More please. I found this article today and it illustrates a trend I’m hoping will develop further. The article talks of a Chinese home electronics company, Haixin, which has built a factory making air-conditioners in a suburb near Cairo. It’s targeting markets in East Africa, North Africa, the Middle East, and Europe. Haixin says it’s trying to take advantage of Egypt’s low-costs and its customs union agreements with neighboring countries.
I’m expecting a growing number of low-cost Chinese manufacturers to follow Haixin abroad to places like Egypt. Why? In part, because rising manufacturing costs are gradually eroding the country’s competitiveness for certain low-cost goods. But, and most importantly, also to escape growing trade protectionism. Chinese manufacturers have captured market share rapidly in most emerging markets over the past few years. It’s unsustainable, and there are growing complaints from New Delhi to Sao Paulo.
I’m not suggesting that all low-cost Chinese manufacturers will move abroad. Far from it. There’s still compelling reasons to stay at home. But it only takes a few to make a difference in a country like Egypt. China’s exports to Europe were worth $240 billion in 2009. That’s more than Egypt’s annual economic output of $160 billion. Egypt just needs to capture a small share of that trade to have a useful impact on growth. Here’s hoping.
China Development Bank has opened a branch office in Cairo, according to Egypt’s Al Masry Al Youm. The article suggests the bank will help fund development projects in Egypt and, possibly, Africa. This is the first time I’ve heard of the bank opening a branch in the Arab world. But it is certainly consistent with the growing debate in China about establishing a “Marshall Plan” for the emerging markets. It also underscores the growing role the Middle East is playing as China’s springboard into Africa, either through Cairo or Dubai.
I am in the U.S. this week, speaking at the State Department, Columbia University and CSIS. I intend to use the opportunity to test drive one of my favourite themes.
In a globalized world it is time to view China and the Middle East as part of the same policy challenge, rather than two distinct challenges.
How so? The growing commercial relations between the two mean that a change in one affects the other. I am thinking specifically about jobs. The rise of China has resulted in a historic shift of manufacturing from the industrialized to the industrializing world. It is a shift that is unlikely to reverse.
However, the consequences have been mixed for the Middle East. A flood of cheap imports to the region has meant factory closures in low-cost countries, such as Egypt and Syria. And that’s a problem given that two-thirds of the region’s population is under the age of thirty. And many are unemployed.
But it could all change, and for the better.
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What are the main differences between the Arabs and Chinese? Religion is an easy answer. There are far more believers in the Middle East. Yet, this isn’t entirely correct, as there are also many Chinese Christians and Muslims.
A more useful way to answer the question is to examine what the Arabs and Chinese are looking at on the internet. Alexa is an internet monitoring company that ranks the Top 100 web sites in each country across the world. The results are revealing.
For a start, the Arabs tend to visit American internet sites more frequently. Google ranks number one in Egypt and Saudi Arabia. Facebook and Youtube also rank high. America might be unpopular among some in the region, but its cultural influence is equally unmistakable.
By contrast, the Chinese rarely spend time on foreign websites. Firewalls are only partly to blame. Importantly, local start-ups have built Chinese-language versions of the most popular foreign sites. They benefit from the economies of scale that the country’s 300 million internet users can bring.
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Egypt, welcome to the club. It used to be only developed economies that suffered from collapsing auto sales. So, I was surprised to learn the other day that Egypt’s annual car sales have plummeted from 250,000 to 85,000 in the past six months. I imagine there are thousands of unsold cars parked in lots outside of Cairo just like there are in Detroit.
But don’t worry, Egypt, you’re not the only new member: car sales have also fallen in China and India. In fact, you can probably find mini-Detroits all across the Silk Road as unsold cars pile up.
The middle-class dream has turned sour. How so? The rise of the Silk Road’s middle-class was one of the region’s big stories of the past decade. And, importantly, the middle-class was a big buyer of cars, whether it was China’s Volkswagen Santana or India’s Maruti 800. In fact, more cars were sold in China, Egypt, and India last year than in the United States.
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The International Monetary Fund advises on economics, not politics. For instance, it recommends that governments cut food subsidies. Makes sense. If governments spend less on food, they can spend more on education, hospitals, and roads.
But what if rising food prices sparks popular unrest?
This is exactly what happened in Egypt earlier this year. Food prices have risen twenty percent in the past year and are still rising. Food accounts for $0.48 of every $1 spent by an Egyptian household. The increase hurts. It was the spark for riots in the satellite suburb of Mahalla.
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