China in the Mediterranean: Beyond growing interests

Almost three years ago, Chinese President Xi Jinping proposed his ambitious plan “One Belt One Road” or (OBOR), that aim to connect China and Europe through terrestrial roads, railways and maritime lanes crossing Central Asia, Middle East and Africa. Since then, China’s economic interests are growing in areas alongside OBOR, particularly in the Mediterranean.

Certainly, a region with a population of over 520 million people, huge markets, and strategic location cannot be ignored. To be sure, in 2015, the Mediterranean countries as a block ranked China’s fourth-biggest market and the sixth-largest trading partner.

However, the Mediterranean region is large, diverse and composed of 23 countries and areas; which all differ in terms of population, languages, area, size of the economy, stages of development, political status and challenges. As a result, China does not have a common strategy towards the Mediterranean region and is dealing with each country bilaterally, but its policy toward the region still dominated by the economic factor, trade and investment in particular.

China has also growing military ties with Israel, Egypt, Algeria and Syria, but these relationships are still limited in their scoop. However, several countries in the region are looking to China as an alternative to balance their foreign policy, a market to sell their products, source of investments and in some cases to buy arms.

Considering this, China has shown a strong desire to invest in the Mediterranean countries. In the last decade (from January 2005 through June 2016), the combined value of China’s investment and construction in the region exceeded $ 129 billion, or around 10 percent of China’s total.

With nearly two-thirds of that amount concentrated in four countries only: France, Algeria, Italy and Egypt. Meanwhile, commercial exchange is also substantial; as the two-way trade volume between China and the Mediterranean countries reached over $ 209 billion in 2015 or around 5-6 percent of China’s total foreign trade. However, trade balance tilts considerably in favour of China.

Gate to Europe

According to the Chinese unofficial map the Mediterranean represents the western end of the Silk Road or “One Belt One Road.” In order to provide this road with a western maritime outlet, China stepped up its presence in the region by acquiring, building, modernizing, expanding and operating Mediterranean ports and terminals in Greece, Egypt, Algeria, Turkey and Israel.

However, Beijing bets big on Greece’s biggest port in Piraeus. China’s COSCO Shipping (China’s biggest shipping company which owns the world’s fourth-largest container shipping fleet) already bought 51 percent of Piraeus operating company for 280.5 million Euros ($ 315.5 million) with another 400 million Euros slated for investments to create China’s largest maritime hub in the Mediterranean and one of the world’s 30 largest container ports by 2018.

Importantly, to complement its western maritime strategy, China proposed plan to connect the port by railway to East and Central European countries; or as Chinese Premier Li Keqiang put it; Greece could be China’s “gateway to Europe”.

Meanwhile many Europeans’ are hopeful that the recent expanding of the Suez Canal could increase the centrality of the Mediterranean region and its main ports. Importantly, China is also building its first overseas logistical naval base in Djibouti. To be sure, around one fifth of China’s total trade, over 4 percent of China’s maritime oil imports and almost 4 percent of its liquefied natural gas (LNG) imports passed through Suez Canal (Red Sea) and Gulf of Aden (Bab-el- Mandeb).

Promising areas

Looking forward, several factors could further China’s engagement in the Mediterranean region. These include; trade, investments, financial integration (using Chinese currency), military cooperation, nuclear energy, and tourism. China’s GDP may add almost $ 7 trillion to hit over $ 18 trillion by 2021. Consequently, the country’s trade could rise by $ 1-1.5 trillion in the same period.

In the long term, China’s GDP could double again by 2030 as well as the trade. As a result, there is room for Mediterranean countries to improve their trade balance with China. Although the use of the Chinese currency renminbi (RMB) in cross-border trade transactions between China and Mediterranean countries is growing, it remains limited. Nonetheless, as trade grows and Beijing moves its currency towards greater convertibility, there is no doubt that the Mediterranean -China Renminbi swap line will grow considerably.

Beijing could also deepen its military ties with countries such as Egypt, Algeria, Syria, and possibly Turkey and Israel. Additionally, the civil nuclear programme is another important area for cooperation as Turkey, Egypt, Algeria and Jordan, all of which signed a memorandum of understanding (MoU) with China. Meanwhile, more than 4 million Chinese visited countries in the Mediterranean region. Countries such as France, Spain, Italy, Egypt, Tunisia, Morocco, and Turkey, which all have plans to attract more Chinese tourists.

Looking ahead

China’s expanding economic presence in the Mediterranean region and the importance of securing maritime lanes for its trade have given Beijing a new focus. The US Department of Defence’s 2016 report on the Chinese military noted that “China is expanding its access to foreign ports to pre-position the necessary logistics support to regularize and sustain deployments in the – far seas – waters as distant as the Indian Ocean, Mediterranean Sea, and Atlantic Ocean.

In late November, China publicly confirmed its intention to build military supporting facilities in Djibouti (...) This Chinese initiative both reflects and amplifies China’s growing geopolitical clout, extending the reach of its influence and armed forces.”

There is no doubt that with China’s economic, technological and military ascent there will be the potential for a comprehensive global power shift. With Beijing’s increasing dependence on the maritime lanes, it may seek to strengthen its military presence in the region and could open the way for strategic partnerships with several countries in the Mediterranean. However, this development could take years to materialize if it occurs at all.

Against this backdrop, there are also several factors that may adversely affect the development of relations between China and the Mediterranean countries including; China’s economic stagnation or sever slow-down, political and security concerns, especially in European countries, and political stability in several Mediterranean countries.

Additionally, Chinese companies have a “tendency” to bring their own materials and workers to overseas projects which could still sparks tensions with some host countries. Above all, protectionist policies and nationalistic sentiment could have a very negative impact.
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Dr. Naser Al-Tamimi is an independent UK-based Middle East researcher, political analyst, and commentator with particular research interests in energy politics and Gulf-Asia relations. Al-Tamimi is the author of the book, (China-Saudi Arabia Relations, 1990-2012: Marriage of Convenience or Strategic Alliance? Routledge, 2014). He has also carried out extensive research on various aspects of Middle East-China/Asia relations, Saudi Arabia in particular. AL-Tamimi has worked for numerous Arab media and academic institutions, in the United Kingdom and a number of Arab countries and has written several articles, papers, and chapters in English and Arabic, (available at: https://independent.academia.edu/nasertamimi) on the most pertinent political and economic issues affecting the Middle East. The writer can be reached at: Twitter: @nasertamimi