France and China to cooperate on development projects worth USD 1.7 billion in third countries
In February, following a virtual meeting between Xi Jinping and French President Emmanuel Macron, Paris and Beijing agreed to jointly build seven infrastructure projects worth over USD 1.7 billion. The groundwork for this development was laid in the 2015 Sino-French joint declaration on cooperation in third markets and seven years of discussions. The list of projects has not been published, but French newspaper Le Monde claims that six of the seven projects are in Africa - a water treatment plant in Senegal, 3 hydroelectric projects in Gabon, port renovation in Ivory Coast, and a road in Guinea, plus a wind energy project in Greece.
In recent years, enthusiasm for China-EU cooperation on infrastructure has waned in favor of competition. The EU’s Global Gateway, which seeks to leverage the EU’s own connectivity toolkit for strategic ends, has eclipsed efforts such as the China-EU connectivity platform, which seeks to foster cooperation on the same topic. However, France continues to quietly cooperate with China in state-led projects that further the fortunes of French companies overseas.
China strengthens ties with Saudi Arabia
Saudi Arabia is China’s biggest supplier of oil, and the two countries have become increasingly close over the past two years. In February, China Merchants Capital and the Silk Road Fund were part of an investor consortium that acquired a 49 percent stake in Aramco Gas Pipelines Company for USD 15.5 billion.
The economic relationship has become increasingly diversified, in line with Saudi ambitions for a post-oil future and Chinese interests in the Saudi renewables and construction markets. In February, Jinko Power Technology made a winning USD 209 million bid to develop a solar project in Saudi Arabia. In March, Saudi and Chinese firms formed a joint venture to manufacture military drones. Around the same time, three tech firms from Saudi Arabia and China signed an agreement to collaborate on the development of space technologies and artificial intelligence.
Saudi Arabia is also helping facilitate Chinese ambitions to internationalize the RMB; in March, reports emerged that Saudi Arabia is in talks to price some of its oil sales in RMB. After Riyadh issued an invitation in March, Saudi Arabia is even rumored to be the destination of Xi’s first international trip since January 2020.
DIGITAL, HEALTH AND TECH
Egypt and China sign agreement on vaccine cold storage
In January, Chinese vaccine maker SINOVAC Life Sciences Co., Ltd. signed a cooperation agreement with Egypt’s Holding Company for Biological Products and Vaccines (VACSERA) to establish a cold storage facility for vaccine storage in Egypt. VACSERA has manufactured around 30 million doses of Sinovac’s COVID-19 vaccine after signing agreements with Sinovac in 2021. VACSERA is expected to manufacture a 100 million more doses this year. The number falls well short of Egypt’s goal of manufacturing one billion doses annually, but it does advance Egypt’s ambition to become a regional Covid-19 vaccine hub.
Huawei continues energy pivot alongside global 5G rollout
In February, Huawei Technologies Co., Ltd signed cooperation agreements with Egyptian companies to promote digitalization in the oil and gas sector using Huawei systems. Huawei has shown increasing interest in the energy sector. It established Huawei Digital Power Technologies in June 2021 in an attempt to take advantage of growing demand for clean energy and diversify beyond the commercial damage caused by US sanctions. In March, Huawei Digital Power signed a cooperation agreement with Meinergy, a Ghanaian power company, to build what may become the largest solar storage project in Africa. Huawei has also had some more limited success in its signature domain of 5G technology. In December, the first commercial 5G network in Bangladesh came online using technical support from Huawei.
Belt and Road in space: China releases new space white paper
On January 28, the State Council Information Office released a new white paper detailing its Five-Year Plan for space exploration. The white paper lists ambitious projects, and lays out China’s ambitions for space governance and the integration of its space sector with the wider economy. The BRI gets several mentions, and the paper emphasizes cooperation with BRI partners in space through projects like the Pakistan Space Center and Egypt's Space City.
China’s State Grid wins contract for important wind project in German North Sea
In March, European transmission network operator Tennet issued a notice confirming that the contract for BorWin6, a grid connector for offshore wind farms in the German North Sea, had been won by an international consortium including China Electric Power Research Institute (CEPRI). CEPRI is a subsidiary of the State Grid Corporation of China, the largest utility company in the world. In 2018, a German government-owned bank blocked State Grid’s attempt to purchase a minority stake in grid operator 50Hertz over concerns about Chinese ownership of critical infrastructure.
China’s nuclear ambitions furthered with Argentina deal
In February, shortly before the Argentine president officially joined the BRI during a state visit to Beijing, the two countries also signed an agreement to construct Argentina’s fourth nuclear power plant. It will use Chinese finance and technology from China National Nuclear Corporation (CNNC). The USD 8 billion plant, Atucha III, will be the third nuclear power plant built outside of China using the home-grown Hualong One reactor. The other two are both in Pakistan. Karachi Nuclear Power Plant contains two Hualong One reactors, while another is under construction at the Chashma Nuclear Power Plant.
