In the age of globalization, developing countries are faced with both opportunities and challenges.  In order to deal with the challenges and take advantage of the opportunities, developing countries should promote cooperation in all areas.

       As a developing country, China always considers its relations with other developing countries as the foundation of its foreign policies.  As a promoter and supporter for South-South cooperation, China adheres to the principle of pursuing equality, mutual benefits, effectiveness and common development. 

From November 11 to 23, 2004, Chinese President Hu Jintao paid an official visit to Brazil, Argentina, Chile and Cuba.  From January 23 to February 3, 2005, Chinese Vice President Zeng Qinghong visited Mexico, Peru, Venezuela, Trinidad and Tobago and Jamaica.  In a time span of just two months a country’s president and vice president visited Latin America.  This was unprecedented in international relations. The two trips made by the Chinese leaders clearly show that China is beginning to attach more importance to Latin America.

Commenting on President Hu’s trip, Chiense Foreign Minister Li Zhaoxing summarized the following achievements: First, this visit lays a new foundation, opens up a new situation and injects new vitality into the development of Sino-Latin American ties. Second, the visit helps to make new proposals and illustrate new ideas and actively guides the Asia-Pacific cooperation process. Third, through this visit, China carries out high-level multi-lateral diplomacy, makes broad contacts with people from all social sectors, expounds China's internal and external policies, and enhances the international community's understanding and support for China.

Indeed, China’s closer relations have attracted attention from the international media as well as countries like the United States, Japan and many others. [1] I begin this paper with a historical overview of the Sino-Latin American relations, followed by a discussion of the implications of the recent development of the bilateral relations.  In the concluding section, I shall try to offer my views on the prospects of the Sino-Latin American relations.

 

I.  Sino-Latin American Relations: A Historical Overview[2]

 Initial contacts between China and Latin America dated back to the 1570s, when Sino-Latin American trade started to flourish across the Pacific. Via Manila, China exported silk, porcelain and cotton yarn to Mexico and Peru, in exchange for silver coins and other items. In the middle of the nineteenth century, peasants from southern China went to South America and the Caribbean as “contract laborers” working in mines and plantations.

After the founding of the People’s Republic of China, Mexico, Argentina, Chile and a few other Latin American countries contacted China regarding possible diplomatic relations.  For a number of reasons their overtures were not successful. In the 1950s, some Latin American countries simply followed the United States in the attempt to isolate China. For instance, in January 1950, before the UN Security Council was about to vote on the Soviet proposal that Taiwan’s seat in the UN should be replaced by the People’s Republic of China, the United States learned that Ecuador was planning to sever its relations with Taiwan.  Washington informed the foreign ministry of Ecuador that, although Ecuador had its own independent right to make any international political decisions, severing relations with Taiwan would have a significant influence upon the outcome of the vote in the Security Council.  Because of these pressures from the United States, the Ecuadorian representative to the UN, Homero Viteri-Lafronte, acknowledged to the U.S. vice-representative to the UN, Ernest A. Gross, that although Ecuador’s vote had limited impact on its own, it would have great significance for the United States.  Therefore, in the interest of the United States, said Viteri-Lafronte, Ecuador would follow the United States’ wishes and not do anything that could risk damaging U.S. interests. Shortly thereafter the Truman administration issued a letter to Latin American embassies in Washington, saying that countries of the Americas should do their best to bring their foreign policies into complete alignment—under the aegis of the United States.[3]

Fidel Castro’s victory in 1959 attracted immediate moral and political support from China. As a matter of fact, Cuba became the first Latin American country to recognize the new China.[4] In September 1960 Chinese Premier Zhou Enlai told Castro, “if necessary, China will furnish all necessary assistance to the Cuban people in their fight for freedom.”[5] In April 1961, U.S. President Kennedy, then seen by many as “inexperienced in foreign affairs,” approved an exile invasion of Cuba at the Bay of Pigs. The Chinese government made an official statement, with strong wording, denouncing the American action. Throughout the whole country, public rallies were held to voice support for the Cuban people’s stand against U.S. imperialism. Subsequently, before disputes gradually erupted between the two socialist countries in the mid-1960s, China and Cuba signed several agreements of economic cooperation.[6]

