China encourages its industrial champions to invest internationally in countries considered friendly to produce and circumvent the obstacles placed on its products by Western nations.
Close to Europe and within reach of Africa, Algeria, one of those countries considered “friendly” by China, offers significant advantages to Chinese investors.
In Algiers, Chinese diplomats and companies are busy explaining the new Chinese policy on foreign investment. The strategy of the industrial giants of the former Middle Kingdom is to produce in Algeria in partnership with local companies to export to Europe, Africa, and even America.
For Chinese companies, now is the time to internationalize
“Chinese companies are convinced that we must get out of China. There is a policy of the Chinese government to favor Chinese companies to invest abroad, in friendly countries, to circumvent blockages, quota policies, and taxes on products put in place by Western countries,” explains TSA, an Algerian businessman.
🇩🇿🇨🇳 What a remarkable testimony from the Ambassador of #China to #Algeria, Mr. Li Jian, on the occasion of the 65th anniversary of diplomatic relations between the two countries. He highlighted the quality of bilateral relations, the genuine friendship that unites the two nations, as well as… pic.twitter.com/g2viSaGEsU
— Hana Ghezzar Bouakkaz (@GhezzarHana) September 17, 2024
This new orientation of Chinese leaders was once again confirmed during the traditional China-Africa summit held last week in Beijing, with always the same promise of shared prosperity between the Middle Kingdom and the African continent.
The advantages of producing in Algeria for China
With Algeria in particular, China has a lot to gain, but also to contribute. The win-win partnership between the two parties gradually materializes through investments in industrial and infrastructure projects. In addition to the proximity of Europe with which Algeria is linked by an association agreement, producing in Algeria offers two major advantages to Chinese companies
The first is the reduction in shipping costs for goods, the second is that the products are entirely Algerian, which means that they can escape the taxes and customs duties imposed by the West on Chinese products, as part of the trade war between the two parties. A strategy that Chinese companies are already applying in Mexico to reach the American market.
With the help of political understanding, Algeria has turned in recent years to China for the realization of several of its major development projects, such as the exploitation of the iron deposits of Gara Djebilet with in particular an investment of one billion dollars in an iron ore processing plant in Béchar. The Chinese are also involved in the exploitation of the Tébessa phosphate mine, the railways, the automobile industry.
The Chinese are only involved in housing and infrastructure projects as in the 2000s and 2010s.
The Chinese side is starting to bring capital and above all know-how that Algeria does not have. The Chinese, for example, have long experience in laying rails in desert environments and their technology is proving useful for similar projects underway in Algeria, a country which aims to mesh its Sahara and bring the train to Adrar and Tamanrasset.
The Chinese refuse to sell the technology. Their approach consists of producing locally in partnership with Algerian groups.
In consumer goods, Chinese companies are also gradually starting actual production in Algeria. In addition to the Italians who launched the vehicle assembly activity at the Fiat factory in Oran, the Chinese manufacturers Geely and Chery are also eagerly awaiting their units in production. Algeria relies heavily on Chinese know-how in the automobile industry which is increasingly asserting itself on world markets.
The Chinese automobile giant BYD could also begin the production of electric cars in Algeria as part of a partnership with Condor. The Chinese giant is discussing with the private Algerian group the possibility of setting up a vehicle production plant in Algeria, Condor boss Abderrahmane Benhamadi told TSA.
The know-how of Chinese companies is also asserting itself in household appliances and Condor plans to open a large compressor factory for refrigerators, still in partnership with a Chinese group, with which the Algerian group based in Bordj Bou Arreidj has many other projects, in mobile telephony and in the production of lithium batteries for electric cars and smartphones. Condor will launch another air conditioner production plant with the Chinese Hisense, the objective of which is to export to Europe.
Investments: Algeria is a “friendly” country for China
Algeria can benefit enormously from the capital and technology of Chinese operators to launch a real industry in cutting-edge technologies.
The authorities’ new strategy for the diversification of the economy focuses on encouraging certain agricultural and industrial sectors, startups and the knowledge economy, tourism, etc.
China has been able to take advantage of the relocation of their factories by large Western groups, attracted by the country’s assets, such as the availability of very expensive labor.
Today it is an industrial giant and world leader in several fields. The experience can be reproduced in Algeria, which has significant comparative advantages, through the installation of Chinese factories.
The Chinese also have a lot to gain from their presence in Algeria. Through, for example, the project to exploit the Gara Djebilet deposit, they aspire to reduce their dependence on iron ore and steel from Australia, the world’s leading producer.
The Tindouf mine has reserves which are among the largest in the world, around three billion tonnes. This is therefore a strategic investment for China.
In other industries too, it is not only Algeria that is winning. The new Chinese strategy is to install production units in countries with comparative advantages (to continue to produce at lower cost) and at the same time circumvent the obstacles that certain Western countries place in front of Chinese goods, notably through heavy customs taxation.
By producing in partnership and with a high rate of integration in Algeria, it and China will have everything to gain, the first by recovering jobs and diversifying its exports, the second by circumventing the pitfalls put in place by the Europeans and the Americans.
For the Chinese, it is also a way of reducing costs for certain products whose transport is expensive. This is the case, for example, with refrigerators, hence the interest in the project envisaged with the Condor group. Algeria also offers a direct gateway to the markets of North Africa, certain Arab countries, and sub-Saharan Africa.
