China–Egypt Trade and the Letter-of-Credit Trap: How a 2022 Mandate Stranded $9.5 Billion of Imports — and How Importers Pay Now

Egypt buys far more from China than it sells back — roughly $17.4 billion of two-way trade in 2024, almost all of it flowing one way, from Chinese factories to Egyptian ports. The goods are the easy part. The hard part is the dollars to pay for them: in 2022, Egypt's letter-of-credit mandate stranded roughly $9.5 billion of imports at port because the banking system could not supply the foreign currency those letters of credit demanded. That episode — a dollar shortage turned into a physical pile-up of containers — is the clearest case study in how a payment instrument can become the bottleneck, and it still shapes how Egyptian importers pay Chinese suppliers today.

This page connects three things most coverage keeps separate: the China–Egypt trade volume, the mechanics of that 2022 letter-of-credit trap, and how Egyptian importers actually pay Chinese suppliers now. As of June 2026. None of this is financial or legal advice — it describes how the payment rails work and why they jam, not how to route around any country's exchange-control or anti-money-laundering rules.

How much do China and Egypt trade?

About $17.4 billion in total two-way trade in 2024 — and it is heavily one-directional. China exported roughly $16.8 billion of goods to Egypt — phones, yarn, cars, machinery — against only about $0.58 billion of Egyptian exports going the other way, per the SAIS-CARI China–Africa trade dataset, which compiles Chinese customs (GACC) figures. That is one of the most lopsided trade balances in the whole China–Africa corridor: for every dollar Egypt sells China, it buys back close to thirty.

One caveat on the headline number. The Atlantic Council has cited a China–Egypt trade figure closer to $13.2 billion, a difference that comes down to measurement baseline — which customs source, which direction, which year — not a factual dispute about whether the trade is large and import-heavy. We lead with the SAIS-CARI/GACC $17.4 billion because it is the most recent full-year, customs-based figure; treat both as dated, source-labeled points rather than stacking them. For the wider picture, China–Africa trade overall hit a record $348.05 billion in 2025, up 17.7% year-on-year, with Africa's deficit widening 64.5% to $102.01 billion, according to GACC data reported by Ecofin Agency in 2026. Egypt sits firmly on the surplus side of that ledger — a market China sells to far more than it buys from.

The figures in the table are plain customs and think-tank values; the gap between the $17.4B and $13.2B totals is a baseline difference, addressed above, not a contradiction in the underlying trade reality.

What was Egypt's 2022 letter-of-credit mandate?

It was a central-bank rule, imposed in February 2022, that required importers to pay for goods using letters of credit instead of the faster documentary-collection method most had been using. The Central Bank of Egypt's stated aim was to ration scarce foreign currency: a letter of credit forces the importer's bank to commit the dollars up front and vet the transaction before goods ship, giving the authorities a chokepoint to control how fast dollars left the country. In a dollar-short economy, that chokepoint became a wall.

The rule applied broadly to imports and effectively re-plumbed how Egyptian firms paid every foreign supplier, Chinese ones included. The intent was defensible — preserve reserves under acute strain. The effect was that legitimate, fully-ordered shipments could not be paid for, because the dollars the letters of credit demanded simply were not available in the banking system to commit.

How did the letter-of-credit mandate strand imports?

It froze payments badly enough that roughly $9.5 billion of goods piled up at Egyptian ports, unable to be released because importers could not secure the dollars their letters of credit required, according to The Maritime Executive's account of the port backlog. By late 2022 the government was clearing the pileup in tranches — releasing about $5 billion of goods between early and late December 2022 alone — a sign of just how large the jam had grown before the rules were eased.

The mechanism is worth being precise about, because it is the heart of the trap. The mandate did not make dollars appear; it made dollars mandatory to commit before a shipment could clear. So the shortage that the rule was meant to manage instead got expressed as a physical backlog — containers of phones, machinery, and inputs sitting at Port Said and Alexandria while the working capital behind them sat frozen. The Central Bank of Egypt finally moved to scrap the blanket letter-of-credit requirement in December 2022, as Ahram Online reported at the time, reverting many importers to documentary collection — but the episode left a lasting lesson about how a payment instrument can become the constraint.

What is a letter of credit, and why did it trap importers?

A letter of credit (LC) is a guarantee, issued by the importer's bank, that the seller will be paid once it presents documents proving the goods were shipped as agreed. It is one of the oldest and safest instruments in trade finance — but it only works if the importer's bank can actually commit the foreign currency behind it. That is the catch that sprang the trap in Egypt: the bank must set aside, or be ready to source, the full dollar value up front, and Egyptian banks in 2022 could not reliably do that.

By contrast, documentary collection — the method many importers used before the mandate — routes shipping documents between the banks but does not require the importer's bank to pre-commit the currency in the same binding way. So when Egypt forced everyone onto letters of credit during a dollar drought, it converted a financing convenience into a hard liquidity test that the banking system kept failing. The instrument was sound; the dollars to back it were missing.

How do Egyptian importers pay Chinese suppliers now?

Egyptian importers pay Chinese suppliers today through four channels: eased import rules, a far weaker but more available pound after Egypt's 2024 reforms, a renminbi swap line at the margin, and — increasingly — direct stablecoin settlement for the dollar leg. The single biggest change came in March 2024, when Egypt secured an $8 billion Extended Fund Facility (EFF) from the IMF — the original $3 billion programme augmented by $5 billion — and let the pound weaken sharply, as the IMF Executive Board confirmed on 29 March 2024. The currency fell more than 38% against the dollar in the early-March move that preceded the deal, per Bloomberg's reporting on the devaluation. A weaker, freer-floating pound is painful, but it restored some of the dollar liquidity that the letter-of-credit mandate had been built to ration.

