Inroads in Algeria: The Promise and Perils of Beijing’s Localization Strategy

Executive Summary:

• The One Belt One Road initiative is evolving, with Chinese enterprises beginning to localize. In Algeria, this has led to increased exposure to the corruption and mismanagement that continue to plague the country’s economy.
• This is leading to tensions with Beijing’s pragmatic commitment to non-interference in other countries’ “internal affairs.” As a result of its localization strategy, Algeria’s “internal affairs” are increasingly the PRC’s problem too.
• The shift is especially evident in the digital domain. An agreement with Huawei to build Algeria’s first national-level data center would give Huawei, and by extension Beijing, a key role in the technological infrastructure underpinning Algerian public services. As Huawei shapes Algeria’s digital governance, the PRC gains not just economic access but increased influence over the state’s administrative and accountability mechanisms.

In June, the Algerian government confirmed it had abandoned its stalled partnership with the People’s Republic of China (PRC) to develop a deep-water port in El Hamdania, once envisioned as the second-largest shipping hub in Africa. Reports indicate that Algiers is instead soliciting additional investment for port modernization from the French shipping giant CMA CGM (L’Opinion, June 4; Arab Weekly, June 14; Radarr Africa, June 16). At first glance, the El Hamdania story has the hallmarks of a classic Belt-and-Road drama: a strategically located port and allegations of onerous financing conditions imposed by powerful state-owned enterprises (SOEs) against the backdrop of mounting competition between the PRC and Europe in the Mediterranean. But there is more to this story than geopolitical rivalry.

Beijing had its own reasons to be concerned about the project. Rampant corruption, poor management, and political interference by Algerian interest groups allegedly had hampered its development since Chinese SOEs took on the project in 2016, even as Beijing highlighted the port as an example of bilateral cooperation (Arabian Gulf Business Insight, March 19; PRC Ministry of Foreign Affairs [MFA], July 20, 2021). These concerns reflect the evolving nature of both Beijing’s relationship with Algeria and its approach to global engagement more broadly.

An emerging trend in PRC-Algeria relations in recent years has been the “localization” (属地化, 本地化) of Chinese enterprises, including the reduced reliance on a Chinese workforce and the establishment of subsidiary companies in the target country. Chinese localization in Algeria is still in its nascent phase and faces obstacles, but several factors are driving it forward, on both the Chinese and the Algerian side. While non-interference and a pragmatic willingness to work with the powers that be in Algeria have facilitated Chinese engagement in the past, one consequence of localization is increased exposure to domestic political risk and a greater stake in Algeria’s internal affairs. As Chinese enterprises become more intertwined with Algeria’s economy, their interests in improving governance and curbing corruption in Algeria will continue to grow, potentially straining the bilateral relationship.

From Comrades to Customers

PRC-Algeria relations have a layered history. The ruling parties in both countries—the National Liberation Front (FLN) and the Chinese Communist Party (CCP)—today claim a legacy of anticolonial struggle even as economic development has eclipsed their revolutionary ideologies. The PRC was the first non-Arab country to recognize the FLN’s provisional government during the war of independence against French colonial rule and provided arms, funds, and aviation training to support the new regime’s consolidation of power into the 1960s. In the 1970s, Beijing dispatched teams of doctors to aid Algeria’s nascent medical system. At the height of Beijing’s international isolation during the Maoist period, Algeria was one of the few countries that maintained close ties with Beijing. Algeria was one of the “two A’s” (两阿), along with Albania, who introduced a United Nations resolution to recognize Beijing as the government of China in 1971. Current foreign minister Wang Yi (王毅) has spoken of the need to “give new connotations to the two countries’ traditional friendship” (赋予两国传统友谊新内涵), affirming the enduring significance of this history while perhaps also hinting at the challenge of establishing a smooth economic relationship (MFA, 2021).

