China expands currency swap with Egypt as trade ties reach new heights

Egypt and China have expanded their currency swap agreement, aiming to increase the use of the yuan in international trade and investment. Chinese President Xi Jinping and Egyptian President Abdel-Fattah el-Sisi emphasized the importance of this move during their meeting, linking it to plans for new factories, energy projects, and digital infrastructure.

The renewed agreement, now worth 18 billion yuan, will remain in effect for three more years. Analysts suggest that while the expansion is a positive step towards reducing reliance on the US dollar and boosting the international use of the renminbi, it will be a gradual process. Egypt has previously borrowed through a panda bond issued in China's domestic market.

The People's Bank of China and the Central Bank of Egypt have also renewed the swap agreement, extending its duration and increasing its value. Egypt's foreign currency shortages have been a recurring issue, but settling some trade in yuan could alleviate some of these concerns. The expanded agreement is seen as a strategic move to position Egypt as a regional industrial and logistics hub, leveraging Chinese technology transfers and investment.

Meanwhile, China's push for the renminbi's internationalization extends beyond Egypt, with African countries like Kenya, Ethiopia, Mozambique, and Zambia also exploring currency swaps, yuan-denominated borrowing, and dollar debt conversions. The China-Egypt TEDA Suez Economic and Trade Cooperation Zone, which has already attracted over 200 companies and US$4.7 billion in investment, is set to expand further, focusing on industries such as electric vehicles, shipbuilding, renewable energy, and digital economy.