       In the 1960s China also voiced support for other Latin American countries struggling against the United States.  When a demonstration calling for the return of the Panama Canal was suppressed by the U.S. army in January 1964, leading to 22 deaths, Chairman Mao Zedong immediately expressed his anger: “The Chinese people will always stand on the side of the Panamanian people, fully supporting their fight against the American aggressors and their just struggle to take back the Panama Canal.”[7] When the United States forcibly intervened during the Dominican Republic’s internal political instability in April 1965, Chairman Mao made a similarly-worded statement denouncing the U.S. action.

       Despite the “Cultural Revolution”--which had disastrous consequences for China’s political, economic and social development, as well as for its relations with other countries--Chinese diplomacy continued to make progress in certain areas. On December 15, 1970, for instance, Chile and China established diplomatic relations.  After U.S. President Nixon made his historic visit to Beijing in 1972, many Latin American countries started to change their attitudes towards China and even expressed their interest in developing relations with it. As Table 1 shows, the 1970s witnessed the establishment of diplomatic relations between China and more than ten Latin American countries.

       Many Latin American countries supported China’s re-entry into the United Nations in 1971, and China used many occasions to voice its support for Latin America’s call for the establishment of a new world order.  At a banquet for the visiting Mexican President Luis Echeverría on April 20, 1972, for example, Chinese Premier Zhou Enlai declared thatLatin America is emerging on the world stage with a new face. […] The struggle led by Latin American countries to defend the maritime sovereignty limit of 200 nautical miles has inspired and motivated people around the world to wage a struggle against maritime imperialism. […] The Chinese government and the Chinese people firmly support the just struggle of the Latin American people, and believe that a united Latin America, through its struggle, will win a great victory over the expansionary influence of imperialism, and new and old colonialism.[8]

    In the early 1970s, China also supported Latin America’s call for the establishment of a nuclear-free continent.

As mentioned earlier, China’s reforms and opening-up to the outside world since 1978 has provided the country with new opportunities to revise and strengthen foreign policy. Since then, Sino-Latin American relations have been moving forward steadily.  As of early 2005, China has established diplomatic relations with 21 Latin American countries (See table 1).

          Table 1.  Diplomatic Relations between China and Latin America

                             (As of writing in July 2005)

Country	Date of Establishment of Diplomatic Relations
Cuba	1960/09/28
Chile	1970/12/15
Peru	1971/11/02
Mexico	1972/02/14
Argentina	1972/02/19
Guyana	1972/06/27
Jamaica	1972/11/21
Trinidad and Tobago	1974/06/20
Venezuela	1974/06/28
Brazil	1974/08/15
Suriname	1976/05/28
Barbados	1977/05/30
Ecuador	1980/01/02
Colombia	1980/02/07
Antigua and Barbuda	1983/01/01
Bolivia	1985/07/09
Grenada	1985/10/01 ~ 1989/07/19, 2005/01/20
Nicaragua	1985.12.07 ~ 1990/11/06
Belize	1987/02/06 ~ 1989/10/23
Uruguay	1988/12/03
The Bahamas	1997/05/23
St. Lucia	1997/09/01
Dominica	2004/03/23

 

                 II.  Recent Development of Sino-Latin American Relations

       China’s open-door policy and Latin America’s reform programs have created impetus for the development of Sino-Latin American relations.  This relationship covers not only general diplomacy and trade, but also political parties, science and technology, education, cultures and others.