MANUFACTURING, CONSTRUCTION, AND RESOURCES
Chinese and French companies finalize USD 10 billion oil production deal with Uganda and Tanzania
In February, TotalEnergies SE and its partner China National Offshore Oil Corporation (CNOOC) reached a deal with Uganda and Tanzania to invest more than 10 billion USD in developing Uganda’s Lake Albert development project. The project will consist of oil fields, processing facilities, and one of the world’s largest export pipelines, running from landlocked Uganda, through Tanzania to the Indian Ocean. French and Ugandan environmental groups have confirmed they will continue legal action against the plans, saying the oil wells and pipeline would have catastrophic environmental consequences.
Chinese company to build plant in Finland to meet electric vehicle battery demand
In December, major Chinese battery material producer CNGR Advanced Material Co Ltd signed a shareholder agreement with Finnish Battery Chemicals (FBC) to establish a joint venture named Project 1 Oy. The joint venture will construct a EUR 200 million facility to produce lithium-cobalt-manganese oxide (NCM) precursor for the European electric vehicle (EV) battery market.
Tsingshan Holding Group crashes metals market after spiking nickel prices
The London Metal Exchange (LME) suspended trading on March 8 for the first time since 1985 to limit contagion caused by Tsingshan Holding Group, the world’s largest producer of nickel and steel. Tsingshan’s billionaire owner Xiang Guangda had taken a massive short position on the price of nickel, betting it would fall. Instead, prices climbed sharply higher after the invasion of Ukraine by Russia, the world’s third largest nicker supplier, which was then hit by punishing sanctions. Tsingshan tried to buy back its forward contracts, causing the nickel price to double in the space of a few hours. The LME resumed trading a week later after Tsingshan announced that it reached a “standstill agreement” with its creditors while it resolved its margin positions and settlement requirements. It is likely that Beijing will have to step in to rescue Tsingshan, which is a key BRI player with massive nickel investments in Indonesia.
Top battery maker urges China to secure lithium supply chain and new contracts show the process is underway
The chairman of the world’s largest battery maker, the Chinese company Contemporary Amperex Technology Ltd. (CATL) called on the Chinese government in March to strengthen its lithium supply chain, citing surging demand. Chinese companies appear to have already heeded the call; major lithium investments have been announced every month since at least September last year. In December, Zhejiang Huayou Cobalt paid USD 422 million to acquire the Arcadia hard rock lithium mine in Zimbabwe. In January, Zijin Mining Group Co. Ltd launched its first lithium exploration project in the Democratic Republic of Congo, and in February, Sinomine Resources Group announced that it had spent 180 million USD to gain control of the Bikita lithium mine project, also in Zimbabwe.
TRADE AND FINANCE
Xi Jinping pledges USD 500 million in grant assistance to Central Asia
Xi Jinping pledged USD 500 million in grant assistance to Central Asia during the January 25 virtual summit held to commemorate 30 years of relations between China and Central Asian countries. He said the funds were to “support livelihood programs.” The grant shows China’s growing economic role in Central Asia and reveals how its development assistance is evolving. Development finance has typically been aimed at infrastructure projects whose construction generated revenue for Chinese companies. However, in recent years the grant element of Chinese development finance has been steadily increasing. The Central Asian grant focuses on social programs, a shift towards “softer” elements of development that remains unusual for Chinese development aid.
Mammoth Asia-Pacific trade agreement enters into force; members include China but not the US
The Regional Comprehensive Economic Partnership (RCEP) entered into force on January 1, 2022. The mammoth free trade zone agreement, signed in November 2020, brings together 15 countries with roughly 30 percent of global GDP and one third of the world’s population. It consists of the ten Association of Southeast Asian Nations (ASEAN) plus Australia, China, Japan, New Zealand, and South Korea. Often framed as “China-led” and in opposition to the Obama-era Trans-Pacific Partnership (TPP) agreement, RCEP was in fact brokered by ASEAN. Nonetheless, RCEP will indeed help accelerate Asian economic integration without the United States, and strengthen China’s relations with its neighbors.
TRANSPORT AND LOGISTICS
Chinese consortium wins USD 2.76 billion contract to develop first portion of Philippines railway
In January, the Philippines signed a USD 2.76 billion USD contract for the first 360 kilometers of the PNR Bicol rail project with a Chinese joint venture of three companies, including China Railway Group Ltd. China’s ambassador to Manila said it was the “highest funded” government-to-government contract that China and the Philippines have signed.
Controversial China-built road finally opens to traffic in Uganda
The Kampala-Entebbe Expressway opened to traffic in January. Built by China Communications Construction Co. Ltd with a USD 350 million loan from the Export-Import Bank of China, work on the road began in 2012. It has missed its deadline by several years. Critics have objected to the high cost of the 51-kilometer toll-road, especially given the projected lack of traffic along the route.
French companies mull takeover of Chinese port contract in Tanzania
Tanzanian Newspaper ‘The Citizen’ reported in February that unnamed French companies will start talks with Tanzania’s government about construction of the revived Bagamoyo port project. A framework agreement for the USD 10 billion project was signed in 2013 with China Merchants Holding International (CMHI), but negotiations were shelved in 2019. Tanzania’s president said at that time that China’s conditions were “exploitative and awkward.” However, China may still be in with a chance of developing the port as Tanzania’s new president Samia Suluhu Hassan hinted in 2021 that new talks China Merchants were underway.