New factory and energy projects in Suez zone
back gradual shift away from US dollar in bilateral investment
·
China
and Egypt have expanded their financial cooperation, renewing and increasing their
local currency swap arrangement to promote greater use of the Chinese yuan and Egyptian pound
in bilateral trade and investment.
·
The
People’s Bank of China and
the Central Bank of Egypt renewed the swap agreement for three years in June,
increasing its size from 18
billion yuan to 30 billion yuan (about US$4.47 billion).
·
Chinese
President Xi Jinping
and Egyptian President Abdel-Fattah
el-Sisi supported greater use of their national currencies and linked
financial cooperation with new investments in manufacturing, energy, infrastructure and digital projects.
·
The
expanded currency swap could allow Egyptian banks and companies to obtain yuan for
transactions with China without
first purchasing US dollars, potentially reducing demand for dollars
in bilateral trade.
·
However,
experts believe that reducing
dependence on the US dollar will be gradual, with the actual use
of the yuan by businesses being the key test of the arrangement's success.
·
Egypt
has faced recurring foreign
currency shortages, and yuan-based settlements could provide some
relief, although they are unlikely to solve the country's broader foreign-exchange
challenges.
·
The
yuan internationalisation push is part of China's wider
strategy, with other African countries, including Kenya, Ethiopia, Mozambique and Zambia,
also considering or using yuan swaps, yuan-denominated borrowing and other renminbi-based
financial arrangements.
·
China–Egypt
trade remains heavily imbalanced: Egypt imported nearly US$20 billion worth of goods from China in 2025,
while its exports to China were only around US$819 million.
·
Egypt
had earlier raised 3.5 billion
yuan in 2023 through Africa's first sovereign sustainable panda bond in China's domestic
financial market.
·
The
growing industrial relationship provides a foundation for increased local-currency
use. By mid-2026, the China–Egypt
TEDA Suez Economic and Trade Cooperation Zone had attracted:
o
More
than 200 companies
o
Over
US$4.7 billion in investment
·
Egypt
plans a third expansion phase
of the Suez industrial zone, creating opportunities for additional Chinese factories
and projects and potentially increasing yuan and Egyptian-pound settlements.
·
China
and Egypt aim to develop Egypt as a regional hub for industry, logistics, clean energy and the
digital economy, connecting markets across Asia, Africa and Europe.
·
Proposed
cooperation areas include:
o
Electric
vehicles
o
Shipbuilding
o
Renewable
energy
o
Desalination
o
Agriculture
o
Data
centres
o
Semiconductors
o
Cybersecurity
o
Aerospace
o
Critical
mineral supply chains
·
Egypt's
location near Europe, the Middle
East and African markets, along with its BRICS membership, makes
it an attractive potential manufacturing and logistics base for Chinese companies.
·
The
two countries are also encouraging local
production, workforce training and technology transfer, with analysts
stressing that Egypt's long-term gains will depend on its ability to build genuine
domestic industrial capacity.
·
Overall,
the agreement represents an incremental
but significant step in China's broader yuan internationalisation
strategy, while also strengthening Egypt's position as a potential
regional manufacturing, logistics and investment hub.
[ABS News Service/05.09.2026]
Egypt’s
expanded currency swap with China may help bring the yuan into wider use in trade
and investment, but experts say any reduced reliance on the US dollar will not happen
in a hurry.
Chinese
President Xi Jinping and his Egyptian counterpart Abdel-Fattah el-Sisi this week
backed greater use of their currencies, while linking closer financial ties to plans
for new factories, energy projects and digital infrastructure.
A
joint statement released on Wednesday during Xi’s state visit to Cairo also envisions
building Egypt up as a regional industrial and logistics hub, leveraging Chinese
technology transfers and investment to anchor Cairo’s role within the expanded Brics
emerging economies bloc as a gateway for regional and global markets. However, analysts
said whether genuine domestic capacity would increase depended on Egypt’s negotiation
of the terms.
