China-Algeria friendship goes back to the Algerian war of Independence. China recognized the interim Algerian government as soon as in 1958, four years before full independence and also supported the liberation movement. Since then, the diplomatic ties between both countries have continued to grow, throughout the cold war, Algeria helping China to regain its seat at the UN and acting as an Ambassador to China in Africa. However, after a decade of civil war, it is especially since 2000 that bilateral trade has soared. Trade value estimated at $200 million in 2000, has boomed to over $8 billion in 2012. This change is mainly due to China’s direct investment in Algeria.
Indeed, China in 2012 accounts for 12,5% of Algeria’s global imports with $5,8 billion (just behind France with $6 billion), a 25% rise compared to 2011 (Algerian customs). China even overtook the historical colonial power in the first five months of 2012, only to be caught up by French wheat imports. On the other hand China remains far behind, in only tenth position of Algerian exports with a 3,6% share ($2,7 billion and an increase of 20%).
This can be explained by China’s poor share of Algeria’s oil and gas resources, which accounts for 97% of Algerian exports. Although open to foreign investment since the late 90s, the industry is dominated by US (mainly Anadarko) and European companies. China, which has been a net oil importer since 1993, has been trying to increase its presence through its two main state-controlled companies: Sinopec and CNPC (China National Petroleum Corporation also known as Petrochina). Algeria has the 3rd largest oil reserves in Africa after Libya and Nigeria and has an average capacity of 1,2 million barrel/day which makes it an envied partner. Both companies have invested in different oil fields in cooperation with Sonatrach the Algerian state-owned oil company. For example, Sinopec has a 75% stake in the Zarzaitine oil field since 2002 and CNPC has a 70% joint venture in the Adrar refinery (one of six Algerian refineries). However investment remains meager compared to western counterparts.
China’s main strength in Algeria is through its imports, mainly building material and textile. Since Mr Bouteflika launched a 500 billion petrodollar construction plan from 1999 to 2014, China has hunted down and been awarded many contracts, ranging from social housing, to the Foreign Office, the Constitutional Council, prisons, dams and luxury hotels (Sheraton Hotel in Algiers amongst others). China even imported and organized the 50th Algerian Independence anniversary fireworks display! Chinese companies have been collecting a vast number of building contracts, to the demise of western competitors for a number of reasons. Mainly, they usually offer low cost and short deadlines, very important since the post- Arab spring where visible results are expected swiftly. Also, China does not make human rights and corruption-free procedures a condition for investment. Everything is imported from China, from the material to the workers: companies frequently prefer Chinese workers to Algerians so that three teams interchange every 8h to work 24/7.
The greatest Chinese projects range from the Great airport of Algiers (Houari Boumedienne) completed in 2006 for $2,6 billion, to two-thirds of the East-West 1216km long motorway for over $11 billion and the new Algiers Great Mosque for over $1 billion. When completed, the mosque will be the 3rd largest in the world (after Mecca and Medina) with a library, a museum and a 270m high minaret. The Mosque project was expected to create 17000 jobs, namely for Algerians. The contract was awarded to CSCEC (China State Construction Engineering Corporation) in 2011, which is otherwise known for having built the Beijing National Aquatic Centre for the 2008 Olympics, and has also built the five largest hotels in Algeria. This Chinese construction company is ranked 3rd largest in the world, but suffers from negative publicity since the World Bank has disbarred it from bidding after corruption allegations in 2009. In an effort to complete the Mosque under Bouteflika’s reign, CSCEC has agreed to work quickly and cheaply, but on its own terms. In 2012, Air Algérie announced it had passed an agreement with CSCEC to transport at least 10000 Chinese workers on site. The employers argue that the Chinese workforce is more qualified, punctual and hard working than Algerians.
As a consequence, the building activity has attracted many Chinese workers throughout the decade, and the Chinese population in Algeria is now the largest in Africa, and Algiers has the only Chinatown in the Arab world (Boushaki in the Bab Ezzouar area east of Algiers). Official figures show that at least 40000 Chinese live in Algeria, making it the largest foreign community (local media suggest the number is closer to 100000). This massive immigration with entire Chinese families include construction workers but also many shopkeepers from southern China selling low-cost products, especially textile and electronics. Also, in the past 10 years, the Algerian customs have confiscated a soaring number of counterfeit goods, and in 2011, 95% were “made in China”. The counterfeit goods are primarily cosmetics, followed by clothes and textile. All these cheap products find their way to the very busy Chinese stores where the shopkeepers haggle in a mix of Mandarin, Arabic and French: shirts in Chinatown can be 5 times cheaper than in Algiers’ souk. The Chinese are generally accepted by the local population with variable feelings from admiration for their hard-working qualities to xenophobia especially from the unemployed (11% of the population in 2012, and up to 25% of youth). Tensions sometimes arise with disputes about religion and work, for example riots in 2010 against the Chinese population required police intervention. However the shopkeepers shake off this problem and rather stay because Algeria is as they say a “business haven”.
The upcoming 2013 partnership between both countries will be in the health field. Chinese medical aid also dates back to newly independent Algeria in 1963 when Chinese medical teams were sent to assist the country. After 50 years of growing medical cooperation, China is going to help Algeria become the new African pharmaceutical hub. China, the world’s first manufacturer of pharmaceutical raw material (drug ingredients and excipients, mostly made synthetically) is going to invest heavily in the sector and share its know-how. In exchange, the Algerian health minister Mr Ould Abbès has already promised important tax breaks for Chinese industries. Algeria, which today imports 75% of its medication, wishes to produce 70% of its drug consumption by 2020.
Although China’s boom in Algeria started a decade ago, its foundation was laid down 50 years ago when China was the first non-arab country to recognize Algerian independence and to send aid. Diplomatic and economic ties have since then been strengthened. This friendship is coined by the Chinese gift, to fund and build the $30 million Algiers Opera House (started in 2012). The trade boom, which will surely soon place Chinese imports in first place in front of France, is an unequal one. Chinese companies seldom employ Algerian workers and share their knowledge. The technological transfer and employment Algerians long for seems to come second to Chinese business objectives and the Algerian government’s haste for growth. The new grand pharmaceutical project might bring back balance.
For more information, please read this excellent 2012 brief by the African Development Bank (www.afdb.org)
Economic brief – China and North Africa