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Monday, January 30, 2012
Perspectives

Latin America 2012: China’s Perspective

Brazil-China trade is expected to grow. Here Vale's Carajas iron ore mine. (Photo: Vale)


The outlook of China-Latin American economic relations in 2012.

BY JIANG SHIXUE

 

In 2012 the momentum of the development of China-Latin American economic relations in recent years will be maintained. On the Latin American side, demand for China’s cheap manufactured goods and investment is likely to increase as the region’s economy will continue to recover from the international financial crisis three years ago. On the Chinese side, its economy will also continue to grow at a rapid speed, sustaining its huge demand for raw materials and commodities from abroad.

 

The Chinese government has been increasingly emphasizing the so-called “going global” strategy, i.e., making investment abroad. Therefore, Chinese investment in Latin America and the Caribbean is expected to increase. However, past statistics show that a lion’s share of the Chinese investment in the region is found in the so-called tax heavens in the Caribbean. By the end of 2010, for instance, according to China’s Ministry of Commerce, total stock of Chinese investment in Latin America and the Caribbean was US$43.9 billion, out of which 92 percent, or US$40.5 billion, was located in the British Virgin Islands and the Cayman Islands. As a matter of fact, in the same year, the two Caribbean tax heavens were the second and the third largest foreign destinations of Chinese investment abroad, only after Hong Kong. This trend is unlikely to be reversed in 2012.

 

China exports to Latin America reached $121.7 billion last year, while China’s imports from Latin America reached $119.8 billion, resulting in total trade of $ 241.5 billion.

 

Increased economic exchanges also mean more opportunities of frictions. It is certain that many Latin American countries will continue to use anti-dumping to restrict Chinese exports. Only after 2016 when China will be automatically granted the market economy status will it witness less anti-dumping.

 

Brazil is reported to have overtaken Britain as the world’s sixth largest economy. Logically speaking, the rising position of the South American country on the world economic stage will facilitate its external relations with other large economies, including China, the world’s second largest.

 

In order to expand the bilateral economic ties, China needs to encourage its enterprises to make more investment and open the market more widely for Brazilian products. Brazil should restrain from applying anti-dumping against China and improve its investment environment for Chinese capital.

 

In 2012 there will be presidential elections in Venezuela.  China has no interest of intervening in any other country’s domestic affairs. No matter who wins the election there, China hopes that the excellent bilateral relations between China and Venezuela over the past decade should be further developed.

 

Jiang Shixue is a professor at the Chinese Academy of Social Sciences and Vice President of the Chinese Association of Latin American Studies. He wrote this perspective for Latin Business Chronicle.

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