China has urged for an immediate halt to the attacks on civilian vessels in the Red Sea. These attacks have significantly escalated the conflict between Hamas and Israel and put China’s commercial interests at risk, especially along the Suez Canal.
The Houthi militia from Yemen, backed by Iran, has been challenging China’s ability to protect its strategic investments in Egypt, which amounts to billions of dollars. The militia’s anti-Israel stance threatens China’s investments and commercial activities in Egypt’s Suez Canal, through which a substantial amount of Chinese goods pass.
Investment and Trade
China has actively encouraged its state-owned companies to invest tens of billions of dollars in Egypt’s logistics, transport, and energy sectors. The American Enterprise Institute (AEI) think tank reports that China has also provided $3.1 billion in loans to Egypt. Furthermore, Chinese and Hong Kong firms pledged over $20 billion in various projects along the Suez Canal leading up to the recent attack by Hamas on Israel.
However, continued attacks in the Red Sea and Suez Canal could discourage commercial shipping and hinder the progress of Chinese investments in the region. For instance, state-owned shipping giant COSCO, together with other major shipping lines, suspended its services to Israel following the attack. COSCO had previously invested $1 billion in Egypt’s port infrastructure.
Another prominent Hong Kong-based conglomerate, CK Hutchison Holdings, announced plans to invest an additional $700 million in developing new container terminals in the Red Sea and Mediterranean ports. Likewise, Xinxing Ductile Iron Pipes expressed its intention to invest $2 billion in iron and steel plants in the Ain Sokhna region, further highlighting China’s commercial interests in Egypt.
In October, Egypt’s Suez Canal Economic Zone struck multi-billion-dollar deals with both China Energy and United Energy Group for the development of green ammonia and green hydrogen projects and the establishment of a potassium chloride production site, respectively.
In addition to economic concerns, China’s flagship Belt and Road Initiative (BRI) is also at stake. Egypt, Yemen, and Iran are all members of the BRI. While China has been adamant about not interfering in the domestic affairs of other countries, its response to issues among BRI members, particularly when it undermines the initiative’s objectives, remains uncertain.
Preserving Reputation
More is at stake for China than just financial interests. China is expected to demonstrate its meaningful involvement in the regional peacemaking efforts between Saudi Arabia and Iran in 2023. Chinese diplomat Wang Yi, who is currently visiting Egypt as part of his African tour, expressed Beijing’s desire to play a constructive role in addressing global issues.
The US officials believe that China can play a crucial role in restraining Iran and have reportedly urged China to use its influence to prevent the conflict between Hamas and Israel, considering Iran’s support for Hamas. The suspicion regarding China’s influence over Iran has arisen because Chinese vessels, including COSCO, continued to visit Israeli ports while other shipping lines rerouted their voyages away from the region. China imports about 10% of its crude oil from Iran.
Bloomberg reported that several vessels in the Red Sea displayed signals indicating “all Chinese crew” to avoid potential attacks. In Cairo, China’s Wang Yi has expressed support for a larger and more authoritative Israeli-Palestinian peace conference and the implementation of a two-state solution within a defined timeframe.
China appears to exercise restraint in its diplomatic efforts due to its policy of non-interference in the internal affairs of other nations. However, it also aspires to increase its international influence and power through diplomacy, as stated by Wang.
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