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China's Global Expansion and Latin America

Published online by Cambridge University Press:  08 February 2011

RHYS JENKINS
RHYS JENKINS
Affiliation:
Rhys Jenkins is Professor of International Development at the University of East Anglia. Email: r.o.jenkins@uea.ac.uk.
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Abstract

China's rapid growth and increased integration with the global economy over the past three decades have significant economic impacts and political implications for Latin America. This paper reviews the debate over whether these impacts have on balance been positive or negative for the region. It argues that those who emphasise the positive economic impacts of China have been over-optimistic and underplay some of the negative impacts associated with Chinese competition in manufacturing and increasing Latin American specialisation in primary products. On the other hand, when focusing on the political dimensions, there has been a tendency to exaggerate both the extent of China's influence in the region and the fears to which this gives rise, particularly among US commentators.

Abstract

El rápido crecimiento de China y su creciente integración en la economía global durante las tres décadas pasadas han tenido impactos económicos significativos e implicaciones políticas para Latinoamérica. Este artículo revisa los debates sobre si estos impactos han sido positivos o negativos para la región. Sostiene que aquellos que enfatizan los impactos económicos positivos de China han sido muy optimistas al tiempo que relegan algunos de los impactos negativos asociados con la competencia china en la manufactura y el incremento de la especialización latinoamericana en productos primarios. Por otro lado, cuando tales debates se han centrado en la dimensión política, ha habido una tendencia a exagerar el grado de influencia de China en la región y los temores que ha despertado, particularmente entre los comentaristas norteamericanos.

Abstract

O rápido crescimento da China e o aumento de sua integração com a economia global ao longo das três últimas décadas ocasionou impactos econômicos e implicações políticas significativas na América Latina. Este artigo examina o debate sobre esses impactos, avaliando se ao final foram positivos ou negativos para a região. Argumenta que aqueles que enfatizam os impactos econômicos positivos da China foram demasiadamente otimistas, ignorando alguns dos impactos negativos associados à competição chinesa com o setor de produção industrial e com a crescente especialização latino-americana em produtos primários. Por outro lado, ao focar as dimensões políticas, há uma tendência em exagerar tanto o alcance da influência chinesa na região quanto os receios que esta suscita, particularmente entre analistas norte americanos.

Keywords

ChinaLatin Americatradeforeign investmentcompetitionUS hegemonydemocracyChinaLatinoaméricacomercioinversión extranjeracompetenciahegemonía norteamericanademocraciaChinaAmérica Latinacomércioinvestimento estrangeirocompetiçãohegemonia norte-americanademocracia
Type
Commentary
Information
Journal of Latin American Studies , Volume 42 , Issue 4 , November 2010 , pp. 809 - 837
Copyright
Copyright © Cambridge University Press 2010

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References

1 Calculated from United Nations Conference on Trade and Development (UNCTAD), World Investment Report, 2009: China Country Fact Sheet, available at www.unctad.org/sections/dite_dir/docs/wir09_fs_cn_en.pdf.

2 Alan Winters and Shahid Yusuf, Dancing with Giants: China, India and the Global Economy (Washington DC, 2007), Table 1.1.

3 The term BRICs was coined by Goldman Sachs' chief economist, Jim O'Neill, in 2001. The first official summit between the leaders of the BRICs was held in Russia in 2009.

4 Jiang Shixue, ‘The Chinese Foreign Policy Perspective’, in Riordan Roett and Guadalupe Paz (eds.), China's Expansion into the Western Hemisphere: Implications for Latin America and the United States (Washington DC, 2008), pp. 27–43.

5 See for example, Mehdi Shafaeddin, ‘The Impact of China's Accession to WTO on the Exports of Developing Countries’ (UNCTAD Discussion Paper no. 160, Geneva, 2002); and Yongzheng Yang, ‘China's Integration into the World Economy: Implications for Developing Countries’ (IMF Working Paper WP/03/245, Washington DC, 2003).