When the One Belt One Road (OBOR) initiative was launched in 2013, Algeria was a promising if remote prospective partner: strategically located at the nexus of European and African trade and supply chains, rich in hydrocarbons, and hungry for exports from the PRC, which had just surpassed France as the country’s largest trading partner (Middle East Institute, January 26, 2021). Since 2000, the PRC has primarily relied on Algeria as a source of energy, with oil and oil-related products consistently representing more than 90 percent of total imports (OEC, accessed August 6). Chinese exports to Algeria, meanwhile, skyrocketed over the early-to-mid 2000s and continued to surge into the 2010s (CEIC, accessed August 6). In 2014, Algeria became the first Arab state to enter into a “comprehensive strategic partnership” (全面战略合作) with the PRC, followed shortly thereafter by Egypt (MFA, June 7, 2014). Algeria was also the destination for a rapidly growing number of Chinese workers, whose presence peaked at around 90,000 in 2016, more than twice the next-largest in Africa (Angola) and dwarfing the rest of the continent (China-Africa Research Initiative [CARI], accessed August 6). That same year, the PRC and Algeria signed a framework agreement for cooperation across manufacturing, energy exploitation, iron, steel, and infrastructure (MFA, October 16, 2016). Chinese companies were managing some of Algeria’s largest and most iconic construction projects, including the Great Mosque of Algiers and the East-West Highway (Chatham House, December 3, 2020).

The Hirak Hiccup

2019 was a watershed in Algerian politics and the PRC-Algeria relationship. Beijing had previously regarded the Algerian regime as relatively sturdy, especially in comparison to its North African neighbors and several other Arab countries. Chinese analysts even dubbed Algeria an “eye of the storm” (风暴之眼) and an “island of stability” (稳定岛) amid the tumult of the Arab Spring “color revolutions” dreaded by Beijing (Global Times, December 8, 2014; Ci Zhigang, “Structural Analysis of Algeria’s Political Stability” [阿尔及利亚政治稳定结构分析], Arab World Studies [阿拉伯世界研究] no. 2, 2019: 19–33). However, a decline in oil prices in the 2010s led to diminished oil and gas revenues with which the regime could buy social peace. Corruption and nepotism plagued the political system; power remained concentrated in a nexus of military-political elites known colloquially as “Le Pouvoir;” and rising unemployment and poor public services fueled discontent. In February 2019, when the long-serving, 81-year-old president Abdelaziz Bouteflika announced he would seek a fifth term, peaceful demonstrations broke out and spread throughout the country (Ghanem, “A Protest Made in Algeria,” 2019).

Over the first year of the so-called “Hirak” (“movement”) protests, Algerian politics and society were thrown into chaos. Mass demonstrations took place in major cities on a regular basis, demanding the removal of the ruling elite, while Algerian authorities struggled to maintain legitimacy. The government responded with a mix of selective concessions and heavy-handed repression, including the imprisonment of hundreds of peaceful protesters and the use of tear gas, rubber bullets, and other weapons to disperse crowds (International Crisis Group, April 16, 2019; Human Rights Watch, February 21, 2022).

PRC-Algeria relations were not immune to this upheaval. The Algerian government suspended work on the El Hamdania project in early 2019 (International Trade Administration, March 29, 2020). Even as Algeria formalized its entry into OBOR in July of that year, the future of the relationship was clouded by political uncertainty (Xinhua, July 10, 2019). With its longtime partners in the FLN under pressure and no clear successor network in place, the PRC scaled back its engagement, signaling a risk-averse posture as the seemingly independent leadership consolidated power under newly elected president Abdelmadjid Tebboune. Exports to Algeria declined by 33 percent over 2018–2020, and the Chinese labor presence dropped sharply in 2020 and again in 2021, no doubt compounded by the COVID-19 pandemic (CEIC; CARI, accessed August 6). Financial flows to Algeria collapsed, from $34 million in 2017 to zero by 2019 (AidData, accessed August 6). The PRC also faced growing risk from its association with the Bouteflika presidency and its costly and allegedly corrupt projects, including the Grand Mosque of Algiers. Data from the Arab Barometer indicates that Algerian public opinion toward the PRC grew increasingly unfavorable after the onset of the Hirak protests (Arab Barometer, March–April, 2021). [1]

Algeria’s political-military elite ultimately managed to re-consolidate power, and the bilateral relationship with the PRC likewise restabilized. Beijing’s success in this respect was at least in part due to its avowed commitment to “non-interference” (不干涉) in what it considers other countries’ “internal affairs” (内部事务) and its willingness to quickly restore ties with the targets of pro-democracy demonstrators once it became clear that “Le Pouvoir” was, in effect, still in charge. At the height of the political unrest, Beijing had distinguished itself from other powers by backing the Algerian government, while France and the United States both implicitly leant their support to the demonstrators (U.S. State Department, December 13, 2019; Le Point, March 4, 2019). Its ability to maintain continuity stemmed not only from its diplomatic restraint but also from its pragmatic approach to economic engagement. The PRC remained an essential partner in infrastructure and technology to Algeria, giving Beijing an easy re-entry point once the dust had settled (Ministry of Commerce, December 12, 2024; MFA, October 21, 2020).

