China will not shut the door to the outside world but will open it even wider.Xi Jinping1
1.1 Context and Motivation
Since the 2004 visit of China’s President, Hu Jintao , to Latin America, the growing relationship between the two regions has been appearing in the news across the world. This was the second visit of a President of the People’s Republic of China to Latin American countries in the twenty-first century, and its consequences are still impacting the dynamics of the world system. One of the most visible results of this visit was the explosion of the trade between China and Latin America; by 2010 it had reached levels rivalling that of EU-Japan trade, one of the traditional axes of the Triad, at the end of the 1990s. China had first engaged Latin America in the 1990s and trade between these mutually remote parts of the world was already on the rise. Since then, China has made deep inroads into the region diplomatically and culturally, even militarily, while everyone else was fixated on the eye-watering increase in the volume of trade (Shambaugh, 2014).
China’s penetration of Latin America and the Caribbean (LAC) has been so sudden as to seem miraculous; a short time ago it would have been unthinkable. “China’s metamorphosis into becoming the world’s largest and most rapidly developing economy is manifest in its soaring bi-lateral trade, its foreign direct investments (FDI), and the scope of political and commercial visits made in both directions across the Pacific” (Ratliff, 2012, p. 207). Its rapid supplantation of the US commercial (and latterly military) presence has raised both hopes and fears amongst peoples of the region. It will be in the end up to them whether the Chinese presence proves to be a boon or a bane to their future (Ratliff, 2012).
The importance China attaches to its relationship with Latin America was underscored in 2013, when Hu’s successor, Xi Jinping , who steered China on a very different course, nonetheless confirmed China’s commitment to the region by inaugurating his Presidency with state visits to Trinidad and Tobago, Costa Rica, and Mexico. Only after these visits did he finally make his way to the USA at the tail end of the trip. Many observers interpreted this, treating the USA like an afterthought, as a snub or at least a whiff of reordered priorities.
He met with at least 20 Latin American heads of state on this, his first tour. His most recent visit was to Ecuador, Peru, and Chile in November 2016. This was his third visit to the region. After just a few years in office he had already visited ten Latin American countries, “the same number as President Barack Obama, who [had] been in office twice as long” (Goodman, 2016, para. 3; see also Table 1.1).
Table 1.1
Visits by Chinese president Xi Jinping to Latin America (2013–2016) (adapted by authors)
Date | Political figure | Countries visited |
|---|---|---|
June 2013 | President Xi Jinping | Trinidad and Tobago, Costa Rica, and México |
July 2014 | President Xi Jinping | Brazil, Argentina, Venezuela, and Cuba |
November 2016 | President Xi Jinping | Ecuador, Peru, and Chile |
Despite the economic difficulties that Latin Americans have borne since the publication of the first edition of this book, the commodity price collapse and its aftermath, the one constant is China’s continuing engagement with Latin America, and its political will to give to the region the highest priority in foreign and trade policy.
Latin America and the Caribbean are of the highest strategic importance to China in the Great Game of geopolitics. The flourishing trade, FDI, and capital inflows into the region from China in the past 15 years testify to that. Four diplomatic milestones have been passed so far. The first was the China Ministry of Foreign Affair's white paper on LAC released in November 2008, spelling out China’s plan for its foreign relations with Latin America (FMPRC, 2008). An ambitious cooperation framework for 2015–2019, known as “1+3+6,” was the second milestone, announced in July 2014 by President Xi Jinping at the first Summit of Leaders of China and Latin America and the Caribbean, held in Brasilia. “1” means “one plan,” the China-Latin American Countries and Caribbean States Cooperation Plan (2015–2019). “3” means “three engines,” the development of China-Latin America practical cooperation on trade, investment and finance, which aims to scale up China-Latin America trade to US$500 billion and investment stock in Latin America up to US$250 billion within ten years with local currency settlement and currency swaps in bilateral trade. “6” means the “six fields” of industry: energy and resources, infrastructure construction, agriculture, manufacturing, scientific and technological innovation, and information technologies (FMPRC, 2014).
