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  • The Ongoing Strengthening of Economic Relations between China and Central and South America: Part 3

The Ongoing Strengthening of Economic Relations between China and Central and South America: Part 3

|China

In April 2009, President Chávez of the South American oil colossus of Venezuela visited China and had talks with President Hu Jintao. The main topic was crude oil. In addition to the crude oil development (in Venezuela) and the construction of a refining plant (in China), and several projects for oil transportation cooperation by the two countries that had already been agreed, a target was made for supplying China with one million barrels of oil daily by 2013. Moreover, not only the energy sector, but also sectors such as agriculture and finance were discussed, and the strategic joint fund, which the two countries set up in 2007 as a resource for these cooperative relations, has come to be put to practical use.

According to the statistics of the Venezuelan news organizations, the trade relations of the two countries achieved rapid growth last year also (2008). The total value of imports and exports reached a level of just under US$9.66 billion (the Venezuelans have a balance of payments surplus of approximately US$3.5 billion), and compared to the previous year (US$5.84 billion in 2007), it ended up recording an increase of a little over 65%. The same value for ten years earlier (1998) was approximately US$0.2 billion and for five years earlier (2003) was approximately US$0.74 billion, and over the last ten years has seen tremendous growth1. In the breakdown by country of origin for Venezuelan imports (2007), China was the third largest import trading partner (9.6%), behind the United States (25.9%) in first place and Colombia (13.5%) in second.2

At the summit, President Hu also mentioned that President Chávez was “a long-time, important friend”, and stated the importance of the development of relations between the two countries in the future. In turn, President Chávez replied, lauding that in the middle of a global economic crisis “China is the biggest engine driving the world forward” and “Beijing is now one of the greatest capitals of the multi-polar world”.3

Additionally, at the end of that month China concluded an FTA with Peru—the second country in South America after Chile. With the securing of the country’s copper and mineral resources an objective, the Peruvians too are hoping for an expansion of investment from China. President García of Peru mentioned that the amount of that investment will increase from US$7.3 billion in 2008 (up 37% on 2007) to US$15.0 billion in 2015.4

Amid such a situation, for Brazil too, the leading country of South America, trade with China has shown solid growth. According to the data of the Ministry of Development, Industry and Foreign Trade of Brazil, exports to China in 2008 reached US$16.40 billion (an increase of 52.6% on the previous year) and in percentage by country the share increased from 6.69% (in 2007) to 8.29% (in 2008). Imports from China also—with US$20.04 (an increase of 58.8% on the previous year) and the share increasing from 10.46% to 11.57% in the percentage by country—have further strengthened China’s presence. Imports and exports have both greatly surpassed the overall figures for the previous year (43.6% and 23.2%, respectively), and in particular last year the growth in exports to China was conspicuous. The principle commodities were: in first place soybeans (at US$5.32 billion, with a share of 32.5%); in second place iron ore (at US$4.11 billion, with a share of 25.1%); and in third place crude oil (at US$1.70 billion, with a share of 10.4%). From the fact that with only the top three commodities amounting to nearly 70% of the whole, it can be made out that for China Brazil is rated a mineral resource and foodstuff supply source. Regarding, on the other hand, the commodities imported from China—in first place are components for cellular phones (US$0.857 billion, with a share of 4.3%); second, liquid crystal panels (US$0.818 billion, 4.1%); third, coke (US$0.599 billion, 3.0%); fourth, components for televisions and radios (US$0.423 billion, 2.1%); and fifth, finished components for cellular phones (US$0.290 billion, 1.5%)—the top five commodities combined end up at just 15% of the whole, and it can be said that the commodity structure is diverse.5

Furthermore, in the background to the expansion in China’s trade with Brazil last year, the economic downturn accompanying the financial and economic crisis in the United States has had an impact. China, which had to date made the United States its largest export market announced in November 2008 a ten-point measure aimed at economic growth via an expansion of domestic demand, in order to tackle the crisis. In outline it is the construction of residential housing, construction of infrastructure in rural areas, construction of road, rail and air infrastructure, the acceleration and strengthening of the building up of environmental health, and such things as the development of medical and hygiene projects and reforms to increase direct taxation.6 The economic structure which is led by foreign demand, however, is as strong as ever, and as one policy for the expansion of its market area, it is considered that the strengthening of relations with the countries of Central and South America is something which will continue in the future.

  1. http://www.telesurtv.net/ (Article dated 7 April 2009)
  2. http://www.jetro.go.jp/ (Accessed April 2009)
  3. http://www.telesurtv.net/ (Article dated 9 April 2009)
  4. http://www.telesurtv.net/ (Article dated 28 April 2009)
  5. All figures are from http://www.desenvolvimento.gov.br/sitio/ (Accessed in May 2009)
  6. The Cabinet Office “World Economic Trends: The Second Report in 2008”, 2008, pp. 175-6 [in Japanese]

[Translated by ERINA]