Toward Localization

The PRC’s post-Hirak engagement with Algeria has been marked by a combination of continuity and change. The country continues to pursue its energy and economic interests, importing Algerian hydrocarbons and exporting an increasing quantity of manufactured goods (CEIC, accessed August 6). In 2022, the PRC and Algeria signed a second five-year agreement under the framework of their comprehensive strategic partnership, which aims at strengthening cooperation across trade, energy, agriculture, science and technology, space, health, people-to-people exchanges, and culture, and to enhance coordination between the two countries’ development strategies (MFA, November 8, 2022). Investments in Algeria since have surged and are now estimated at nearly $4.5 billion, approaching the scale of its interests in Egypt ($9 billion) and Morocco ($10 billion) (The New York Times, May 7; Aljazeera, May 20).

The nature of the economic relationship is changing, however, by becoming more localized—part of a broader trend in the PRC’s economic engagement overseas. In the early stage of OBOR, most Chinese SOEs followed a familiar playbook of “going out” (走出去) to different countries: they secured contracts through international bidding, deployed Chinese work teams, and operated through their parent companies based in the PRC. This approach effectively transplanted domestic business practices to foreign markets with minimal adaptation. However, as OBOR engagement deepened, this model began to show its limits. Rising labor costs in the PRC and tightening visa regulations, coupled with labor protections abroad, made it increasingly difficult to rely on Chinese expatriate workforces. SOEs continued applying internal management practices that worked with the Chinese regulatory environment but often clashed with evolving local laws. For example, certain firms required employees to comply immediately with overtime notices, a practice that violated labor protections in some partner countries (International Engineering and Labor Magazine, January 30, 2023).

The term “localization” has been a part of OBOR rhetoric since the mid-2010s but has become more prominent in recent years (Xinhua, March 29, 2015). Chinese companies increasingly talk in terms of not just “going out” into the world but “going into” (走进去) other countries. This shift is in part a reflection of widespread concerns that OBOR is exploitative. Official sources cast localization as an example of how OBOR projects “strengthen implementation of environmental, social, and governance (ESG) principles, actively integrate into local society, realize self-sustainable development, and jointly build win-win cooperation for all parties” (践行环境、社会、公司治理（ESG）理念，积极融入当地社会，实现自身可持续发展，与共建各方合作共赢) (Xinhua National High-End Think Tank, “‘Belt and Road’ Development Studies: Exploring the Theory and Practice of Global Common Development” [“一带一路”发展学——全球共同发展的实践和理论探索], October 19, 2023).

Localization is more than a public relations exercise aimed at countering foreign allegations of “debt-trap diplomacy” and “Chinese neocolonialism” (Clark, “The Rise and Fall of the BRI,” April 6, 2023; Ping and Odota, “Will China Directly Intervene to Protect Its Investments in Africa,” October 25, 2024). Country-specific investment guides published annually by the PRC Ministry of Commerce offer insight into how the government encourages firms to seek out opportunities overseas. [2] Guides for Algeria published between 2018 and 2024 consistently call on SOEs to adapt to local market conditions and establish on-the-ground subbranches. In the 2018 guide, China State Construction Engineering Corporation (CSCEC; 中国建筑集团) was the sole featured example of a Chinese SOE executing localization by training and employing local workforce. By 2021, these practices were much more common.

As localization efforts deepen, Beijing’s commitment to “non-interference” and its long-held aversion to engaging in countries’ “internal affairs” have begun to blur. Corruption, bureaucratic opacity, and regulatory unpredictability are now issues that can directly impact the profitability and viability of Chinese enterprises. The 2023 investment guide for Algeria openly acknowledges these problems, pointing to opaque policies as one of the main obstacles that hinder SOEs’ commercial operations. It also includes frank assessments of the deleterious effects of increased corruption and social unrest (Ministry of Commerce, March 14, 2023). Evaluations from Chinese advisory firms also offer candid reporting on Algeria’s rigid political system, limited transparency, and lack of institutional reform as barriers to effective cooperation (GoalFore Advisory, November 1, 2019; Cuiquanqiu, May 27, 2024; Tiandiren Law Firm, June 13, 2024).