The Communist Party of China (CPC) always plays a decisive role in China’s foreign policy-making.  During the “Cultural Revolution,” it must be admitted, the CPC made some mistakes in this arena.  At that time, the CPC believed that the major themes of the era were war and revolution, and that if revolution could not stop a war, then war would stop revolution.  Now the CPC’s general stance toward international relations is based on four principles: autonomy, full equality, mutual respect and mutual non-interference. And in particular, the CPC has formed explicit and productive relationships with political parties in Latin America.[9]

       China has also made efforts to develop relations with the multilateral and regional organizations of Latin America. For instance, since the establishment of political dialogue between China and the Rio Group in 1990, many talks have been conducted at the foreign-ministry level. China has always praised the important role of the Rio Group and considered it to be an important political force among developing countries, as well as a reliable partner in international affairs. In June 1994, China became the first Asian country to be an observer to the Latin American Integration Association. In May 1997, China was admitted into the Caribbean Development Bank, and in September 1993, China officially applied to join the Inter-American Development Bank. Meanwhile, MERCOSUR is becoming an important integration organization in the Western Hemisphere, and China has held several official talks with this group following the establishment of a dialogue mechanism.

It is increasingly recognized that, in the age of globalization, politics tend to be economic in nature, and economic issues are often linked to politics. Indeed, to develop bilateral relations, it is important to expand economic ties.  In demonstration of this point, China and Chile signed a bilateral trade agreement in October 1952, the first such agreement between China and a Latin American country. Since then, Sino-Latin American trade has grown steadily. By 1960, two-way trade between China and Latin America had risen to more than US$30 million as compared with only US$7 million in 1955. In 1970 and 1978 it surpassed US$100 million and US$1 billion, respectively. With the rapid development of diplomatic relations across the Pacific since the late 1970s, Sino-Latin American trade increased impressively.  By 2004, as shown in Table 2, two-way trade between China and Latin America had risen to more than US$40 billion. 

Table 2.       Sino-Latin American Trade (in millions of US$)

 

1950	1955	1960	1965	1970	1975
1.9	7.3	31.3	343.1	145.8	475.7

 

1980	1985	1990	1995	1998	1999
1331	2572	2294	6114	8312	8260

 

2000	2001	2002	2003	2004
12600	14938	17826	26806	40027

 

Source: zhonguo haiguan tongji (China Customs Statistics ),various issues, and

http://www.moftec.gov.cn/

 

During the 1990s, China’s once-frequent trade deficit with Latin American countries shifted to become a small surplus. In 1997, for example, China enjoyed a surplus of US$837 million, and in 1998 and 1999 its surplus stood at US$2.3 billion.  Starting from 2003, however, Sino-Latin American trade balance turned negative again for China.

       China’s exports to Latin America are mainly machinery (tractors, machine tools, engines, ships, hydroelectric generators, etc.), electronics (TV sets, refrigerators and other household devices), textiles, clothing, medical products, cosmetics, and light industrial products.  From Latin America it imports such goods as iron and copper ore, fish meals, petroleum, wool, machinery, steel, edible oil, sugar, paper pulp and leather, among others.

       China’s major trade partners in Latin America are quite concentrated in number. As Table 3 indicates, China’s six largest trade partners, Brazil, Mexico, Chile, Argentina, Panama, Peru and Venezuela, accounted for more than 80% of its trade with the entire region in 2004.

Table 3       China’s largest trade partners in Latin America in 2004

                          (in billions of US$)

Brazil	Mexico	Chile	Argentina	Panama	Peru	Venezuela
12.4	7.1	5.4	4.1	2.2	1.9	1.3

Source:http://gcs.mofcom.gov.cn/aarticle/Nocategory/200503/20050300021338.html

 

It should be pointed out that Sino-Latin American trade accounts for a small share in each side’s overall foreign trade (less than 4% for each). However, the outlook for increased trade appears promising. This is simply because: (1) Latin America has a wealth of natural resources, and China’s rapid economic development will need more such input to sustain growth. (2) There is some economic complementarity between the two sides.  (3) As both China and Latin America undergo economic reforms, markets are opening and investment regulations are becoming more liberal.  (4) Latin America cannot afford to neglect China’s huge market potential, particularly after the latter entered the WTO. Moreover, as it diversifies its external economic strategy, Latin America will also need China and other East Asian countries.  (5) In the age of globalization, China and Latin America have common interests involving such issues as South-South cooperation. 