Three things to know about how China payments specifically clear today:

• Letters of credit are back to normal use, but still demanding. US government trade analysis notes the pressure has not disappeared. As the US International Trade Administration's Egypt trade-financing guide put it (last published 21 November 2025):

"Tighter credit terms offered by the EU, Japan, and China have required importers to seek full LOCs or cash-in-advance payments for imports."

In other words, even after the reforms, Chinese suppliers often still require a full letter of credit — putting the importer back in front of the same dollar-commitment hurdle, just without a blanket government mandate forcing it.

• A renminbi swap line helps only at the margin. China and Egypt hold a bilateral local-currency swap line — reported at roughly RMB 30 billion — that lets a slice of trade settle in yuan rather than dollars. It eases pressure for the firms that can use it, but it is small relative to $17 billion of annual trade, and the dollar still settles the majority. The corridor-wide yuan-versus-dollar verdict is its own question, covered in does the renminbi settle China–Africa trade?
• Stablecoin settlement is now part of the mix. A growing number of importers route the dollar leg of a China payment through compliant, Treasury-backed stablecoin rails — settling a supplier directly in seconds rather than queuing for an LC line to be funded. For the rail-by-rail comparison on speed and cost, see stablecoin settlement vs SWIFT.

Is the dollar still the bottleneck for Egypt–China trade?

Yes. Even after the 2024 IMF programme, the devaluation, and the return to ordinary trade finance, dollar scarcity and the cost of moving money still slow Egyptian payments to Chinese suppliers. The reforms loosened the choke; they did not remove it. When a Chinese supplier insists on a full letter of credit — as the US trade guidance above documents many now do — the importer is straight back to needing a bank to commit scarce foreign currency before goods can ship.

The broader friction is structural and not unique to Egypt. Sub-Saharan and North African importers sit at the costly end of global payments: it costs 8.4–8.78% to send $200 from Sub-Saharan Africa, against a 3% G20 target, per the World Bank's Remittance Prices Worldwide data, while global banks cut 127 African correspondent-banking relationships in 2024–25, according to the Financial Stability Board, thinning the very rails that dollar payments run on. Egypt's letter-of-credit episode was an acute version of a chronic problem: the dollar is the unit the trade is priced in, and it is the unit hardest to get.

How do stablecoins bypass the letter-of-credit trap?

They let an importer settle a supplier payment in dollars directly, in seconds, without waiting for a bank to fund a letter-of-credit line. That is the precise failure mode Egypt's 2022 mandate exposed: roughly $9.5 billion of goods stranded at port not because the trade was unsound but because the banking system could not commit the dollars the letters of credit demanded. Treasury-backed stablecoins are digital dollars pegged 1:1 to the US dollar and backed by US Treasuries and cash held with regulated custodians. They are settlement infrastructure, not speculative crypto: the value is fixed to the dollar, the reserves are auditable, and the purpose is to move money, not to bet on price. Used through compliant, licensed channels with a full audit trail, they take the dollar leg of a China payment out of the LC queue entirely — the queue that, in 2022, became a quayside pile-up.

The shift is already visible in the data. Business-to-business stablecoin payments reached $226 billion globally in 2025, up 733% year on year, according to McKinsey's analysis with Artemis data — corporate settlement, not retail speculation. For the underlying mechanism — why dollar-backed digital rails relieve the shortage rather than dodge it — see how stablecoins solve dollar shortages in Africa.

Why is the dollar shortage the real constraint on China–Egypt trade — and how does Artoh fix it?

Because every other piece works: the goods ship, the banks process, the instrument is sound — but a letter of credit is only as good as the dollars the bank can commit to it, and in a dollar-short economy those dollars are the bottleneck. Egypt's letter-of-credit trap is the clearest illustration of that single point: the constraint on China–Egypt trade was never the goods, the shipping, or even the instrument — it was the dollars behind the instrument. A letter of credit is only as good as the foreign currency the bank can commit to it, and in a dollar-short economy that turned a routine payment into a year-long backlog at the quayside. Reforms eased it; they did not end the underlying scarcity, and Chinese suppliers still frequently demand full LCs.

This is the gap Artoh is built to close. We give businesses on the corridor direct USD liquidity and Treasury-backed stablecoin settlement: a compliant way to pay a Chinese supplier — or collect from a Chinese buyer — in seconds, with a full audit trail, instead of joining a letter-of-credit queue or a multi-day correspondent chain. It is not a bet on currencies, and it is not advice to route around any country's exchange-control or AML rules — it is faster, cheaper plumbing for the dollar leg you already have to settle. If your China trade is waiting on settlement — payables stuck behind an LC line, or receivables you cannot convert and move quickly — let's talk.

This article is for general information, not financial or legal advice. Trade and settlement figures are dated and attributed to their primary sources; verify current rules with a licensed advisor before acting.

Part of

China–Africa Trade in 2025: The $348 Billion Corridor and How It Gets Settled

Related in this series:

• China–Nigeria trade and the dollar gap: paying Chinese suppliers when dollars are scarce
• Does the renminbi settle China–Africa trade? A CIPS reality check
• China's EV and solar export wave into Africa

Further reading (reference): Stablecoin settlement in Egypt