Over the past decades, China has significantly enhanced its national strength and arisen as the second largest economy in the world. Meanwhile, Beijing has become enthusiastic for developing South-South relations through bilateral and multilateral mechanisms. China’s economic expansion across the Global South has gone parallel with the crisis of neoliberal model of development, which is incapable of generating new growth momentum. What are the strategic calculations and motivations behind Chinese engagement with the Global South? What are the domestic and international implications of the increasing Chinese presence in developing nations? This article tries to tackle these questions based on evidences form Latin America.
Compared with well-established links with neighboring Asian countries and with Africa, China’s ties with Latin America has started attracted worldwide attention in the recent decades. With China’s entrance in the World Trade Organization in 2001 and its modernization drive for domestic need, China’s trade with Latin America increased dramatically. After the global economic and financial crisis in 2008, Chinese capitals, in the forms of loans, aids and investments, have founded their way into the region carving the niches in the areas of energy, agriculture, infrastructure, manufacture, high-tech and information industries, etc. In addition to the more frequent high-official leaders’ visits, bilateral and multilateral engagement, Chinese government issued two policy documents on Latin America in 2008 and 2016 respectively, giving expression of Beijing’s strategic importance towards the region. Along with the complex international environment, the relationship between the two partners across the Pacific has entered unprecedentedly dynamic and plural era.
From Ideological Indifference to Economic Engagement
In the post-war period, there was scant official contact between China and Latin American governments. Except Cuba, the rest of the region showed no interest in China for two decades as the result of ideological hostility. In the name of “Monroe doctrine”, Latin America was within the sphere of influence of the United States. The American embargo on trade with Communist regime discouraged its “allies” from engaging with China. The geographical distance and cultural ignorance also imposed barriers to commercial exchanges and establishing trust. Besides, both China and Latin America were underdeveloped Third World economies, stumbling with domestic problems and regional affairs.
The Sino-Soviet dispute in the 1960s led to a significant shift in Chinese foreign policy. In order to gain greater political and economic independence, China was abandoning its Cultural-Revolution-era view on foreign relations, making it much more pragmatic and flexible. Chile’s recognition of the People’s Republic of China (PRC) can be interpreted as a transition from ideological moment to politics —and economy— oriented period. In 1970, weeks after the presidential inauguration, Chile’s President Salvador Allende, as head of a socialist-communist coalition, established diplomatic relations with China. When Allende was overthrown three years later by the anticommunist military government of General August Pinochet, Beijing did not hesitate to recognize the new regime. Within a few years, the governmental and non-governmental links had return to pre-coup levels [1]1 — Mora, F. (1997). “The People’s Republic of China and Latin America: From Indifference to Engagement”. Asian Affairs: An American Review, 24 (1): 35-58. . From then on, China started to build diplomatic and economic relations with Latin American governments, no matter what their ideological or political affiliation are. This process was accelerated by two major events in the history, which changed completely the global politics: Sino-American rapprochement and PRC’s entry into the United Nation.
The “third worlds” theory presented not only a political project against the hegemony of the two superpowers, but also a non-Western way to understand the dynamics of world politics. The desire of Latin American governments to diversify their political and commercial relations facilitated Chinese promotion of closer relations with the region
Although the key South American governments, Brazil and Argentina, recognized PRC after U.S. President Richard Nixon’s historic visit to Beijing, the specific timing of the development of Brazilian and Argentine relations with China “owes more to the South American countries’ attempt to balance U.S. power in the sub-region than to their following U.S. leadership” [2]2 — Catalinac, A. et al. (2006). China’s Relations With Latin America: Shared Gains, Asymmetric Hopes. Hemisphere. . In 1974, Chairman Mao presented his “Three Worlds” strategy, stating that all Asia but Japan, Africa and Latin America belong to the third world, the developing world. The “third worlds” theory presented not only a political project against the hegemony of the two superpowers, but also a non-Western way to understand the dynamics of world politics. The desire of several Latin American governments to diversify their political and commercial relations facilitated Chinese promotion of closer relations with the region. From the Chinese side, after long exclusion and isolation from the postwar international system, China was eager for sources and markets to heal the desperate condition of its economy. On the other hand, Beijing also tried to gain Latin America’s favor “by championing North-South economic issues, emphasizing South-South cooperation, and supporting various issues of regional and economic interest to the leadership in Latin America” [3]3 — Mora, F. (1997). “The People’s Republic of China and Latin America: From Indifference to Engagement”. Asian Affairs: An American Review, 24 (1): 35–58. .
