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From issue: China's Global Rise: Implications for the Americas (Winter 2012)

AQ Feature

Much in Common

A senior Shanghai scholar says China poses no threat to the region.

China and Latin America may be distant geographically, but they share a long history of friendship and common challenges. Both are at similar stages of development, and both seek more development. As our economies grow closer, we are pursuing even greater opportunities for mutual understanding and closer cooperation.

The Chinese government views its relations with Latin America and the Caribbean strategically, and from this perspective it is seeking to build a comprehensive and cooperative partnership of equality, mutual benefit and common development.

The past decade has witnessed dramatic progress in China–Latin America relations. What began as primarily a trade relationship—in which two-way trade has grown exponentially—has developed into a multifaceted relationship. Exchanges of high-level visitors occur regularly. China has established strategic partnerships with Brazil, Argentina, Mexico, Chile, and Venezuela. Communication between China and Latin America has expanded dialogue and exchanges at all levels of government. New channels have opened for people-to-people exchanges. And many countries now collaborate in multilateral institutions and forums.

China and Latin America share common or similar positions on many issues. China and the emerging powers in Latin America now consult, coordinate and collaborate well in many formal and informal multilateral forums like the grouping of BRIC (Brazil, Russia, India, and China) countries, the G20, the United Nations Conference on Climate Change, and the UN Conference on Environment and Sustainable Development. These pragmatic trade and economic relationships have not only consolidated political relations; they have brought tangible benefit to the well-being of both peoples.

China has signed free-trade agreements with Chile, Peru and Costa Rica. It has become one of Latin America’s major trade partners, and the number-one trade partner of Brazil and Chile. The pattern of trade has deepened and continues to improve. With the aim of realizing economic complementarity, it is based on the principle of mutual benefit and sustainable development for both sides.

China’s demand for energy, agricultural products and minerals has grown as China’s economy and standard of living have grown. The mix of these products accounts for the largest share of Latin America’s exports to China. But at the same time, Latin American countries are also invested in the high-end potential of China’s economic development and its ever-growing market demand. These offer the opportunity for Latin America and the Caribbean producers to improve the quality of their economic and trade cooperation with China by taking advantage of their rich energy and mineral resources and their relatively developed agricultural products.

Supporters await Chinese President Hu Jintao outside the Argentine National Congress. (Daniel Luna/AP)
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The progress achieved through our cooperation is obvious. In 2010, the volume of trade between China and Latin America and the Caribbean reached $183 billion, and China’s nonfinancial investment in the region reached $11.09 billion.

The diversification of trade with China has served Latin America well in recent years. A stable and healthy Chinese economy contributed to Latin America’s—and much of the world’s—ability to avoid the destabilizing effects of global financial fluctuation and recession.

Latin America and the Caribbean on China's "Strategic Plane"

Chile was the first Latin American country to establish diplomatic relations with China, the first to enter into negotiations for China’s accession to the World Trade Organization (WTO), and the first to sign a free-trade agreement with China. Brazil is now on a fast track of developing comprehensive relations with China. Not only is it China’s most important Latin American partner in terms of investment and trade, Brazil also has engaged in high-tech cooperation. We are currently jointly developing a satellite, which is the best example to date of South-South cooperation in aviation and technology.

As a reflection of these growing relations, in November 2008 the Chinese government released its first-ever strategy paper on its relations with the region. According to China’s policy paper on Latin America and the Caribbean, China has three political, economic and cultural objectives in developing the relationship: 1) politically, to support each other and become reliable and all-weather friends; 2) economically, to realize complementary advantages and become cooperation partners based on mutual benefit and new issues; and 3) culturally, to communicate closely and to establish a constructive pattern of dialogue.

China has played, and will continue to play, the role of a responsible power in global development. In a speech commemorating the 90th anniversary of the founding of the Chinese Communist Party, President Hu Jintao said that China has sought this role through a policy of pursuing “reform and opening-up, seeking economic development and improving the well-being of the people.” Because it believes that this path is a positive one, China welcomes all countries to participate in China’s development, and to share China’s development opportunity. By doing so, China will share its prosperity with people all over the world.

This year China starts its 12th Five-Year Program. The program seeks to further implement a strategy of mutual benefit. This includes enhancing the level of our opening to the outside world; improving the structure and dynamic of foreign trade; improving the efficiency of foreign investment; accelerating China’s strategy of “Going Out”; and actively promoting global economic governance and regional cooperation. The program also supports development and trade by increasing China’s openness to the global economy, and it actively creates new comparative advantages for China to engage in international economic cooperation and competition.

