How Jordan is stuck in billions of dollars in debt to China

After four years, the Chinese mega-mart in Jordan - Dragon Mall - has closed its doors. The 160 orientally-decorated stores and office spaces could not attract the business once hoped for the $20-million-worth project - built to serve as a reflection of China’s investments in Jordan.

Over the last decade, China has signed agreements for infrastructure projects in Jordan worth over $7 billion, including plans to construct a new Jordan-China university, a national railway network, and an oil pipeline to link Iraq and Jordan.

But as hope for the Dragon Mall’s success has faded, so too have China’s billion-dollar promises for massive development projects, the majority left as no more than ink on paper. 

Chinese investment in Jordan - what Beijing once saw as its “gateway” into the Levant - has been “a flop”, Jesse Marks, a non-resident fellow at the Washington-based Stimson Center, told The New Arab. 

"Over the last decade, China has signed agreements for infrastructure projects in Jordan worth over $7 billion, but the majority are no more than ink on paper"

One of the few Chinese projects that have actually materialised has left Jordan caught in a heated lawsuit to get out of a deal that would leave the resource-poor Kingdom billions of dollars in debt.

As per the current agreement for the construction of the Attarat power plant, a Chinese-built shale-oil power plant in the country’s southeast, Jordan must pay China $8.4 billion over a 30-year period, which, after the first two years of the plant’s operations, Jordan has barely managed to repay, according to the Associated Press. 

However, the removal of the contract would undermine one of China’s leading Belt and Road Initiative (BRI) projects, likely fuelling tension between Amman and Beijing.

So, the Attarat power plant - once set to be the largest BRI private infrastructure project outside of China -  has left Jordan between a rock and a hard place with Beijing, stuck in a lawsuit destined to end in frustration.

“I would not underestimate the extent to which this point of contention will impact the bilateral ties,” Marks stated, adding that in the coming period Jordan will likely put more weight on its relationship with the US and the West.

With the diplomatic hurdle on the horizon, last spring Jordan’s leading telecom companies all pivoted away from the Chinese telecom giant, Huawei, opting to partner with Swedish and Finnish companies for their 5G equipment. 

The moves to relinquish Huawei’s hold on Jordan’s telecommunications sector “should be linked to Jordan’s political vision”, Jordanian political analyst, Amer Sabaileh, told TNA. “Jordan is aligned with and depends completely on the US”.

Jordan 'outlier' among China's MENA investments

While Sino-Jordan ties have stagnated, the Kingdom is surrounded by countries where Chinese investment and cooperation have flourished. Jordan is an “interesting outlier” in China’s BRI Middle East case study, Marks said.

The failure of Chinese investment in Jordan is “what happens when a country who is used to dealing with one specific approach faces a newcomer”, Marks stated.

Jordan has grown accustomed to the decades of robust packages of economic and military assistance from the US, which are significantly different “in substance and approach” than China’s foreign aid, Marks added.

The assistance from China did not prioritise local contractors, as the aid from Washington tends to, and a series of imbalanced expectations of how the projects should be carried out meant the majority failed to materialise, he said. 

"The Attarat power plant - once set to be the largest BRI private infrastructure project outside of China -  has left Jordan between a rock and a hard place with Beijing, stuck in a lawsuit destined to end in frustration"

But Beijing has been expanding its investment ventures in the region, with the exception of Jordan. In 2021, MENA countries received the majority of China’s BRI investment projects, with Iraq the largest beneficiary of the year. And in 2022, Saudi Arabia hit the charts as the second largest beneficiary, raking in $5.6 billion. 

Today, amid the economic turndowns of the pandemic’s aftermath and the repercussions of the war in Ukraine, China has transitioned to “where it can get higher returns”, notably in the Gulf, Marks said. 

“Gulf Arab countries like Saudi Arabia and the UAE are huge priorities for Chinese engagement in the Middle East,” Robert Mogielnicki, a Senior Resident Scholar at the Arab Gulf States Institute in Washington, told TNA. “Jordan is on the periphery of this engagement,” he said.

But, Marks added, “we shouldn’t underestimate the extent that Chinese involvement in the Gulf is actually shaping China as a more accepted partner, at least economically in the region”.

Jordan-China trade booming

While China has focused its BRI development projects outside of Jordan, it has continued to bridge itself to the Kingdom through trade, with Amman remaining tied to Beijing by the ample opportunities for business.

“On a social and economic level, you cannot eliminate China,” said Sabaileh. “Where there are economic difficulties, China is a must,” he added. “In Jordan, things are getting worse, and people will become more dependent on what China can offer.”

Over the past 25 years, exports and imports to and from China have been rising at a rate of 13.5% and 14.1%, respectively, with China becoming Jordan’s second-largest import partner and third-largest trade partner, just behind Saudi Arabia and the United States.

The popularity of Chinese goods, like electric vehicles and Huawei smartphones, has boomed. In the first five months of the year, 90% of electric vehicles and 38% of all vehicles were imported from China, according to a recent announcement by a representative of the Jordan Free Zone Investor Commission, Jihad Abu Nasser.

Abu Nasser also highlighted the growing preference for Chinese vehicles due to their lower costs when compared to their American and European counterparts. Imports of the majority- Chinese-made electric vehicles have spiked 105.3%, from just 5,265 cars in 2022 to an impressive 10,803 cars in 2023, the report also noted.

“From telecommunications to electronics, China offers an alternative to people who don’t have the economic means,” Sabaileh said. “China is always there, and when there are economic difficulties, China appears.”

Saudi 'gateway' for China's return?

Improving Chinese-Saudi ties are an “important gateway” for China to enter Jordan’s market moving forward, even potentially at a strategic level, Marks said.

Saudi Arabia is Jordan’s largest investor, according to a 2020 report, and a major contributor of remittances to Jordan, and heightened Chinese investment is likely to catch the eye of the over 430,000 Jordanians who work in the Kingdom.

“It will give more confidence to businessmen and entrepreneurs in Jordan who want to start a company, to look more towards Beijing for everything from products to manufacturing, to investment,” he added.  

“The more people that depend on China, the greater the reach,” Sabaileh said, who added that as Chinese influence grows in the region, Jordanians are increasingly finding interest in studying Mandarin or living in China.

"China is testing its investments through Saudi Arabia. It can tune its engagement in Saudi Arabia before it enters other markets, like Jordan"

In a 2021 public opinion survey, 70% of Jordanians surveyed said they would like China to play a “much larger role” or “a larger role to some extent” in the region. Jordanians often see China favourably for its strong rhetoric in favour of Palestine; nearly half of those interviewed in the poll saw China as neutral in the Israel-Palestine conflict, differing greatly from their perceptions of the US’s pro-Israel role in the conflict.

“Now, China is testing its investments through Saudi Arabia. It can tune its engagement in Saudi Arabia before it enters other markets, like Jordan,” Marks said. 

So, as Chinese investment flourishes past Jordan’s southern border, Beijing may find the space to re-tackle the Jordan case - and maybe, another Dragon Mall will find a space in Jordan once again.

Hanna Davis is a freelance journalist reporting on politics, foreign policy, and humanitarian affairs.

Follow her on Twitter: @hannadavis341