6 On China's growing relations with Africa, see, for example, Andrea Goldstein et. al., China and India: What's in it for Africa (Paris, 2006); Jenkins, Rhys and Edwards, Chris, ‘The Economic Impacts of China and India on Sub-Saharan Africa: Trends and Prospects’, Journal of Asian Economics, vol. 17, no. 2 (2006), pp. 207–25CrossRefGoogle Scholar; Chris Alden, China in Africa (London, 2007); Harry G. Broadman, Africa's Silk Road: China and India's New Economic Frontier (Washington DC, 2007). Recently two special issues of journals have been devoted to the role of China in Africa: see Review of African Political Economy, vol. 35, no. 1 (2008); and European Journal of Development Research, vol. 21, no. 4 (2009).

7 An interesting comparison could be made between China's role in Latin America and its role in Africa, where despite certain parallels in terms of the economic links that have developed, there are significant political differences in terms of governance structures and the role of the United States. For reasons of space, this will not be attempted here.

8 People's Republic of China, Ministry of Foreign Affairs, China's Policy Paper on Latin America and the Caribbean (Beijing, 2008).

9 Rhys Jenkins, ‘The Latin American Case’, in Rhys Jenkins and Enrique Dussel (eds.), China and Latin America: Economic Relations in the Twenty-First Century (Bonn, 2008), p. 42.

10 Ibid.

11 Congressional Research Service, China's Foreign Aid Activities in Africa, Latin America, and Southeast Asia (Washington DC, 2009), Table 3.

12 China adopts three labels to characterise its relations with other countries. They are, in descending order of importance, ‘strategic partner’, ‘cooperative partner’ and ‘friendly cooperative relations’: Jorge Domínguez, China's Relations with Latin America: Shared Gains, Asymmetric Hopes (Washington DC, 2006) p. 23.

13 In 2007, following a change of government, St. Lucia switched its diplomatic recognition back to Taiwan, after ten years of recognising the PRC.

14 See Andrés López and Daniela Ramos, ‘The Argentine Case’, in Jenkins and Dussel (eds.), China and Latin America, pp. 65–157; Daniel Saslavsky and Ricardo Rozemberg, ‘The Brazilian Case’, in Jenkins and Dussel (eds.), China and Latin America, pp. 159–226.

15 In the case of a country which does not have market economy status, a complainant can prove dumping by comparing the prices charged for imports, in this case from China, with production costs in some other country, since costs in a non-market economy are not necessarily a good indication of real cost. When a country is recognised as a market economy, dumping can only be shown to occur when it sells goods at a price below their cost of production.

16 Congressional Research Service, China's Foreign Policy and ‘Soft Power’ in South America, Asia, and Africa (Washington DC, 2008), p. 26.

17 Duncan Freeman, Rhys Jenkins and Jonathan Holslag, ‘Chinese Resources and Energy Policy in Latin America’ (report prepared for the Development Committee of the European Parliament, EP/EXPOL/B/2006/33, 2007).

18 Alexandre Barbosa and Débora Miura Guimarães, ‘Economic Relations between Brazil and China in the Consumer Electronic Sector’ (University of East Anglia, programme on The Impact of China's Global Economic Expansion on Latin America, Working Paper no. 9, 2009), Table 14, available at www.uea.ac.uk/dev/faculty/Jenkins/china-latinamerica; López and Ramos, ‘The Argentine Case’.

19 Li, He, ‘China's Growing Interest in Latin America and its Implications’, Journal of Strategic Studies, vol. 30, no. 4 (2007), p. 487CrossRefGoogle Scholar.

20 Congressional Research Service, Comparing Global Influence: China's and US Diplomacy, Foreign Aid, Trade and Investment in the Developing World (Washington DC, 2008), pp. 162–3.

21 See, for example, Robert Devlin, Antoni Estevadeordal and Andrés Rodríguez-Clare (eds.), The Emergence of China: Opportunities and Challenges for Latin America and the Caribbean (Washington DC, 2006); Daniel Lederman, Marcelo Olarreaga and Guillermo Perry (eds.), China's and India's Challenge to Latin America: Opportunity or Threat? (Washington DC, 2008); Jorge Blázquez-Lidoy, Javier Rodríguez and Javier Santiso, ‘Angel or Devil? China's Trade Impact on Latin American Emerging Markets’, in Javier Santiso (ed.), The Visible Hand of China in Latin America (Paris, 2007), pp. 45–83.