China is well positioned to do this. Globally it has become the largest exporter, the second-largest importer and the second-largest economy in the world. In terms of innovation, it is the world’s fourth-largest holder of patents.

Regionally, China has become the third-largest trade partner of Latin America, and Latin America has become the fastest growing destination of Chinese imports. All Latin American countries, regardless of size, political system, development model or level, seek political stability, economic development and the well-being of their people. This is true of China as well. Pursuing the goals of economic development and improving the standard of living has become the foundation and condition for greater cooperation between China and Latin America.

Observers and policymakers in the region have declared with confidence that this is the decade of Latin America and its development. They believe that the world economic recovery will largely depend on Asia and Latin America, and the Latin American countries, especially the large powers in South America, will embrace this great opportunity for development. The coordination between economic growth and poverty reduction will be the defining feature of the Latin American decade.

For example, the Brazilian government has announced its second Growth Acceleration Plan, which involves the investment of 955 billion reais ($534 billion) in infrastructure construction. Similarly, the Argentine government has announced a 2020 Strategic Industrial Plan that outlines a blueprint for the country’s development.

Meeting those plans for domestic development will require foreign investment to compensate for the shortage of domestic savings.  At a time when China is turning to its own strategy of “Going Out”—which includes using its vast foreign exchange reserves more efficiently and strengthening economic relations with the world— the region’s goals offer much in the way of mutual interest for China and Latin America.

Still, the China–Latin America relationship will face various challenges in the future. The uncertainties in the world economy, including the financial and currency turbulence caused by the debt crisis in the West, could affect both sides. Other challenges include the severe disparity in development between the North and the South; the rising pressure of inflation in China and Latin America fueled in part by the rising prices of international commodities; the excess of international liquidity; and the huge cross-border inflow and outflow of funds. China and Latin American countries are also facing shifts in their industrial structure caused by the integration in the global economy and the challenge of building infrastructure to meet new needs.

To further develop China–Latin America relations, both sides need to work hard to increase pragmatic economic and trade cooperation and to expand social and people-to-people exchanges. That will help consolidate political relations.

China and Latin America also need to train a new pool of technical professionals in areas such as economic and trade cooperation to match the demands of their relationships. These professionals must be knowledgeable in policies, guidelines and economic and trade  rules. And, as with any educational effort, both sides must work to retain those new professionals. Preventing brain drain is as important as boosting the levels of education in science and technology.

Both China and Latin America need to be strategic in promoting their economic and trade cooperation. Their cooperation will contribute to economic growth for all sides.

To this end, governments should pay particular attention to creating the space to develop new trade diversity and expanding areas of cooperation. Adhering to the principle of mutual benefit, they should adopt different means of cooperation.

To be candid, China–Latin America economic and trade cooperation is both complementary and competitive. But when differences over specific cases emerge, both sides must seek to address them through dialogue and friendly consultation. We should not allow narrow disagreements or frictions to disrupt our overall bilateral economic and trade relations. Trade protectionism is not the solution to problems and will only undermine our cooperation. As part of this, when Chinese enterprises mke invest in Latin American countries, they should take greater account of social responsibility and make greater efforts to integrate in local development.

In some quarters, we hear concerns about the so-called “China threat” and “China looting” (that unfair trade practices will undermine local economies). Nothing could be further from the truth: the China–Latin America relationship is normal and founded on mutual respect and interest. China’s growth of investment and trade in Latin America is organized entirely around the principles of cooperation, mutual benefit and common development.

Some people also claim that the development of China–Latin America relations, especially economic and trade relations, threatens the interests of other powers in Latin America. I believe the contrary. Our economic and trade relations do not pose any potential threat to the interests of the United States and European countries in Latin America; they will instead help to alleviate the pressure on the U.S. and European countries to provide aid to Latin America.

Of course, China and Latin America are not the first priority in either side’s foreign policy strategies. The U.S., the European Union and the countries on the periphery of China in Asia are China’s diplomatic priorities. At the same time, Latin America’s diplomatic priorities are the U.S., the European Union and its hemispheric neighbors. That’s only natural. And it is for that reason that the development of China–Latin America relations should not affect U.S. and EU positions in respect to their relationship or diplomacy with Latin America.

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