III.  Three factors in Sino-Latin American relations

In discussing Sino-Latin American relations, we have to note the three factors, namely, the Latin American factor in China’s development, the China factor in Latin American development, and the U.S. factor in Sino-Latin American relations.

A.  The Latin American factor in China’s development

       Since China started to carry out its reform policies in 1978, its economy has been growing rapidly.  In the course of 25 years between 1978 and 2003, China's economy grew by an average annual rate of 9.4%.  China now is the world's sixth largest economy and the fourth largest trader. The government has set out the goal of realizing industrialization, making per capita GDP at US$3,000 by the year 2020.

       To reach this objective is not easy.  One of the challenges is how to eliminate the bottle-neck of resource shortage.  It is true that China is a nation with a great amount of natural resources. Because of its huge population, however, China is also lacking resources in terms of per capita distribution. Take forest and timber for example. According to recent statistics, China’s forest area is 1.2 million square kilometers, and timber resources are about 10 billion cubic meters. These two absolute numbers are huge compared to many other countries in the world. But in per-capita terms, China’s forest area is merely 0.10 hectare, and timber resources are less than 10 cubic meters, as compared with the world average of 1.07 hectare and 83 cubic meters, respectively.[10] On the one hand, the nation should make strenuous efforts to upgrade the efficiency of using the resources.  On the other, it needs to locate supplies from abroad.  Latin America is the perfect place where China can import many kinds of resources.

       The importance of a continent or a country is closely related to its economic size.  According to the World Bank, Latin America, home to 525 million people, produces US$1. 8 trillion GNP, the largest among the low- and middle-income groups of countries.  Therefore, the Latin American market is important for China’s enterprises which are trying their best to globalize their business.

Politically, Latin America could be a partner for China and other developing countries in the struggle to establish a just world order.  Both Latin America and China share many common or similar positions towards some of the major international issues.  Also noteworthy is the fact that in the current U.N. system one country enjoys one vote, and China could win the support from Latin American countries in many issues.

Diplomatically, the Taiwan issue has yet to be resolved.  Indeed, with the passage of time, this issue has become an increasingly conspicuous part of China’s diplomatic efforts, and the Chinese government refuses to relinquish sovereignty over Taiwan. As of early 2005 there are still twenty-six countries that have “diplomatic relations” with Taiwan, and twelve of them are found in Latin America.

B. The China factor in Latin American development

China’s rising in the world stage, in both political and economic aspects, pose opportunities for Latin American development.  Though some of the exports from Latin America and China are competing in the world market, China’s huge demand for natural resources offers higher prices for the Latin American exports of raw materials.  As the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC) indicates, China has become the engine for Latin American growth in a certain sense.  In its annual report analyzing Latin America’s economic situation in 2004, ECLAC said, “The satisfactory performance of the region’s economies was closely tied to developments in the international economy. World economic activity picked up speed in 2004, resulting in estimated global GDP growth of just under 4% (versus 2.7% in 2003), while the expansion of world trade could top 9% (versus 5.8% in 2003). The United States and China were the engines of this expansion, which contributed to the commodity price hikes that have benefited many countries of the region, especially those in South America.”[11] 

In recent years, however, the use of anti-dumping measures against Chinese exports is quite common.  On April 15, 1993, Mexico decided to levy anti-dumping tariffs on ten categories of imports from China. This was the first action ever taken in Latin America to limit Chinese exports. Since then Argentina, Brazil, Chile, Colombia, Ecuador, Peru and Venezuela, among others, have all employed this trade practice against China.

Several features characterize Latin America’s anti-dumping policies. First, this practice tends to cover a wide range of Chinese products.  Second, the anti-dumping tariffs levied are very high.  For example, Mexico once levied a tariff of 1105% on Chinese shoes--a rate that was equivalent to a total ban on this product.  Third, until recently, some Latin American countries still believed China’s economy is commanded by central planning. Lastly, certain Latin American countries seldom follow international norms, i.e., they tend to levy tariffs before carrying out an actual investigation.