22 See, for example Moreira, Mauricio Mesquita, ‘Fear of China: Is There a Future for Manufacturing in Latin America?’, World Development, vol. 35, no. 3 (2007), pp. 355–76CrossRefGoogle Scholar; Paus, Eva, ‘The Rise of China: Implications for Latin American Development’, Development Policy Review, vol. 27, no. 4 (2009), pp. 419–56CrossRefGoogle Scholar; Nicola Phillips, ‘Consequences of an Emerging China: Is Development Space Disappearing for Latin America and the Caribbean?’ (Centre for International Governance Innovation, Working Paper no. 14, Waterloo ON, 2007); Jenkins, Rhys, ‘El impacto de China en América Latina’, Revista CIDOB d'Afers Internacionals, no. 85–6 (2009), pp. 251–72Google Scholar.

23 Tomoe Funakushi and Claudio Loser, ‘China's Rising Economic Presence in Latin America’, Inter-American Dialogue (June 2005); Francisco González, ‘Latin America in the Economic Equation – Winners and Losers: What Can Losers Do?’, in Roett and Paz (eds.), China's Expansion, pp. 148–69; Rosales, Osvaldo and Kuwayama, Mikio, ‘Latin America Meets China and India: Prospects and Challenges for Trade and Investment’, CEPAL Review, no. 93 (2007), pp. 81–103Google Scholar.

24 Blázquez-Lidoy et al., ‘Angel or Devil’; Devlin et al., The Emergence of China; Patricio Meller and Gabriela Contreras, ‘La competitividad de las exportaciones chinas en los mercados de Estados Unidos y Japón’ (CIEPLAN, Serie Estudios Socio/Económicos, no. 16, 2003); Daniel Lederman, Marcelo Olarreaga and Guillermo Perry, ‘Latin America's Response to China and India: Overview of Research Findings and Policy Implications’, in Lederman et al. (eds.), China's and India's Challenge to Latin America, pp. 3–35.

25 Daniel Lederman, Marcelo Olarreaga and Eliana Rubiano, ‘Latin America's Trade Specialization and China and India's Growth’ (World Bank, Background Paper for the Office of the Chief Economist for Latin America and the Caribbean, Washington DC, 2006).

26 Gallagher, Kevin and Porzecanski, Roberto, ‘What a Difference a Few Years Makes: China and the Competitiveness of Mexican Exports’, Oxford Development Studies, vol. 35, no. 2 (2007), pp. 219–23CrossRefGoogle Scholar; Kevin Gallagher, Juan Carlos Moreno-Brid and Porzecanski, Roberto, ‘The Dynamism of Mexican Exports: Lost in (Chinese) Translation?’, World Development, vol. 36, no. 8 (2008), pp. 1365–80Google Scholar; Moreira, ‘Fear of China’; Rhys Jenkins, ‘China's Global Growth and Latin American Exports’ (UNU-WIDER Research Paper, no. 2008/104, Helsinki, 2008).

27 Batista, Jorge Chami, ‘Competition between Brazil and Other Exporting Countries in the US Import Market: A New Extension of Constant-Market-Shares Analysis’, Applied Economics, vol. 40, no. 19 (2008), pp. 2477–87CrossRefGoogle Scholar.

28 For a fuller analysis see Jenkins, ‘China's Global Growth’.

29 See the analysis by the Federação das Indústrias do Estado de São Paulo (FIESP), A ascensão chinesa e os prejuízos às exportaçoes brasileiras para os Estados Unidos (Sao Paulo, 2007). See also the reports from various Latin American countries by Murphy, Helen, Swann, Christopher and Drajem, Mark, ‘Economic Outlook: Competition from China Squeezes Developing Countries’, International Herald Tribune, 2 April 2007Google Scholar.

30 Enrique Dussel, ‘The Mexico–China Economic Relationship in Electronics: A Case Study of the PC Industry in Jalisco’ (University of East Anglia, programme on The Impact of China's Global Economic Expansion on Latin America, Working Paper no. 5, 2008), available at www.uea.ac.uk/dev/faculty/Jenkins/china-latinamerica.

31 For a brief account of this and other related approaches, see Jennifer Bair, ‘Global Commodity Chains: Genealogy and Review’, in Jennifer Bair (ed.), Frontiers of Commodity Chain Research (Stanford CA, 2009), pp. 1–34.

