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Friday, Dec. 3, 2004

China's foray south of the U.S. border


HONG KONG -- Chinese President Hu Jintao's two-week foray into Latin America in November shows the extent to which China's economic development over the last quarter century has strengthened its foreign policy outreach.

Today, Beijing's friendship -- in particular its investment and trade -- are warmly welcomed in a corner of the world that has been traditionally recognized as America's backyard.

China has worked hard at courting Latin American countries in recent years, with then-President Jiang Zemin taking a swing through six countries in 2001. This time, Hu paid state visits to Brazil, Argentina, Chile and Cuba in conjunction with an Asia-Pacific Economic Cooperation meeting in Santiago. By contrast, U.S. President George W. Bush, who also attended the APEC meeting, visited only one Latin American country, Colombia, where he stayed for four hours.

In addition to state visits to four countries, Hu also held bilateral meetings with other leaders on the margins of APEC, including President Vincente Fox of Mexico and President Alejandro Toledo of Peru.

Beijing's growing economic ties to Latin America illustrate the extent to which the country has become an engine for growth in the world.

The Chinese economy and those of Latin American countries are highly complementary. While China is hungry for natural resources to fuel its economy, the Latin countries by and large are resource rich. And China, with more than $500 billion in foreign exchange reserves, is in a strong position to satisfy those countries' appetite for foreign investment.

Trade between China and Latin America doubled last year, to almost $27 billion. What is perhaps even more important is the amount of investment that China is pouring into the region. During Hu's swing in Latin America, the Chinese signed agreements amounting to more than $30 billion in new investments.

China is now Brazil's second-largest trading partner, buying large amounts of iron ore, bauxite and soybeans. Exports from Brazil nearly doubled last year, to $4.5 billion. The country is China's largest trading partner in Latin America, followed by Mexico and Chile.

A major component of China's investment and trade with Latin America is related to energy. China this year became the third-leading destination of Brazilian crude exports, with shipments of about 50,000 barrels a day. The Chinese state oil company Sinopec has invested $1 billion in a joint venture for the construction of a gas pipeline within Brazil.

In October, China displaced the United States to become the leading purchaser of Chilean copper. In fact, China has replaced the U.S. as the leading market for Chilean exports.

In Argentina, China's fourth-largest trading partner in Latin America, Hu unveiled nearly $20 billion in new investments, much of it in railways, oil and gas exploration, construction and communication satellites. Two-way trade reached more than $3 billion last year, up 122 percent from the year before.

In Cuba, Hu's last stop, Beijing signed an agreement for a $500 million investment in a new nickel plant, marking a tenfold increase of Chinese investment in that country.

With China, as with other countries, closer economic ties often lead to closer political ties. In addition to insisting on a "one China" policy, Beijing now also calls on its trade partners to accord it full market-economy status, which would strengthen its hands in antidumping disputes within the World Trade Organization. Brazil, Argentina, Chile and Peru have all signed on.

Latin American countries welcome China's new found interest, not least because this gives them leverage in their dealings with the U.S.

So far, however, the U.S. does not seem worried. Bush chuckled when a Chilean reporter cited China's growing reach in Latin America and asked whether he was going to do anything "so you don't lose your influence in this region." The American president replied that he thought China's "phenomenal growth rates" were positive, and that it was "helpful for there to be universal prosperity."

Frank Ching is a Hong Kong-based journalist and commentator.


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