Egypt’s tightrope: Chinese funds, US arms and a new capital

As Egypt and China approach the 70th anniversary of diplomatic relations in 2026, their partnership has never appeared stronger. In July 2025, Chinese Premier Li Qiang paid an official visit to Cairo, reaffirming both countries’ commitment to deepening strategic ties. The visit resulted in new agreements on trade, infrastructure and clean energy, and was widely seen as a milestone in what Chinese media called a “new qualitative phase”.

From political symbolism to tangible investments, the bilateral relationship is often hailed as a model of south-south cooperation. Yet beneath the celebratory rhetoric lies a more complex story: one shaped by historical ebbs and flows, fast-paced but uneven development, and a set of emerging risks that may determine the sustainability of this latest golden era.

Egypt was the first Arab and African country to establish diplomatic relations with the People’s Republic of China in 1956. In fact, the ties between the two countries extend far beyond the modern era of diplomacy. As two of the world’s oldest civilisations, early contact can be traced back to as early as the 11th century BCE, when Chinese silk is believed to have made its way to Egypt through ancient trade routes. Alexandria, Egypt’s famed Mediterranean port, was the first African city ever recorded in Chinese historical texts, underscoring the early awareness and exchange between the two civilisations. 

In the modern era, the foundations of bilateral political relations took shape during the transformative years of the early 1950s. The 1952 Egyptian Revolution brought President Gamal Abdel Nasser to power, ushering in a new era of Arab nationalism. During the 1955 Bandung Conference in Indonesia, Chinese Premier Zhou Enlai and Egyptian President Nasser held several in-depth conversations. The two sides agreed to normalise relations gradually, beginning with trade.

On 16 May 1956, Egypt officially recognised the PRC and severed relations with Taiwan. In the same year, the Suez Crisis erupted. China firmly condemned the joint invasion by Britain, France and Israel. In a notable show of public solidarity, Chinese university students organised demonstrations outside the British legation in Beijing. Among them was Mr An Huihou, who would later become China’s ambassador to Egypt. He recalls participating in the protest as a young student, never imagining that decades later he would help shape the very relationship he once demonstrated to support.

This early embrace was more than symbolic; it reflected a convergence of anti-colonial aspirations and shared positioning within the Non-Aligned Movement.

With Anwar Sadat’s pivot toward the US, Cairo moved firmly into the Western camp. For nearly three decades, China-Egypt relations remained cordial but limited in scope. A renewed phase began in the late 1990s. In 1999, during then-President Hosni Mubarak’s seventh visit to China, Ambassador An Huihou accompanied the Egyptian leader throughout the trip. The most important outcome was the signing of a joint communique with President Jiang Zemin, which elevated bilateral ties to a “strategic cooperative relationship for the 21st century”. Both sides emphasised that China-Egypt relations had become a model for cooperation among developing countries and a hallmark of south-south solidarity.

This trajectory gained further momentum in 2014, when the two countries established a “comprehensive strategic partnership”. While initially symbolic, this partnership has since expanded into wide-ranging cooperation across infrastructure, energy, finance, and cultural exchange, the foundation for the present moment of high-level engagement.

Today, the China–Egypt relationship is marked by bold headlines and visible transformation. The clearest symbol of this cooperation is Egypt’s New Administrative Capital (NAC), a mega-city being constructed 50 kilometres east of Cairo. At its heart stands the Central Business District, where China State Construction Engineering Corporation (CSCEC) is building Africa’s tallest skyscraper — the 385-metre Iconic Tower.

Costing an estimated US$58 billion, the NAC aims to alleviate Cairo’s congestion (population 22.9 million), stimulate economic growth, promote sustainable urban development, and enhance Egypt’s digital transformation and regional standing under the Egypt Vision 2030 framework.

This major project, funded partly through Chinese loans and investments, showcases China’s expertise in large-scale urban development and strengthens bilateral economic ties under the Belt and Road Initiative. Chinese workers and engineers are actively involved, contributing to the rapid progress of the business and finance district, which aims to position the NAC as a regional financial centre, and aspires to mirror the influence of Gulf hubs like Dubai and Abu Dhabi.