32 Daniel Lederman, Marcelo Olarreaga and Isidro Soloaga, ‘The Growth of China and India in World Trade: Opportunity or Threat for Latin America and the Caribbean?’ in Lederman et al., China's and India's Challenge, pp. 101–20.

33 Economic Commission for Latin America and the Caribbean, Economic and Trade Relations between Latin America and Asia-Pacific: The Link with China (Santiago, 2008), Table III.3.

34 Own estimates based on IMF, Direction of Trade Statistics, available at www2.imfstatistics.org/DOT/.

35 Lall, Sanjaya and Weiss, John, ‘China's Competitive Threat to Latin America: An Analysis for 1990–2002’, Oxford Development Studies, vol. 33, no. 2 (2005), pp. 163–94CrossRefGoogle Scholar; Moreira, ‘Fear of China’.

36 See Dani Rodrik, ‘What's So Special about China's Exports?’ (NBER Working Paper no. W11947, 2006).

37 This discussion is based on Andrés López, Daniela Ramos and Cecilia Simkievich, ‘A Study of the Impact of China's Global Expansion on Argentina: Soybean Value Chain Analysis’ (University of East Anglia, programme on The Impact of China's Global Economic Expansion on Latin America, Working Paper no. 2, 2008), available at www.uea.ac.uk/dev/faculty/Jenkins/china-latinamerica.

38 Alexandre Barbosa and Débora Miura Guimarães, ‘Economic Relations between Brazil and China in the Mining/Steel Sectors’ (University of East Anglia, programme on The Impact of China's Global Economic Expansion on Latin America, Working Paper no. 10, 2009); Jonathan Barton, ‘A Study of the Impact of China's Global Expansion on Chile: The Copper and Textile Value Chains’ (University of East Anglia, programme on The Impact of China's Global Economic Expansion on Latin America, Working Paper no. 7, 2009). Both of these papers are available at www.uea.ac.uk/dev/faculty/Jenkins/china-latinamerica.

39 On the commodities boom see, for example, UNCTAD, Trade and Development Report, 2005 (Geneva, 2005), chap. 2; IMF, World Economic Outlook, 2006: Financial Systems and Economic Cycles (Washington DC, 2006), chap. 5. One recent exception to the lack of detailed analysis in this area is Kevin Gallagher and Roberto Porzecanski, ‘China and the Latin America Commodities Boom: A Critical Assessment’ (University of Massachusetts, Political Economy Research Institute, Working Paper no. 192, 2009).

40 See Rosales and Kuwayama, ‘Latin America Meets India and China’, Table 2.

41 Rhys Jenkins, ‘The Impact of China's Growth on Global Commodity Prices and Latin American Export Earnings’, CEPAL Review (forthcoming, 2011).

42 Ibid.

43 Ibid., Table 5.

44 Murphy et al., ‘Economic Outlook’.

45 Lucio Castro, Marcelo Olarreaga and Daniel Saslavsky, ‘The Impact of Trade with China and India on Argentina's Manufacturing Employment’, in Lederman et al. (eds.), China's and India's Challenge to Latin America, pp. 269–90; Enrique Dussel, ‘The Mexican Case’, in Jenkins and Dussel (eds.), China and Latin America, pp. 279–385.

46 Jenkins, ‘The Latin American Case’.

47 Conselho Empresarial Brasil-China, China-Brazil Trade Report, Year 1, Issue 1 (Rio de Janeiro, 2008), p. 4.

48 Daniel Sica, ‘Algunos elementos de análisis sobre la presencia de China en la relación Argentina–Brasil’, Economía Online (www.abeceb.com) (2007); Barbosa and Guimarães, ‘Consumer Electronic Sector’.

49 Pew Global Attitudes Poll, May 2008, quoted in David Shambaugh, ‘China's Multidimensional Thrust into the Latin American Region’ (address to Third International Conference of the China–Brazil Business Council, ‘China's Presence in Latin America’, São Paulo, 30 June 2009).

50 Gabriel Correra López and García, Juan González, ‘La inversión extranjera directa: China como competidor y socio estratégico’, Nueva Sociedad, no. 203 (2006), pp. 114–27Google Scholar.