The third important diplomatic milestone was the adoption of the China-CELAC Cooperation Plan 2015–2019, the Beijing Declaration, and the Regulations of the China-CELAC Forum in January 2015 laying out proposed measures in 13 thematic areas “covering politics, security, trade, investment, finance, infrastructure, energy, resources, industry, agriculture, science, and people-to-people exchange” (Cui, 2016, p. 19). The fourth and latest milestone was the publication of the second white paper on LAC, launched to coincide with Xi Jinping’s visit to the region in November 2016 (FMPRC, 2016). This paper laid out a plan for the years up to 2020, based on the China-CELAC Forum’s China-Latin American and Caribbean Countries Cooperation Plan (2015–2019)—which featured “a continued concentration on natural resources and energy, but supplemented with upstream and downstream investments to create supply chains in related industries” (Ray & Gallagher, 2017, p. 1).
During the years 2000 to 2011, the China-Latin America trade relationship had already grown, sometimes at rates between 40% and 50% per year (World Bank, 2017a), a pace which has changed the shape of the globalising world economy. During that period around 40% of the FDI flows in the world were going to China and Latin America, four-fifths of the 50% that was going into emerging markets (UNCTAD, 2017). Multinational companies from both regions were becoming important players in world markets, and for the first time since the publication of the Brandt Report in 1980, a strong South-South trade axis has developed. Since then, the growth rate has levelled off owing to the financial crisis of 2008, yet all the necessary economic and political ingredients for a resumption of the previous trend-line remain intact.
The China-Latin America trade axis continues also to change the political landscape of the world. China has become a powerful contestant to the USA’s traditional influence in Latin America and to the EU presence as well. “In 2014, China overtook the European Union to become the region’s second largest trading partner after the US” (Huang, 2016, para. 5). While the commodity boom lasted, Latin America sought to leverage its position on the world stage by getting closer to China in order to form an axis of trade; and to diminish its economic dependence on the USA and the EU. Its economies grew at high rates between 2004 and 2014. This relationship seemed to benefit both China and Latin America. On China’s side, its companies have found in Latin American countries a growing middle class eager to consume their low- and medium-priced manufactures. On the Latin American side, their firms were able to sell agricultural products and minerals (where they have clear competitive advantages) into the big Chinese market without many of the restrictions imposed by the EU and the USA. The financial crisis that began in 2007 amplified these causes. China and Latin America hardly felt the impact of the crisis at first. They continued for a while to grow at high rates, a situation the reverse of the impact on the developed economies, the EU in particular. But since 2014 the economies of both China and Latin America have slowed (World Bank, 2017b), and at present it is hard to predict what the future relationship between China and Latin America will be.
These exceptional events and changes were the motivation for writing this book, which attempts to offer an objective analysis of the relationship between China and Latin America, including both past and current events. It features those trends which are currently emerging, and discusses what their likely future consequences are. It does this at three distinct levels: political, commercial and financial, and corporate. As it is a new phenomenon, the authors highlight some trends to watch and propose some possible scenarios. It is clear from the data in this book that the world is phasing into a configuration in which the influence of the USA, the EU, and Japan is waning while the weight and dynamism of China is waxing. Whether or not and regardless to what extent the rest of the global South, and especially Latin America, will participate in the new order, the trends are definitely reshaping the future of globalisation.
How did this extraordinary and extraordinarily rapid development come about? What were the Chinese doing and why were they doing it? On one level, the answer is obvious: China was following its age-old imperial tradition, which in essence hardly differs from any other superpower’s. It was treating Latin America as a peripheral source of critical raw materials to be expropriated to the centre (the “Middle Kingdom”), and converted into wealth and power. But questions linger: why now? how so suddenly? to which ultimate, concrete end?
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