Commodities Boom and afterwards
With the economic development as the top priority, China’s attempt to broaden foreign relations was more motivated by its need and desire to expand economic links with different countries and regions. Latin America was not only a potential market for Chinese products, but also a vast territory with abundant natural resources which could fuel China’s economic growth. The foreign trade became the most important pillar of China’s new development strategy, which facilitated and accelerated domestic industrialization. The Chinese “going-out” policy, initiated in 1999, is a national strategy to encourage its enterprises, especially the state-owned ones, to invest overseas. In Latin America, China’s outward Foreign Direct Investment (FDI) went into massive resources-related infrastructure projects. A combination of outgoing FDI and policy bank loans coming from the China Development Bank and the Export & Import Bank of China entered various Latin American countries for building ports, roads, railways, dams, and nuclear power plants
Since the entrance of China in the WTO, the largest emerging economy began with a super circle of growth that endured until the 2008 financial crisis. The commodities boom made China a major trading, investing and lending partner which helped Latin America sustain its growth even after the 2008 economic crisis. Meanwhile the region became the most dynamic trading partner of China because the rich primary resources and market opportunities in Latin America could propel China’s growth and development. In addition, the external environment also contributed to the Sino-Latin American relationship. After the 9/11 attack, the United States, troubled by the wars in Middle East, was too busy with international anti-terrorism campaigns to watch over Latin America [4]4 — Zheng, B. et al. (2019). “Sixty Years of Sino-Latin American Relations: Review and Reflection, in Sino-Latin American Economic and Trade Relations”. Springer: 1–33. .
Due to China’s involvement in the global economy, Latin America, particularly South American countries, have benefitted from a super cycle of high commodity prices fueled by China’s yearly growth of 10% in the noughties. In terms of investment, the presence of Chinese firms in the region was very modest before 2010 and mostly they were concentrated in Peru, Ecuador or Venezuela. Since 2010, several large acquisitions and investment projects have been announced and Chinese multinational companies have maintained a relevant presence in several largest economies of the region. In terms of the distribution, Chinese investment flows usually enter Brazil, Peru, Argentina, Ecuador and Venezuela.
However, since the beginning of the second decade of the 21st century, growth has slowed down in China. Serving as world’s factory for decades, China suffered environmental consequences, which pose real challenges for its sustainable growth. Beijing had to abandon the traditional model of blindly pursuing GDP growth and started to transform into “ecological civilization”. Latin America meets the needs for Chinese capitals in seeking for expanding investment abroad, reducing excess capacity, and large consumer markets.
Serving as world’s factory for decades, China suffered environmental consequences, which pose real challenges for its sustainable growth
In turn, China can contribute to closing the region’s gap in infrastructure, logistics and connectivity, which would stimulate the emergence of regional value chains. Apart from the traditional sectors such as extractive industries, power generation, agriculture and infrastructure, recently Chinese investors, state-controlled or private companies, have diversified their investing profile, setting foot in high-tech and service industries. Quantitatively, they cannot compete with those large oil and mining companies, but they are breaking free from the traditional sectoral approach and carving niches for more diversified Chinese investments in the region.
Washington Consensus and China’s Model
The Washington Consensus refers to a set of economic policies as an attempt to help crisis-wracked developing countries. The ideas were promoted by International Monetary Fund, the Word Bank and the U.S. Treasury and recommended structural reforms that enhanced free market in exchange for financial aids. The U.S. prescriptions served as material and ideological nexus between the periphery and the center led by the United States. However, since the 2001 economic crisis, the Latin countries have suffered from privatization, deregulation and unilateral liberalization of finance. The rise of several left and center-left governments over a course of nearly a decade brought back the role of the state and strengthened its functions [5]5 — Vadell, J. (2019). “China in Latin America: South-South Cooperation with Chinese Characteristics”. Latin American Perspectives 46 (2): 107-25. .
On the other side of the Pacific, Chinese peaceful rise has challenged the deterministic liberal theory as the only approach to development. The conventional mechanisms of neoliberalism, such as private ownership, financial and political liberalization are not key components of China’s path to growth. When the Communist Party of China established the regime by defeating Kuomintang in the civil war, China eradicated imperialist domination and confiscated foreign property without negotiation in order to gain complete economic sovereignty, which laid foundation for national industrialization. The land and social reforms cleared up the obstacles from the established interest groups for subsequent economic reforms. Since “reform and opening up” in 1978, China has started to move from self-reliance and self-sufficiency to an open-door approach based on international exchange, foreign investments, and the introduction of advanced science and technology. China’s development mode was based on trial-and-error under the unique international and domestic context. Although China’s model may not be easily copied by other economies, it does demonstrate that the liberal democracy is not the precondition for growth. China’s achievement is not attributed to “blindly following a set of ideological prescriptions but to solving a series of serious crises with flexibility and imagination” [6]6 — Zhang, Y. et al. (2019). “Rewriting China’s Recent History: Fluctuations in State Economic Control, 1949–1984”. American Journal of Economics and Sociology 78 (5): 1071–1100. .