51 See the statements by Mahatir Mohamad, former prime minister of Malaysia, and Supachai Panitchpakdi, former deputy prime minister of Thailand, quoted in Benoît Mercereau, ‘FDI Flows to Asia: Did the Dragon Crowd Out the Tigers?’ (IMF Working Paper WP/05/189, Washington DC, 2005).

52 Barry Eichengreen, and Hui Tong, ‘Is FDI to China Coming at the Expense of other Countries?’ (NBER Working Paper no. 11335, 2005); Busakorn Chantasasawat, Fung, K. C., Lizaka, Hitomi and Siu, Alan, ‘The Giant Sucking Sound: Is China Diverting Foreign Direct Investment from Other Asian Economies?’, Asian Economic Papers, vol. 3, no. 3 (2005), pp. 122–40Google Scholar; Chengang Wang, Wei, Yingqi and Liu, Xiaming, ‘Does China Rival its Neighbouring Economies for Inward FDI?’, Transnational Corporations, vol. 16, no. 3 (2007), pp. 35–60Google Scholar.

53 Javier Cravino, Daniel Lederman and Marcelo Olarreaga, ‘Foreign Direct Investment in Latin America during the Emergence of China and India: Stylized Facts’, in Lederman et al., China's and India's Challenge to Latin America, pp. 121–42.

54 Alicia García Herrero and Daniel Sanatabárbara, ‘Does China Have an Impact on Foreign Direct Investment to Latin America?’, in Santiso (ed.), The Visible Hand, pp. 133–59; de la Cruz, José Luis, Boncheva, Antonina Ivanova and Ruiz-Porras, Antonio, ‘Competition between Latin America and China for US Direct Investment’, Global Economy Journal, vol. 8, no. 2 (2008), pp. 1–20Google Scholar; Busakorn Chantasasawat, K. C. Fung, Hitomi Lizaka and Alan Siu, ‘Foreign Direct Investment in East Asia and Latin America: Is there a People's Republic of China Effect?’ (Asian Development Bank Institute, Discussion Paper no. 17, Tokyo, 2004); Eichengreen and Tong, ‘FDI to China’. Chantasasawat et al. find no impact on the level of FDI in Latin America; they do find an impact on Latin America's share of total FDI in developing countries, but argue that China is not a major factor in this.

55 Javier Cravino, Daniel Lederman and Marcelo Olarreaga, ‘Substitution between Foreign Capital in China, India and the Rest of the World: Much Ado about Nothing’ (World Bank, Background Paper for the Office of the Chief Economist for Latin America and the Caribbean, Washington DC, 2006).

56 The case study of the Mexican PC industry discussed earlier is a good example of such work.

57 Congressman Dan Burton, Statement before the Subcommittee on the Western Hemisphere of the Committee on Foreign Affairs, ‘The New Challenge: China in the Western Hemisphere’ (Washington DC, 2008).

58 Xiang Lanxin, ‘A Geopolitical Perspective on Sino-Latin American Relations’, in Cynthia Arnson, Mark Mohr and Riordan Roett (eds.), Enter the Dragon? China's Presence in Latin America (Washington DC, 2007), pp. 59–63; Xiang Lanxin, ‘An Alternative Chinese View’, in Roett and Paz (eds.), China's Expansion, pp. 44–58. I am grateful to an anonymous referee for emphasising the point about the realist perspective to me.

59 June Teufel Dreyer, ‘The China Connection’ (University of Miami, Center for Hemispheric Policy, China-Latin America Task Force, 2006), pp. 1–2.

60 Johnson, Stephen, ‘Balancing China's Growing Influence in Latin America’, The Heritage Foundation Backgrounder, no. 1888 (2005)Google Scholar; Evan Ellis, China in Latin America: The Whats and Wherefores (Boulder CO, 2009), chap. 2.

61 Ibid., pp. 283–4.

62 Domínguez, China's Relations with Latin America, pp. 8–9.

63 See Li, ‘China's Growing Interest’; Shixue, ‘The Chinese Foreign Policy Perspective’; Juan Tokatlian, ‘A View from Latin America’, in Roett and Paz (eds.), China's Expansion, pp. 59–89; Barbara Stallings, ‘The US–China–Latin America Triangle: Implications for the Future’, in Roett and Paz (eds.), China's Expansion, pp. 239–59.

