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UPDATED: May 23, 2015 NO. 30 JULY 24, 2014
The Latin Link
China and Latin American countries welcome more opportunities to bolster economic and trade cooperation
By Sun Yanfeng
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Obstacles ahead

However, several issues stand in the way of Sino-Latin American economic and trade cooperation.

Traditional industrial cooperation relies largely on trade—historically the strongest Sino-Latin American link. In the past decade, trade between the two sides increased sharply, growing from $26.8 billion in 2003 to $261.5 billion in 2013. But the rate of trade growth dropped from a year-on-year increase of 20-30 percent in 2003-05 to merely 0.1 percent in 2013. This slowing of bilateral trade growth is due in part to the general economic slowdown in China that caused a drop in commodity demand. At the same time, Latin American countries are adjusting their domestic industrial structure—seeking to "re-industrialize," protecting domestic producers and limiting imports of industrial goods. Protectionist measures such as anti-dumping initiatives against Chinese products are on the rise. A few Latin American scholars even expressed concern over the current trade structure between the two sides, noting that 80 percent of products exported from Latin America to China are raw materials, whereas China exports mainly industrial products to Latin America.

Moreover, the two sides lack adequate mutual understanding—a shortcoming due in part to geographical distance, as well as differing beliefs, cultural backgrounds, languages and social systems. Even among the 33 Latin American countries themselves, stark differences exist. Despite the growing number of Chinese people learning Spanish and a growing number of Mandarin learners in Latin America in recent years, bilingual speakers are still few even as bilateral relations become closer. Many Chinese enterprises have encountered problems investing in Latin American countries as they are unfamiliar with local laws and regulations, and vice versa. The media often exaggerates such issues, causing harm to China-Latin America relations. In particular, as there is a lack of direct communication between China and Latin American countries, most Latin American people are inclined to learn about China from Western media, which are can be biased against China.

Potential platforms

Currently, China-Latin America intergovernmental political mutual trust is strengthening thanks to a frequent exchange of visits between high-level officials from both sides. The cooperation framework between China and the Community of Latin American and Caribbean States (CELAC) is taking shape. China is also interacting more closely with regional powers including Brazil and Mexico on global issues. Now, China and Latin American countries may seize new opportunities to collaborate in a wider range of fields.

Trade is the cornerstone of Sino-Latin American economic relations. At present, China has begun to ease import restrictions on pork, beef and chicken from Mexico, Brazil, Argentina and Chile.

China-Latin American relations should be driven more heavily by investment rather than by trade. China pledged more than $60 billion worth of non-financial investment in Latin American countries from 2002 to 2012 with half already being put into use. The Chinese Government should also encourage Chinese companies with comparative advantages in terms of capital, technology and human resources to participate in infrastructure construction. In the future, investment and financing should become the new impetus for Sino-Latin American economic cooperation. The two sides need to come up with more innovative ways to interact, such as establishing a "China-Latin America infrastructure development fund" as a new platform to take advantage of China's large foreign reserves. These measures can help Latin American countries finance infrastructure construction as well as guarantee China's stable import of resources. In addition, China with Brazil and Argentina should carry out currency swap agreements, making these two countries pilot locations for the renminbi's internationalization.

Furthermore, China and Latin American countries should make joint efforts to promote the establishment of the China-CELAC Forum. They also need to strengthen cultural and people-to-people exchanges, including exchange-students programs. The two sides can also share experiences and collaborate in areas such as science, nuclear energy technology, tourism, social governance, and more.

As developing nations, China and most Latin American countries are in a similar stage of development and face many of the same challenges. As such, the two sides should seize the current favorable environment to advance Sino-Latin American economic ties in the next decade.

The author is an associate researcher with China Institutes of Contemporary International Relations

Email us at: liuyunyun@bjreview.com

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