However, other developing countries are usually influenced by the ideological soft power of Western world and their policy makers and opinion leaders simply attribute the problems to the backwardness of their own political systems, which are not as progressive as those of the developed countries. Thus, there are various “color revolutions” promoted in the name of “democracy” and “freedom”, which turn economic and social conflicts into political conflicts. That is why China does not impose any political conditions or development models in exchange for foreign aid or investment. This flexible way has enabled China to maintain friendly relations with politically diverse nations while pursuing its objectives. It is Beijing’s belief that economic cooperation should take precedence over political divergence and that the former’s success would promote political relations. This strategy has perpetuated through the 1990s as well as in the new millennium.
Multilateralism and the U.S.
Beyond bilateralism, China also engaged in official multilateral channels, such as Rio Group, Mercosur, and other regional organizations via dialogue and consultation mechanisms. In a broader sense, Latin America witnessed a shift away from the preponderant role of Western countries including Japan to “a dominant PRC, which came from a negligible presence to account for 50% of the trade in 2010” [7]7 — Asian Development Bank and Inter-American Development Bank (2012). Shaping the Future of the Asia and the Pacific–Latin America and the Caribbean Relationship. .
In 2008, China released its first ever policy paper on Latin American and the Caribbean, clarifying China’s principles and goals for developing relations with Latin America. It was the first time to state clearly in an official document that Beijing regards Sino-Latin American relations from the level of “strategic cooperation” and that China is devoted to developing “a comprehensive partnership featuring equality and mutual benefits”. Moreover, the 2008 economic crisis rendered United States and European countries troubled with their own domestic situation. China is the one of the few countries which has sustained the economic momentum and helped Latin America to overcome the global crisis.
Since Xi Jinping has taken his presidency in 2013, the Chinese foreign policy has taken a more active and assertive profile. Xi is more willing to go beyond the bilateralism and strengthen the relationship with Latin America and the Caribbean as a whole. With only three years in his presidency, Xi had already visited the region on three occasions. The first one took place only two months after his presidency began. He visited Mexico, Costa Rica, Trinidad and Tobago, and arranged high level meetings with officials in Antigua, Barbuda, the Bahamas, and Jamaica. It is important to note that the Caribbean countries are not traditional destinations of Chinese presidents. Thus, Xi’s visit suggests a strategic purpose of increasing China’s influence in that sub-region. By doing so, Beijing can also squeeze the space for countries that still have official relations with Taiwan in view of the fact that Latin America, especially Central America and the Caribbean, is a major arena of diplomatic competition for Beijing and Taiwan. After the pro-independence party came into power in Taiwan, Beijing terminated the “diplomatic truce”. And then Panama, Salvador and Dominican Republic severed their official relations with Taiwan and switched them to Beijing.
Only one year later, in 2014 Xi made the second trip to Brazil, Argentina, Venezuela, and Cuba. During the visit, Xi proposed a new cooperation framework for China and Latin America, which translated later into China-CELAC (abbreviation in Spanish, Comunidad de Estados Latinoamericanos y Caribeños) Forum. The Forum reflects Chinese way of dialogue mechanisms based on “non-binding agreements, voluntarism and consensus, derived from the tradition of South-South cooperation”. The flexible institutional structure allows China to “combine multilateral and bilateral approaches, creating a highly adaptable blueprint for managing foreign relations on a regional scale” [8]8 — Jakóbowski, J. (2018). “Chinese-Led Regional Multilateralism in Central and Eastern Europe, Africa and Latin America: 16 + 1, FOCAC, and CCF”. Journal of Contemporary China 27 (113): 659–73. . Moreover, the agenda of Sino-Latin American cooperation has transcended the traditional economic sphere and gone into sociocultural, political, and even security matters. This tendency is well demonstrated in the second Chinese policy paper on the region.
Latin America can carve a niche in China’s complete industrial chain and massive market, which are open to both public and private sectors of all economies as long as they abide by China’s territorial integrity, mutual respect and mutual gains
Additionally, China actively seeks support from countries in the region for its new multilateral institutions. Chinese official discourse calls LAC a “natural extension” of Belt & Road Initiative (BRI), and LAC countries are beginning to endorse BRI in an effort to gain access to infrastructure financing. Today’s world has witnessed a tendency to protectionism and reverse globalization. With the decision of the Trump administration to tear up the Trans-Pacific Partnership (TPP) agreement, the TPP members in LAC, namely Chile, Mexico, and Peru, pivot more toward China. The renegotiation of the North American Free Trade Agreement (NAFTA) around its “America first” pledge may further boost Chinese engagement with the region [9]9 — Wise, C. and Chonn, V. (2017). “Conceptualizing China–Latin America Relations in the Twenty-First Century: The Boom, the Bust, and the Aftermath”. Pacific Review 2748: 1-20. .