These official and private assessments suggest that the PRC is no longer indifferent to how Algeria is governed. The shift is especially evident in the digital domain. In April 2024, the Algerian High Committee for Digitalization signed an agreement with Huawei to build the country’s first national-level data center (Ministry of Commerce, May 8, 2024). The project, which is set to connect ministries and support a unified government cloud platform, would give Huawei, and by extension Beijing, a key role in the technological infrastructure underpinning Algerian public services. One month later, the head of the committee, Meriam Ben Mouloud, visited Beijing to deepen cooperation (Algerian Ministry of Foreign Affairs, May 16, 2024). Though presented as technical assistance, the initiative they signed quietly binds the PRC more closely to the inner workings of the Algerian state. As Huawei shapes Algeria’s digital governance, the PRC gains not just economic access but increased influence over the state’s administrative and accountability mechanisms. In effect, the more localization advances, the more Algeria’s internal governance becomes the PRC’s business, whether Beijing admits it or not.

Conclusion

The OBOR initiative is widely understood to be a pillar of the PRC’s grand strategy and is often analyzed from a geopolitical perspective as a result. The trajectory of PRC-Algeria relations instead indicates the need to examine not just the reach of Chinese influence but also the nature of that influence within OBOR partner countries. The strengthening economic relationship in the 2010s, which has picked up again after the Hirak upheaval in 2019–2020, are testaments to the advantages of Beijing’s pragmatic commitment to non-interference in other countries’ “internal affairs.” Yet, as Chinese enterprises have begun to localize in Algeria in the 2020s, they have increased their exposure to the corruption and mismanagement that continue to plague Algeria’s economy. Algeria’s “internal affairs” are increasingly the PRC’s problem too.

The dynamics of localization hint at an overlooked factor driving the PRC’s interest in digital governance and promotion of various “global governance” (全球治理) mechanisms. These efforts enhance the PRC’s status on the world stage and promise direct influence over the shaping and codification of new global norms. At the same time, its growing economic stake in efficient, predictable, well-run institutions in other countries is leading to new concerns about governance overseas. Beijing is not on a path toward conditioning aid and development assistance on political reform and promotion of liberal values, but not everything that a regime may consider its “internal affairs” is a matter of repression. Even if one takes freedom of expression and other rights out of the equation, Chinese enterprises may find themselves increasingly frustrated with the way Algeria is governed and increasingly tempted to ask Beijing to take action and intervene on their behalf.

Notes

[1] Respondents ranked China lowest in terms of perceived project quality and showed declining support for awarding infrastructure contracts to Chinese firms—a notable shift from the results from 2018–19, when many Algerians viewed China more favorably than other powers, including the United States and Russia, and expressed greater interest in deepening economic ties with Beijing. The question concerning contracted project quality by country appeared on Arab barometer Wave 6 Part 3 as Question 727. In terms of project quality, Germany, US, and Turkey are viewed with the highest quality. China only has 11.5 percent of respondents think it has the best quality. However, when it comes to lowest quality, China has the most votes with 39.4 percent of respondents thinking it is the worst, followed by Germany (13.9 percent) and the United States (11.8 percent) (Arab Barometer, March–April, 2021)

[2] First published in 2009, these guides were initially limited to few countries with strong trade ties to China (Chinese State Council Information Office, October 22, 2014). However, as OBOR took off in 2013, state-endorsed investment guidance became an important component to China’s foreign policy. Concurrently, the scope of the country-specific investment guide also expanded significantly to include more OBOR signatories. As of 2024, the guides cover 180 countries and regions. While the guides started much earlier, they are currently published under the OBOR section of the Chinese Ministry of Commerce’s website, implying an institutional signal that Beijing sees them as part of the broader toolkit for pushing Chinese firms outward under state guidance under the greater scheme of OBOR (Chinese Ministry of Commerce, December 12, 2024). While the guides are broadly quoted by other governmental agencies and external organizations for analysis, the target audience of the guides are Chinese companies seeking to export, invest, or secure construction contracts abroad, referencing the guides as an official overview of the political and commercial circumstances they are entering (China International Development Cooperation Agency, May 21).