In what ways has Cyprus strengthened its relationship with China, and which economic sectors provide the most investment potential at the moment? How can Cyprus facilitate more business from China and make itself even more attractive to Chinese investors?
Cyprus and China established official diplomatic relations in 1971 and since then the two countries have been working to steadily strengthen their economic, trade and investment relations through initiatives and strategic collaborations in several key areas. Moreover, through the years both sides have expressed willingness to actively encourage their business sectors to utilise all available platforms in promoting bilateral cooperation.
In 2019, China and Cyprus signed a government-level Memorandum of Understanding pushing forward practical cooperation between the two countries. In addition, in November 2021 there was a formal Joint Statement between the People’s Republic of China and the Republic of Cyprus on the establishment of a strategic partnership. This partnership has opened avenues for collaboration across various sectors, enhancing mutual growth and investment opportunities.
Cyprus has, in fact, entered into several agreements with China, including economic cooperation and investment treaties, which facilitate trade and investment, promoting the island as an attractive destination for Chinese investors. In addition, initiatives to foster cultural understanding have laid the groundwork for stronger business ties.
Located at the crossroads of Europe, Asia and Africa and as an EU Member State, Cyprus serves as an ideal jurisdiction for Chinese businesses to establish European and worldwide presence. Amongst others, Cyprus offers high-quality professional services, modern and transparent legal, tax and regulatory frameworks, an extensive network of double tax treaties and a highly educated, multilingual workforce.
Unsurprisingly, the trade balance between the two countries is significantly in China’s favour. Cyprus primarily imports manufactured goods, electronics, machinery, and textiles from China, whereas its exports include dairy products (especially halloumi cheese), wine, and certain manufactured goods. Pharmaceuticals, particularly generics produced by Cypriot companies, have also found a growing market in China. Efforts are ongoing for Cyprus to similarly enhance its agricultural exports to China, mostly in high-quality food products, which are increasingly in demand in the Chinese market.
As Cyprus seeks to diversify its economy, there is potential for further collaboration in sectors like financial services, shipping, maritime services, renewable energy, tourism, and education, where Cyprus could benefit from Chinese investment and synergies. For instance, with a focus on sustainability, collaborations in solar and wind energy projects could be mutually beneficial, since China is considered to be the leader in both sectors.
Recently, China and Cyprus have also signed a Memorandum of Understanding on bilateral air rights arrangements and have drafted a bilateral air transport agreement. The provisions of both documents can help boost the exchanges of tourists between the two countries, which can also benefit from partnerships forged by Cypriot and Chinese travel agencies.
Cyprus is a prominent shipmanagement centre in the EU, hosting a significant number of global shipping companies. It has the third-largest merchant fleet in Europe and a well-structured service providing system for fleet needs, making it an attractive hub for Chinese investments in maritime logistics and shipping services. In addition, the island’s strategic location at the crossroads of major shipping routes enhances its role as a transshipment hub, facilitating trade between Asia, Europe, and Africa.
At the same time, Cyprus’ developed financial services sector can attract Chinese investors looking for a stable and accommodating business environment. The competitive tax framework is particularly appealing, and the Cypriot tech sector presents opportunities for collaboration, particularly in fintech and smart city initiatives. Overall, the economic relationship between Cyprus and China is not only mutually beneficial, but also aligns with broader geopolitical and economic interests.
