Growing slowly but surely
By: Dr. Naser al-Tamimi
Virtually every day, new developments in China or stories about its foreign policy attract huge media attention. However, amid Algeria’s election drama, two recent pieces of news regarding China-Algeria relations got less attention. Firstly, China and Algeria established recently what they called “the comprehensive strategic partnership.” Of all the relationships China has built with Arab countries, the partnership is the first of its kind. Secondly, the latest economic data shows that France lost its position as Algeria’s major supplier to China in 2013.
These developments are very important as they give strong indications about the future trajectory of Algeria-China relations. Although the relations between the two countries date back more than 55 years, Beijing is a latecomer to Algeria’s market. Over the past decade, the bilateral trade between Algeria and China has increased significantly. It has doubled almost 15-fold, jumping from only $608 million in 2003 to over $9 billion at the end of 2013, according to latest data from the United Nations. Today, Algeria is China’s top trade partner and the largest export market in Maghreb region (Algeria, Morocco, Libya, Tunisia and Mauritania). Beijing’s trade with Algeria represents over 40 percent of China’s total trade with Maghreb (nearly $21 billion) in 2013.
Growing economic relations
To put these figures in perspective, China still has a long way to catch-up with the EU which is Algeria’s top partner with total trade of over $ 71billion in 2013. Additionally, China’s bilateral trade with Algeria represents only 3.7 percent of China’s total trade with the Arab World (over $241 billion with 22 Arab states) and 4.3 percent with Africa ($210 billion with the continent). Nevertheless, the trade balance tilts considerably in favor of China. Manufactured items such as vehicles, electrical and electronic equipment, textiles and clothing form the bulk of exports from China to Algeria; while mineral fuels, oils, distillation products, etc. form the bulk of Algerian exports to China.
The Chinese economic footprint in Algeria is most pronounced in the construction sector. Chinese companies have won billions of dollars’ worth of infrastructure contracts from Algeria over the past several years. Chinese contractors constructed important projects such as the Ministry of Foreign Affairs building, parts of the 1,200 km East-West highway, a shopping center in Algiers and low-cost government housing in major urban centers. Not to mention the gift of $40 million in 2010 from China to build a 1,400-seat opera house in the west of the Algerian capital and the Chinese 15 MTt Es-Salam plant heavy water reactor that started up in 1992. Chinese firms are also building photovoltaic projects, a cement plant and a vehicle’s assembly factory.
China’s interests are growing significantly in Algeria. According the American Enterprise Institute and the Heritage Foundation’s “China Global Investment Tracker,” between 2005 and end-2013 China’s investments and contracts in Algeria reached $14 billion, making Algeria one of the top 15 global markets for Chinese contractors and second largest (after Nigeria) in Africa. However, some Chinese official data estimates that Algeria has granted 50 Chinese constructions contracts worth a total of $20 billion (including the $1.5-billion contract for a huge mosque in Algiers that is expected to be the third-largest in the world after those in Makkah and Madinah). In addition, more than 30,000 Chinese people work in Algeria in sectors including railway, road construction and the water sector.
Chinese cars shine
Interestingly, one of the areas that the Chinese brands are prominent in Algeria is the automobiles sector. China exports more cars to Algeria than any other country. According to the China Association of Automobile Manufacturers (CAAM), Algeria was China’s top vehicle export destination in 2012 and 2013. In this regard, Chinese state manufacturer FAW has recently signed a deal to build an assembly plant in Algeria, producing 10,000 vehicles per year.
As for energy, last year Algeria produced around 1.2 million barrels per day (mb / d) of crude oil and exported an estimated of 770 thousand barrels per day, only 37 thousands went to China. Meanwhile, the United States has been one of Algeria’s top markets for crude oil for almost a decade. Tellingly, the U.S. Energy Information Administration (EIA) recently noted that the U.S. crude oil imports from Algeria have dramatically declined from almost 443 thousands in 2007 to only 29 thousand barrels per day in 2013. In this context, as Algeria ramps up its oil and gas export capacity, China, to some extent, could replace the United States in years to come.
Comprehensive strategic partnership
It has become clear that after the fall of the Qaddafi regime in Libya and the continued instability in Egypt, China attaches great importance to developing relations with Algeria. From China’s perspective, Algeria is Africa’s largest country by area, has the 8th largest by population (almost 39 million people) and is the fourth largest economy in Africa (and the Arab world). Algeria is also a member of OPEC, the largest natural gas producer and second largest oil producer, after Nigeria, in Africa.
To underscore the importance of relationships, on the 55th anniversary of the establishment of diplomatic relations, China and Algeria established the comprehensive strategic partnership that is the first of its kind among China’s relationship with Arab countries. In this context, Algeria which already runs Africa’s biggest defense budget is looking to increase its military cooperation with China. Although Russia is Algeria’s main military supplier, recent military reports indicate that Algeria bought three 2,800 ton corvettes from China. The South African news outlet, DefenceWeb also reported this month that “the Algerian military appears to have acquired self-propelled artillery from China and is evaluating Chinese unmanned aerial vehicles (UAVs) as it continues to vastly expand its military forces.” This military cooperation is likely to expand in the future as Algeria continues with the modernization of its military capabilities.
Against that backdrop, political stability is a major concern. Although Algeria has managed to avoid the popular unrest that toppled three Arab leaders in three North African countries (Tunisia, Egypt and Libya) in 2011, the country remains at risk as many of the ingredients that proved to be a recipe for the political revolt during the so-called “Arab Spring” are present in Algeria. In addition, Islamic militants still present security risks to oil and gas installations in the country. Above all, according to MEES estimates, Algeria’s crude oil production declined from a peak of 1.39 mb / d in 2005 to 1.12 mb / d. Natural gas output has also been falling. If this situation persists, Algeria’s export capacity will be eroded as the time passes by.
To be sure, the IMF in its latest review of the Algerian economy warned that “Algeria’s vulnerability to developments in the hydrocarbon sector worsened, as declining hydrocarbon production and surging domestic consumption are squeezing export volumes, compounding the longstanding risk of lower oil prices.” In addition to this, the Algerian energy sector remains stymied by political issues and accusations of corruption. Without deep and serious structural reforms, Algeria could face economic and political tremors in the medium and long term.
Dr. Naser al-Tamimi is a UK-based Middle East analyst, and author of the forthcoming book “China-Saudi Arabia Relations, 1990-2012: Marriage of Convenience or Strategic Alliance?” He is an Al Arabiya regular contributor, with a particular interest in energy politics, the political economy of the Gulf, and Middle East-Asia relations. The writer can be reached at: Twitter: @nasertamimi and email: firstname.lastname@example.org