The repeated rejection of multilateral institutions by Trump has severely damaged U.S. credibility. Even with Biden in the office and his Administration enthusiastically calls for multilateralism, the domestic pandemic and economic rescue will leave its traditional “backyard” unattended. As the Latin scholar Zuleta puts it, “its general neglect and a historically reactionary and inconsistent foreign policy toward the region have led to a situation in which U.S.-Latin America ties are only superficially cordial” [10]10 — Zuleta, P. (2020). “How Latin America Can Make the Most of the US-China Competition”. The Diplomat. . The U.S. may find itself in an awkward position where it is eager to restore its power and squeeze China’s influence in the region, but it cannot expect Latin countries to cut off their ties with China only for US’s lip service. During the pandemic, China’s efficient control of the domestic outbreak enabled it to make contributions to global response to COVID-19, especially for developing countries. When the rich countries hoard vaccine supplies at expense of equitable distribution, Chinese biopharmaceutical companies can provide vaccines with easier conditions for transport and storage, key factor for underdeveloped countries.
Since most economies are still deeply mired in the COVID-19, Chinese economic recovery should be driven more by domestic market with consumer and public spending, as stated in the 14th Five-Year Plan (2021-2025). The “dual circulation” will reduce the excessive dependence of China’s economy on global economy and strengthen the resilience in the face of volatility and uncertainty. By no means does it imply China’s de-coupling with the outside world. The signature of the Regional Comprehensive Economic Partnership (RCEP) and China-EU Comprehensive Investment Agreement is testimony to China’s continued opening-up and commitment to fair competition. Latin America can carve a niche in China’s complete industrial chain and massive market, which are open to both public and private sectors of all economies as long as they abide by China’s territorial integrity, mutual respect and mutual gains. The best bet for the region might be dealing with any superpowers, partners, economies with flexibility and based on its own national interests.
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References
1 —Mora, F. (1997). “The People’s Republic of China and Latin America: From Indifference to Engagement”. Asian Affairs: An American Review, 24 (1): 35-58.
2 —Catalinac, A. et al. (2006). China’s Relations With Latin America: Shared Gains, Asymmetric Hopes. Hemisphere.
3 —Mora, F. (1997). “The People’s Republic of China and Latin America: From Indifference to Engagement”. Asian Affairs: An American Review, 24 (1): 35–58.
4 —Zheng, B. et al. (2019). “Sixty Years of Sino-Latin American Relations: Review and Reflection, in Sino-Latin American Economic and Trade Relations”. Springer: 1–33.
5 —Vadell, J. (2019). “China in Latin America: South-South Cooperation with Chinese Characteristics”. Latin American Perspectives 46 (2): 107-25.
6 —Zhang, Y. et al. (2019). “Rewriting China’s Recent History: Fluctuations in State Economic Control, 1949–1984”. American Journal of Economics and Sociology 78 (5): 1071–1100.
7 —Asian Development Bank and Inter-American Development Bank (2012). Shaping the Future of the Asia and the Pacific–Latin America and the Caribbean Relationship.
8 —Jakóbowski, J. (2018). “Chinese-Led Regional Multilateralism in Central and Eastern Europe, Africa and Latin America: 16 + 1, FOCAC, and CCF”. Journal of Contemporary China 27 (113): 659–73.
9 —Wise, C. and Chonn, V. (2017). “Conceptualizing China–Latin America Relations in the Twenty-First Century: The Boom, the Bust, and the Aftermath”. Pacific Review 2748: 1-20.
10 —Zuleta, P. (2020). “How Latin America Can Make the Most of the US-China Competition”. The Diplomat.
Mejie Jiang (蒋梅杰)
Meijie Jiang (蒋梅杰) is a FI-SDUR researcher and PhD candidate at the Pompeu Fabra University in Barcelona, where she is member of the International Law and International Relations research group. She received her Bachelor Degree in Spanish Philology from the Sun Yat-sen University in 2014 and her Master Degree in Ibero-American International Relations in 2017. She is currently doing her PhD thesis on the impact of institutions on China-Latin American economic relations, and teaching the subject of Foreign Relations and Geopolitics in Asia-Pacific. She has research interests in International Relations, Foreign Policy, political discourse and Chinese media, among other issues. Recently she has published the article “A network analysis of China’s role and function in normative shaping” by Tirant Lo Blanc.