64 Shixue, ‘The Chinese Foreign Policy Perspective’, p. 40.

65 Calculated from IMF, Direction of Trade Statistics. Figures for 2008.

66 Chinese ambassador to Ecuador, Cai Runguo, quoted in Ellis, China in Latin America, p. 123.

67 Riordan Roett and Guadalupe Paz, ‘Introduction: Assessing the Implications of China's Growing Presence in the Western Hemisphere’, in Roett and Paz (eds.), China's Expansion, p. 2.

68 Sergio Cesarín, ‘The Relationship between Latin America and China: Realities and Trends’, in Aranson (ed.), Enter the Dragon?, pp. 17–25; Martín Pérez Le-Fort, ‘China y América Latina: estrategias bajo una hegemonía transitoria’, Nueva Sociedad, no. 203 (2006), pp. 89–101.

69 Rafael Fernández de Castro and Laura Díaz Leal, ‘Falsa ilusión: China, el contrapeso de Estados Unidos en el hemisferio occidental’, in Enrique Dussel and Yolanda Trápaga (eds.), China y México: implicaciones de una nueva relación (Mexico City, 2007), pp. 105–17.

70 China–Latin America Task Force, ‘Findings and Recommendations of the China-Latin America Task Force’ (University of Miami, Center for Hemispheric Policy, 2006) p. 24.

71 The Office of the US Trade Representative claimed that ‘CAFTA would provide regional garment-makers … a critical advantage in competing with Asia’: CAFTA Facts: The Case for CAFTA (Washington DC, 2005), p. 1.

72 China–Latin America Task Force, ‘Findings and Recommendations’, p. 21.

73 Evan Ellis, ‘The Military–Strategic Dimensions of Chinese Initiatives in Latin America’ (University of Miami, Center for Hemispheric Policy, China-Latin America Task Force, 2006), p. 9.

74 Tokatlian, ‘A Latin American View’, p. 64.

75 Robert Devlin, ‘China's Economic Rise’, in Roett and Paz (eds.), China's Expansion, pp. 111–47; Paus, ‘The Rise of China’.

76 Alex Fernández Gilberto and Barbara Hogenboom, ‘Latin America and China: South–South Relations in a New Era’, in Alex Fernández Gilberto and Barbara Hogenboom (eds.), Latin America Facing China: South–South Relations beyond the Washington Consensus (forthcoming).

77 See Phillips, ‘Consequences of an Emerging China’.

78 A. Cha, ‘China Uses Global Crisis to Assert its Influence’, Washington Post Foreign Service, 23 April 2009.

79 Shixue, Jiang, ‘Una mirada china a las relaciones con América Latina’, Nueva Sociedad, no. 203 (2006), pp. 62–88Google Scholar.

80 Li, ‘China's Growing Interest’, p. 849.

81 For an earlier discussion of the implications of the experience of the East Asian newly industrialising countries for Latin America, see Jenkins, Rhys, ‘Learning from the Gang: Are There Lessons for Latin America from East Asia?’, Bulletin of Latin American Research, vol. 10, no. 1 (1991), pp. 37–54CrossRefGoogle Scholar.

82 Paus, ‘The Rise of China’.

83 A number of individual country studies do already exist, particularly on Mexico. These include Enrique Dussel, Economic Opportunities and Challenges Posed by China for Mexico and Central America (Bonn, 2005); Omar Neme, La competencia entre México y China: la disputa por el mercado de Estados Unidos (Mexico City, 2006); Arturo Oropeza, China entre el reto y la oportunidad (Mexico City, 2006); Enrique Dussel (ed.), Oportunidades en la relación económica y comercial entre China y México (Mexico City, 2007); Dussel and Trápaga (eds.), China y México. On Argentina, see Carlos Tramutola, Lucio Castro and Pablo Monat, China: Cómo puede la Argentina aprovechar la gran oportunidad (Buenos Aires, 2005).

84 In Brazil, for example, the Federação das Indústrias do Estado de São Paulo (Federation of Industries of the State of São Paulo), which represents the country's major industrialists, has been highly critical of the economic effects of China on the country, while the Conselho Empresarial Brasil–China, which is largely made up of firms which export to China, has defended the relationship.