China expands currency swap with Egypt as trade ties reach new heights
New factory and energy projects in Suez zone back gradual shift away from US dollar in bilateral investment
SCMP
Egypt’s expanded currency swap with China may help bring the yuan into wider use in trade and investment, but experts say any reduced reliance on the US dollar will not happen in a hurry.
The People’s Bank of China and the Central Bank of Egypt renewed the swap in June, extending it for three years and increasing its value from 18 billion yuan, also known as the renminbi.
In their statement, Xi and el-Sisi “welcomed the renewal of the local currency swap agreement and the expansion of its scale”, and encouraged Chinese and Egyptian financial institutions to support industrial and development investment, infrastructure and green and digital projects.
John Calabrese, a non-resident senior fellow at the Washington-based Middle East Institute, said “the reference to yuan use is probably significant”.
It signalled “an effort to deepen financial ties, reduce reliance on the dollar and advance the international use of the renminbi, mirroring what China is doing with other partners”, he said.
Egypt has faced recurring foreign currency shortages in recent years, although dollar availability has improved. Settling some trade in yuan could reduce the demand for dollars, but it will not resolve the country’s broader foreign currency needs, according to observers.
Lauren Johnston, a China-Africa specialist and senior research fellow at the AustChina Institute, described the expansion as a gradual step and more “a continuation than a revolution”, saying the swap was small compared with China’s arrangements with parties such as Indonesia or the European Central Bank.
“The key question is whether it is actually drawn down and used,” she said.
Yun Sun, a senior fellow and director of the China programme at the Stimson Centre, also said the yuan’s internationalisation would not happen in a single breakthrough.
“There is no determining moment but each step counts,” Sun said. “By creating more currency-swap partnerships, the renminbi is gradually extending its reach. It still faces significant headwinds, which makes the incremental approach even more important.”
Chinese customs data shows that Egypt imported nearly US$20 billion of goods from China in 2025 but exported only about US$819 million back.
Under the swap, each central bank can provide the other with its currency up to an agreed limit. Egyptian banks and companies could therefore obtain yuan for transactions with China without first buying US dollars.
Egypt raised 3.5 billion yuan in 2023 through Africa’s first sovereign sustainable panda bond, according to the African Development Bank.
The currency push also has an existing industrial base. By mid-2026, the China-Egypt TEDA Suez Economic and Trade Cooperation Zone had attracted more than 200 companies and more than US$4.7 billion in investment.
El-Sisi announced this week that the zone would enter a third expansion phase, with new factories and projects able to create more opportunities to use yuan and Egyptian pounds for investment, equipment and supplier payments.
The leaders also outlined the hub ambition for “industry, logistics, clean energy and the digital economy connecting Asia, Africa and Europe”. Proposed areas include electric vehicles, shipbuilding, renewable energy, desalination, agriculture, data centres, semiconductors, cybersecurity, aerospace and key mineral supply chains.
“Egypt is one of the potential winners from the reorganisation of global supply chains,” Johnston said. “It is close to Europe and the Middle East and also offers access to African markets.
“This could become one of China’s more advanced industrial clusters in Africa, supported by Egypt’s proximity to major markets, its Brics membership and its links to sub-Saharan Africa.”
The joint statement encouraged local production, training and technology exchanges.
“Egypt has the potential to develop its own production capability through the deal, but it depends on how the government captures the opportunity and negotiates arrangements that cultivate local capacity rather than simply turning the country into a conduit for Chinese exports,” Sun said.
“Instead of concentrating the gains and losses through exports, overseas production spreads them across more countries,” she said.