Beyond NAC, the China–Egypt TEDA Suez Economic and Trade Cooperation Zone within the Suez Canal Economic Zone (SCZone), has matured into a manufacturing base hosting over 180 Chinese firms. These companies are producing textiles, auto parts, chemicals, and electronics for export to Middle Eastern and African markets. The TEDA zone’s expansion agreement, signed in July 2025, represents a deepening of industrial integration.

Perhaps more notably, the partnership is expanding into clean technologies and advanced innovation. In late 2024, solar products company Elite Solar held a groundbreaking ceremony for its project in the TEDA Cooperation Zone, marking the start of construction on Egypt’s first solar cell and module manufacturing plant. This milestone signalled a shift in bilateral cooperation from bricks-and-mortar to high-tech industries.

Since 2023, chairman of the SCZone, Waleid Gamal El-Dien, has made multiple visits to China to promote investment and deepen bilateral economic ties. Immediately following Chinese Premier Li Qiang’s visit to Cairo in July 2025, Gamal El-Dien returned to China to launch a major investment roadshow. His first stop was Shenzhen’s Qianhai district, where he spoke at an economic cooperation salon.

There, Gamal El-Dien announced that the SCZone is seeking investment across 17 priority sectors, including green fuels, aluminium electrolysis, wind turbines, solar photovoltaics, petrochemicals, electric vehicles and batteries, as well as four key service areas such as logistics and data centres. These developments reflect Egypt’s growing ambition to position itself not just as a recipient of infrastructure aid, but as an emerging regional hub for sustainable and technology-driven industries.

Still, the road ahead is far from smooth. While China offers Egypt capital and expertise without overt political strings, this asymmetry is not without cost.

Egypt’s external debt has ballooned in recent years, surpassing US$164 billion in 2023. As of the end of the 2023/24 fiscal year, this amount was reduced to US$153 billion, yet it remained at 89.6% of GDP. Even if Chinese projects are financed through concessional or innovative mechanisms, the broader fiscal space remains constrained.

Stability, too, remains a concern. Egypt’s economy has long suffered from structural problems, now compounded by regional conflicts, persistent stagnation, and soaring inflation. While public frustration is growing and demands for change are rising, the path forward remains uncertain.

More importantly, China needs to place greater emphasis on environmental and social impact assessments. Critics warn that projects like the NAC, though impressive, may not yield short-term returns and risk siphoning attention from pressing environmental and social concerns. For example, Egypt faced a 7 billion cubic metre water deficit in 2021, per UNICEF, raising concerns about the impact of a high water-demand project in a water-scarce country, and its potential to exacerbate carbon footprints due to new infrastructure needs.

Sceptics also question whether the NAC will address the needs of poorer Egyptians living in underserved urban areas, as over 70% of Egyptian cities have low development potential. The project’s success is seen as a critical test for other Egyptian megaprojects like New Alamein and Ras El-Hekma, with concerns about affordability, accessibility, and sustainability lingering among environmental and social campaigners.

While China is not responsible for Egypt’s domestic priorities, its central role in financing and executing projects raises legitimate questions about the long-term sustainability of its development model, especially given similar criticisms directed at Belt and Road initiatives in parts of Africa and Southeast Asia.

Geopolitically, as Egypt deepens ties with China, it remains cautious not to alienate the US, its long-standing military ally. Since the 1978 peace treaty with Israel, Egypt has received over US$50 billion in US military aid, including US$1.3 billion annually in foreign military financing.

Cairo is clearly reluctant to over-rely on any single external partner, as doing so could undermine its strategic autonomy. The joint military drills “Eagles of Civilisation 2025” with China reflect Egypt’s attempt to diversify its security partnerships, and its diversification moves have drawn Washington’s attention. With global rivalries intensifying, Egypt’s hedging strategy will face growing stress tests. 

Finally, history offers a cautionary tale. The warmth of the 1950s gave way to decades of drift. Whether today’s golden age avoids a similar fate will depend on structural adjustments, policy continuity, and whether both sides remain committed beyond enthusiastic headlines.

For Egypt, the key challenge is to translate Chinese cooperation into broader national development, not just flagship infrastructure. For China, the test lies in adapting its overseas engagement to local realities and ensuring long-term benefit sharing. If managed wisely, this partnership could evolve into a promising model of global south collaboration.

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