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    Economy

    China's relations with Latin America near turning point

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    2017-02-21 09:41Global Times Editor: Li Yan ECNS App Download

    FTAs will drive further investment, cooperation in bilateral ties

    After decades of stunning growth, China's economic and trade relationship with Latin America is nearing "a turning point" due to a lackluster global economy, the absence of understanding local regulations among domestic companies and unfavorable business environments, experts said.

    But they also noted that the outlook is promising, as negotiations for free trade agreements (FTAs) are under way and China's role as an economic stabilizer for Latin American countries and regions cannot be replaced by other nations.

    In 2016, China's economic ties with Latin America entered a period of adjustment. China's exports to Latin American countries and regions tumbled 13.8 percent year-on-year to $113.9 billion last year, while imports declined 1.1 percent year-on-year to $102.7 billion, according to the website of the Ministry of Commerce (MOFCOM).

    Sluggish global economic growth impedes China-Latin American countries' economic activity, experts said.

    "The export structure of resource-rich Latin American countries concentrates on such commodities as minerals, fossil fuels and agricultural products, whose prices have slumped due to global economic conditions," Dong Jingsheng, vice director of the Latin America Research Center at Peking University, told the Global Times on Monday.

    Latin America were once destinations for China's manufactured goods, especially those made in Yiwu, East China's Zhejiang Province, which is home to many of small commodity vendors, according to Dong. "But the economic meltdown in the region has undercut the desire for such imports."

    Meanwhile, as China's economy has entered a "new normal" phase, the country's demand for Latin America's low value-added primary products also shrank in recent years, Dong noted.

    Given these conditions, the "complementary relationship" that has led to tighter China-Latin America trade ties in past years has almost vanished, experts said.

    Another obstacle that Chinese companies meet is that they are not familiar with local laws and regulations of Latin America, especially in terms of environmental protection and labor rights, Dong said.

    Jiang Shixue, director of the Center for Latin American Studies at Shanghai University, agreed. He suggested that domestic companies seeking development in Latin America should learn more about local markets to target sectors that are suited for their investment.

    Also, the investment environment of Latin America is worse than that of the US or the EU due to unstable economic conditions, changeable policies and turbulent public security, Jiang told the Global Times on Monday.

    "Latin American countries and regions are expected to improve their investment environments to attract more Chinese investors," Jiang said.

    The "China threat" mentality also exists in Latin America as some countries and regions there fear that Chinese companies will come to grab their resources and employment, he said, noting that such ideas should be discarded.

    China still plays the role of an important "stabilizer" in bilateral economic ties, the People's Daily's reported, citing an official at the United Nations Economic Commission for Latin America and the Caribbean. There are new growth engines, according to experts.

    China has signed FTAs with many Latin American countries including Chile, Peru and Costa Rica, according to the MOFCOM. FTAs with Colombia and Uruguay are also under negotiation, which is expected to drive up bilateral trade volume in the near future.

    The importance of Chinese entrepreneurs to their Latin American counterparts is also "irreplaceable," Dong said. China has scaled up investment in Latin America in such sectors as industry, agriculture and resources. In 2016, China's direct investment into Latin America's non-financial sectors reached $29.8 billion, up 39 percent compared with that of 2015, according to the MOFCOM.

    The infrastructure sector, where Chinese companies enjoy advantages in technology and construction costs, is quite underdeveloped and investment in that sector will become a new driving force for domestic companies' expansion in local markets in the coming years, Jiang said.

    Other sectors such as finance, services, and tourism are also potential areas for Chinese capital, experts said.

    In 2016, bilateral trade between China and Latin America reached $216.6 billion, 16 times larger than that in 2000, according to the People's Daily. The number also represented 6 percent of China's total foreign trade, up from 2.7 percent in 2000.

      

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