China and Cyprus have upgraded their relations to a strategic partnership. With an advanced geographical location connecting three continents and as an EU member and a strong transshipment hub, the Mediterranean island nation is expected to become an additional node on the China-initiated maritime silk road.
On November 30, 2021, China and Cyprus formally announced their strategic partnership on the 50th anniversary of the establishment of their diplomatic ties. The agreement was reached after a phone conversation between Chinese President Xi Jinping and Cypriot President Nicos Anastasiades.
China and Cyprus have agreed to upgrade the bilateral relationship to a strategic partnership and promote cooperation between China and the EU. The two sides will cooperate in areas, including economy and trade, telecommunications, transportation, and clean energy, and promote cultural and educational exchanges.
Analysts believe that China’s intention to enhance ties with Cyprus is closely linked to its Maritime Silk Road Initiative (MSRI), a component of the larger Belt and Road Initiative (BRI) framework.
The Republic of Cyprus is an island country in the eastern Mediterranean Sea, located in the south of Turkey; west of Syria; northwest of the Gaza Strip, Israel, and Lebanon; north of Egypt; and southeast of Greece.
Despite its small size (9,251 square kilometers) and small population (about 1,190,000), Cyprus is strategically located in the north-eastern corner of the Mediterranean basin, at the crossroads of Asia, Europe, and Africa.
Sitting at the intersection of major international and regional shipping lanes, even it has a relatively small size of foreign trade, it is regularly served by about 100 different routes. Vessels exiting the Suez Canal and entering European waters meet at Cyprus, the first European port.
Cyprus is one of the largest and most prominent ship management centers in the EU, home to some of the world’s leading names of the global shipping industry. Besides the unique geographical location, Cyprus’ advanced infrastructure and competitive shipping taxation, make it an ideal location for ship owning, ship management, ship chartering, and ancillary shipping-related services.
According to Invest Cyprus, the investment authority of the Government of Cyprus, Cyprus is a signatory to all major international maritime conventions and has bilateral cooperation agreements with 25 countries. In 2019, the number of Cyprus’ ship-management operators rose to 50, placing it at the top of this category in the EU. This island has the third-largest merchant fleet in Europe and the 11th largest globally. In 2020, Cyprus’ merchant fleet had more than 1,857 ships with 21 million in gross tonnage.
Cyprus has traditionally good political relations with China. In 1971, the two countries established diplomatic relations.
China sees Cyprus as “an important partner along the BRI”. In 2019, a Memorandum of Understanding (MOU) was signed between the two countries during Cypriot President Anastasiades’ visit to China. In 2015 and 2019, Cypriot President Anastasiades attended the Silk Road Conference of Asian Political Parties and the second Belt and Road Forum for International Cooperation.
According to China’s state media Xinhua agency, Cyprus adheres to the one-China principle (which doesn’t allow recognition of Taiwan) and supports the EU in actively developing cooperation with China. China also backs UN Security Council resolutions seeking reunification of Cyprus.
This year, China and Cyprus also developed health cooperation during the pandemic.
Cyprus has been a member of the European Union since May 2004. It pursues a neutral foreign policy of peace and stresses the importance of safeguarding national independence, sovereignty, unity, and territorial integrity. The country stays friendly with China and Russia and has signed a Double Taxation Avoidance (DTA) Agreement with Russia.
China is investing in port facilities and key large-scale infrastructure projects in the Eastern Mediterranean with an aim to build new trade links with the Eurasia-Africa regions and enhance ties with the European market, one of its largest trading partners.
Cyprus potentially constitutes a stop on the MSRI, connecting the Indian Ocean and the Mediterranean Sea through the Gulf of Suez and energy projects. The strategic partnership with Cyprus enables China to expand its footprint in the Mediterranean region.
Cyprus and China may be able to deepen cooperation in ports, sea transportation, and infrastructure construction to drive the local economy further. The island can be attractive for China to facilitate the delivery of goods from China to the growing markets in the Middle East, North Africa, and Europe.
The island’s location at the hub between Europe, Asia, and Africa will play a key role in China’s expanding footprint in the eastern Mediterranean due to its superior maritime location, developed shipping sector, gas reserves, and rich experience in financial services.
China can take advantage of the geographical advantages of Cyprus ports to facilitate and increase transit flows from China and the Far East to the EU, the Balkans, and the Black Sea region, and vice versa. Cyprus’s choice is likely to further increase the throughput of China’s land-sea express link with Europe.
Cyprus’s friendly attitude towards China and Russia may make it to develop as a mixed source of China and Russian funds for BRI development.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
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