China’s economic impact in the Arab world has soared since the Arab Spring but jobs haven’t

Chinese workers on the construction site of the new Great Mosque of Algiers, Algeria
Chinese workers on the construction site of the new Great Mosque of Algiers, Algeria
Image: REUTERS/Zohra Bensemra
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On this day, 10 years ago, a fruit and vegetable vendor in Tunisia stood in front of a municipal building shortly after local authorities confiscated his license to operate, doused himself in gasoline, and lit himself on fire.

That fatal act of self-immolation by the frustrated vendor, Mohammad Bouazizi, triggered the uprising in Tunisia that led to the fall of its long-ruling autocrat, Zine Abidine Ben Ali, and reverberated across the region in uprisings that led to the fall of “presidents for life” and dictators with a combined 100+ years of rule and raging civil wars in Libya and Syria.

Today, the regions most affected by the uprisings—the Levant and North Africa—still smolder and the basic conditions that prompted the wide-ranging protests—high unemployment, state corruption, poor governance, and lack of freedoms—have only grown.

If there has been one consistent theme in much of the region over the past decade, it has been youth frustration, economic underperformance, and poor governance. Another theme, however, has emerged quietly over the past decade, with potentially significant ramifications for the region’s economies: the rise of China as a major actor in regional economies.

From Algiers to Abu Dhabi, from Rabat to Riyadh, China has become either a top trade partner, leading source of investment, or both. All told, China’s trade with the Arab world approaches a whopping $245 billion, a roughly 700% increase since 2004.

Over the past decade, energy-hungry China has risen to the top of export destination rankings. In 2019, Saudi Arabia exported $47.6 billion of goods to China, mostly crude oil. By contrast, Saudi exports to the US stood at $13.3 billion. For Saudi Arabia, Iraq, Oman, and Kuwait—all US allies—China is their number one export destination.

Oil receipts that flow into Gulf Arab states support their national budgets and lubricate their economies, but they also have a larger effect on the region and broader emerging markets via remittances. Thus, China’s purchases of, say, Saudi crude or Qatari gas not only bolsters their bottom lines, but also supports the Arab and Asian workers that play a key role in their labor, service, and professional sectors—as well as the remittances they send home.

Young Arabs will need every job outlet they can find. On the eve of the Arab uprisings, nearly 30% of youth faced unemployment. That number has barely budged a decade later. For the tenth year in a row, in a wide-ranging, highly regarded survey of Arab youth, they listed unemployment as a top concern.

As 300 million young Arabs enter the workforce over the next 20 years, the region faces a jobs crunch that will add new stresses to the region’s many fault lines. According to the World Bank, Middle East and North Africa (MENA) economies are expected to contract by 5.2% in 2020, with only a modest recovery in 2021.

This spells continued trouble for the region’s looming jobs crunch. For a select few young, well-educated Arabs, they may find relief via jobs in Dubai or Doha, but the scale of the needs suggests that jobs must be created closer to home.

Seeking FDI

What of Chinese foreign direct investment (FDI)? Could that support jobs needs? China has emerged as one of the leading sources of foreign investment in the region. We know that foreign direct investment can be an important job creator, but the scale of needs hardly matches with China’s FDI numbers.

China’s “investments” in the region can seem like whopping sums, nearly $200 billion in total since 2005, according to AEI’s China Global Investment Tracker. But a closer look at the “investments” reveal that most are construction projects, not necessarily FDI, and they are focused heavily in the already wealthy oil and gas-rich Gulf Arab states. Those construction projects tend to employ tens of thousands of South Asians, but their impact on youth Arab unemployment is modest.

In two cases, however, Algeria and Egypt, China’s significant project investments have likely been a boost to local job creation. A 2012 Africa Development Bank study found Chinese investments in large-scale construction projects in Algeria and Egypt boosted employment for local workers without college education or advanced skills, but they did not make much of a dent in the more highly-skilled sector.

That may be changing, albeit modestly, as China expands its investment footprint in Egypt.

China views Egypt as a vital gateway to both Africa and Europe and has focused much of its attention on investments in the Suez Canal Economic Zone. John Calabrese, Director of the Middle East Asia Project at the Middle East Institute in Washington, notes that “this is not surprising, given that the Suez Canal is China’s primary shipping route to its largest market, Europe.”

China is now Egypt’s second most important source of greenfield FDI—the most intensive job creating type of foreign investment. FDI Intelligence notes that half of China’s investments into Egypt since 2015 have targeted manufacturing from consumer electrics and automotive parts to the food and beverage sector. In addition to manufacturing jobs created for Egyptians, these investments will also create managerial and marketing positions, as well as indirectly supporting associated businesses. Chinese tourists have also been flocking to Egypt in big numbers, boosting an industry that employs more than a million Egyptians.

Meanwhile, in Morocco, Chinese companies have pledged $1 billion to finance King Mohammad VI’s flagship project, Tangier Tech City. Launched in 2017, if the project comes to fruition, it will create much-needed jobs across the tech sector. In Algeria, Chinese investments have focused on construction, housing, and energy, and a steady stream of Chinese nationals have moved to the north African country, creating a large “Chinatown” in the capital, Algiers.

In a recent white paper on China’s ties with the Middle East and North Africa region, I concluded that China has emerged as the most significant geo-economic actor in many states across the region, including top US allies. A close examination of China’s projects in the region suggest a focus on major oil producers, with Egypt the sole exception.

The regional countries that make up what I call the $20 Billion-Plus club—countries that have recorded more than $20 billion in China investment and construction projects since 2005 – are Saudi Arabia, the United Arab Emirates, Egypt, Iran, Iraq, and Algeria. Not surprisingly, five of those six countries also hold China’s highest diplomatic status: A Comprehensive Strategic Partnership.

Those relationships will likely accelerate over the next decade, boosting economies and inevitably creating jobs. But robust trade and investment ties with China will not be a panacea to the major problem facing the region, a looming jobs crunch that will lead a new generation to cry out: “how am I supposed to make a living?”

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