Cairo
already has a 30 billion yuan (US$4.47 billion) swap arrangement
with Beijing and has borrowed through a panda bond issued in China’s domestic market.
Whether Egyptian and Chinese companies use the yuan regularly will be the main test
of the currency push.
The
People’s Bank of China and the Central Bank of Egypt renewed the swap in June, extending
it for three years and increasing its value from 18 billion yuan, also known as
the renminbi.
In
their statement, Xi and el-Sisi “welcomed the renewal of the local currency swap
agreement and the expansion of its scale”, and encouraged Chinese and Egyptian financial
institutions to support industrial and development investment, infrastructure and
green and digital projects.
John
Calabrese, a non-resident senior fellow at the Washington-based Middle East Institute,
said “the reference to yuan use is probably significant”.
It
signalled “an effort to deepen financial ties, reduce reliance on the dollar and
advance the international use of the renminbi, mirroring what China is doing with
other partners”, he said.
Egypt
has faced recurring foreign currency shortages in recent years, although dollar
availability has improved. Settling some trade in yuan could reduce the demand for
dollars, but it will not resolve the country’s broader foreign currency needs, according
to observers.
Lauren
Johnston, a China-Africa specialist and senior research fellow at the AustChina Institute, described the expansion as a gradual step
and more “a continuation than a revolution”, saying the swap was small compared
with China’s arrangements with parties such as Indonesia or the European Central
Bank.
“The
key question is whether it is actually drawn down and used,” she said.
Yun
Sun, a senior fellow and director of the China programme at the Stimson Centre,
also said the yuan’s internationalisation would not happen in a single breakthrough.
“There
is no determining moment but each step counts,” Sun said. “By creating more currency-swap
partnerships, the renminbi is gradually extending its reach. It still faces significant
headwinds, which makes the incremental approach even more important.”
The
yuan push extends beyond Egypt, with African governments using or considering currency
swaps, yuan-denominated borrowing and conversions of dollar debt into renminbi,
including in Kenya, Ethiopia, Mozambique and Zambia.
Chinese
customs data shows that Egypt imported nearly US$20 billion of goods from China
in 2025 but exported only about US$819 million back.
Under
the swap, each central bank can provide the other with its currency up to an agreed
limit. Egyptian banks and companies could therefore obtain yuan for transactions
with China without first buying US dollars.
Egypt
raised 3.5 billion yuan in 2023 through Africa’s first sovereign sustainable panda
bond, according to the African Development Bank.
The
currency push also has an existing industrial base. By mid-2026, the China-Egypt
TEDA Suez Economic and Trade Cooperation Zone had attracted more than 200 companies
and more than US$4.7 billion in investment.
El-Sisi
announced this week that the zone would enter a third expansion phase, with new
factories and projects able to create more opportunities to use yuan and Egyptian
pounds for investment, equipment and supplier payments.
The
leaders also outlined the hub ambition for “industry, logistics, clean energy and
the digital economy connecting Asia, Africa and Europe”. Proposed areas include
electric vehicles, shipbuilding, renewable energy, desalination, agriculture, data
centres, semiconductors, cybersecurity, aerospace and key mineral supply chains.
“Egypt
is one of the potential winners from the reorganisation of global supply chains,”
Johnston said. “It is close to Europe and the Middle East and also offers access
to African markets.
“This
could become one of China’s more advanced industrial clusters in Africa, supported
by Egypt’s proximity to major markets, its Brics membership and its links to sub-Saharan
Africa.”
The
joint statement encouraged local production, training and technology exchanges.
“Egypt
has the potential to develop its own production capability through the deal, but
it depends on how the government captures the opportunity and negotiates arrangements
that cultivate local capacity rather than simply turning the country into a conduit
for Chinese exports,” Sun said.
Johnston
said that developing production hubs via foreign direct investment was “one way
for China to address its trade-balance challenge”, referring to China’s huge global
trade surplus and pushback from several trading partners.
“Instead
of concentrating the gains and losses through exports, overseas production spreads
them across more countries,” she said.