China Power | Economy | East Asia

Why Egypt Is Looking Beyond Its Trade Deficit With China

Trade access matters, but investment can also change what Africa produces, where it produces it, and which markets it can serve.

Egyptian President Abdel Fattah El-Sisi holds talks with Chinese President Xi Jinping at Al-Ittihadiya Palace, Cairo, Egypt, Sep. 2, 2026.

When Chinese President Xi Jinping visited Egypt from September 1-2, much of the international attention focused on the security and geopolitical significance of the moment. The visit came amid continued instability across the Middle East and was widely interpreted in the context of China’s expanding regional engagement and growing diplomatic role in an area historically shaped by significant U.S. involvement. 

Security considerations are undoubtedly an important dimension of the relationship. Yet they are not the only lens through which to understand China-Egypt ties.

Egypt’s importance in Africa-China relations is also rooted in the longevity of its diplomatic ties with China. On May 30, 1956, Egypt became both the first African and the first Arab country to establish diplomatic relations with the People’s Republic of China. That was more than two decades before the establishment of China-U.S. diplomatic relations. In 2014 China and Egypt elevated their relationship to a Comprehensive Strategic Partnership. 

Beyond the diplomatic history, the China-Egypt economic relationship is nuanced, but hugely significant – something, in a sense, for other African countries to aspire to. That said, the aspiration should not necessarily focus on the trade relationship. 

China has become one of Egypt’s most important trading partners, but even under the circumstances of an extremely mature relationship, the bilateral trade balance remains heavily tilted toward China. This is true even though Egypt is Africa’s second largest economy (the largest, South Africa, also runs a persistent trade deficit with China). 

According to Chinese customs data., during the first half of 2026 Egypt exported around $596 million worth of goods to China, while imports from China reached $11.2 billion, leaving a substantial bilateral trade deficit. 

But Egypt is not necessarily unhappy about this – certainly not to the degree that many G7 countries have been complaining about in their China relationship. Indeed, a large trade deficit is a problem, but it does not by itself determine whether the wider relationship is economically productive. Trade captures flows of goods; investment can influence where and how those goods are produced, creating value and productive capacity even when the resulting products can ultimately be sold to markets beyond China.

Egypt exported around $131 million worth of goods to China in June 2026, the first full calendar month after China introduced its zero-tariff treatment for products from African countries, compared with around $79 million in June 2025, an increase of 66.9 percent year-on-year. Although it is too early to establish whether the policy will produce a sustained shift in Egypt’s export performance, still the growth is encouraging. Monthly exports have historically fluctuated with recurring peaks and troughs across the year, but the broader trajectory has been upward. 

Egypt realizes that agricultural processing, mineral beneficiation, and greater value addition are important not only for increasing exports to China, but for capturing more value along the entire supply chain. 

This is where the Egypt and China investment relationship matters, and it tells a very interesting story. Chinese investment in Africa is spread across the continent; the share of China’s total investment stock within Africa in Egypt specifically is modest, at 3.2 percent in 2024. Yet the stock of Chinese direct investment in Egypt has increased consistently since 2017, unlike many other countries, reaching $1.4 billion in 2024. 

More recent figures point to a significant acceleration in new investment. According to Mustafa Ibrahim, vice chairman of the Egyptian-Chinese Business Council, Egypt attracted between $1.5 billion and $2 billion in new Chinese investment during the first half of 2026 – more than the total Chinese investment stock in Egypt as of 2024.

This suggests that Egypt’s attractiveness to Chinese investors is not tied only to individual investment cycles, but increasingly reflects structural advantages, including its connectivity, market access and industrial platforms.

The key to Egypt’s attractiveness has been........

© The Diplomat