Canal, especially after its new branch increased the waterway's capacity and cut waiting times of vessels, would help in this regard.
A greater improvement, though, can be seen through direct Chinese investments in Egypt's transformative industries, as mentioned above.
Production of such industries would therefore meet local demands, sparing Egypt imports from overseas and easing a trade balance deficit that reached $39.1 billion in the fiscal year 2014/2015, according to official data from Egypt. Also, a good part of the production will be exported, which will in turn improve Egypt's trade balance in general.
Encouraging Chinese investment in Egypt requires presenting an inclusive map of prospective projects in Egypt with initial feasibility studies for Chinese investors, while suggesting local partners for each project.
Egypt should also organise more tourism exhibitions, sponsor reproductions of antiquities to promote Egyptian tourism, hold more commodity and real estate fairs in Chinese cities such as Beijing, Shanghai, and Shenzhen.
Considering Egyptian-Chinese ties as strategic ones, China, on its part will need to give an investment push to the Egyptian economy on a mutual-interest basis to help put it on the route to rapid growth.
Egypt will in return provide an exceptional location in the middle of world's markets with all associated benefits of low transport and insurance cost, open relationships with the world, free entry to Arab, European and African markets as well as a workforce with diverse skills and low wages, and sufficient raw materials in Egypt or its African and Arab neighbours.
Bureaucracy, however, will remain the most challenging of all hindrances, and to eliminate it, Egypt should toughen penalties for corruption and improve oversight of public employees and their financial records, especially those authorised to issue project permits.
The government also needs to implement the one-stop shop for investors; one that is efficient, transparent and subject to firm financial supervision under a new law.
This body will be in charge of earmarking agricultural, industrial and service lands all the way to the issuing of permits and licences to investors.
This will make it easier for foreign investors, stem corruption and bolster economic relationships between Egypt and China as they become strategic.
*Ahmed El-Sayed Al-Naggar is an Egyptian economist and the CEO of Al-Ahram organisation