In recent years the development of Sino-Latin American relations came up with another problem.  In some Latin American countries, there exists the mentality of “China threat”.  Some Latin Americans tend to blame rising unemployment rate on the expansion of Chinese exports.

The above argument is wrong.  First, China’s relations with Latin America are not targeted towards any third party.  Second, both China and Latin America belong to the Third World and cooperation between the two sides will benefit world peace and development.  Third, since the 1990s, Latin America has been opening its door to the world, to any country with all kinds of political systems and cultures.  So China is only one of the partners Latin America is trying to build economic relations. As a matter of fact, Latin America’s relations with Japan, Korea and EU are much closer than with China.  Finally, China’s relations with Latin America in the political fields, such as the establishment of strategic partnership, also contribute to world peace and South-South cooperation.

Indeed, expanding its market share in Latin America has been part of China’s objective to reduce its dependence upon the United States, Japan, and Europe. China has therefore been trying very hard to find ways and means to increase economic relations with Latin America. One recent measure has been called “processing with our own materials,” which means that China ships the production lines and intermediate goods to Latin America instead of selling the final products. This idea seems feasible, since China’s own capacity of production for certain types of goods is showing signs of exceeding its domestic market needs.

Government officials, business people, and scholars from both China and Latin America have frequently suggested that both China and Latin America should think of more effective ways to sustain the momentum of economic cooperation that has been underway over the past several decades.  One such way would be for them to make more foreign direct investments in each other’s economies.

According to China’s Ministry of Commerce, by 2003, China had invested $4.6 billion in Latin America, accounting for 14% of its total overseas investment. (For comparison, Asia’s share was 80%.)  Most of the investments were located in the British Virgin Islands and Cayman Islands.  Other major Chinese investments in Latin America include an iron ore mine in Peru, oil fields in Venezuela, Mexico and Peru, agriculture and textiles in Mexico, timber in Brazil, fish meals and timber products in Chile, fisheries and TV sets in Argentina, motorcycles in Colombia, shrimp raising in Ecuador and gas production in Venezuela and Peru.

C. The U.S. factor in Sino-Latin American relations

The “China threat” in Latin America was echoed by some international media.  One article in the Wall Street Journal, for instance, says, “The rise of China in the region could complicate U.S. efforts to control illegal immigration, weapons shipments, the drug trade and money laundering because China is cooperating with Latin countries that are not especially friendly toward those efforts. Some of these nations may try to use the Chinese alternative to challenge U.S. hegemony.”[12]  Another article on the web called Hu Jintao's first trip to Latin America as Chinese President as "Operation American Backyard".  The article predicted that, over the long term, China's Latin-American offensive could have a negative impact on Sino-U.S. relations.  It went on to say, “[Chinese President] Hu’s whirlwind tour of Brazil, Argentina, Chile and Cuba the past week or so, however, has illustrated the extent to which Beijing can exploit the less-than-cozy relations between the U.S. and Latin America to establish major economic and energy footholds in Washington's backyard.”  It even  asserted that “over the long term, China's Latin-American offensive could have a negative impact on Sino-U.S. relations.” [13]

Testifying before a House subcommittee on China's growing economic presence in the Western Hemisphere, U.S. Assistant Secretary for Western Hemisphere Affairs Roger Noriega said, “We continue to monitor closely China's outreach to Latin America, as we monitor it elsewhere. We seek to ensure that this activity does not run counter to US goals in the region and is compatible with this hemisphere's hard-won progress towards representative democracy.”

The U.S. concern is unnecessary.  First, China’s relations with Latin America are not targeted towards any third party.  Second, both China and Latin America belong to the Third World and cooperation between the two sides will benefit world peace and development.  Third, since the 1990s, Latin America has been opening its door to the world, to any country with all kinds of political systems and cultures.  So China is only one of the partners Latin America is trying to promote economic relations with. As a matter of fact, Latin America’s relations with Japan, Korea and EU are much closer than with China.  Finally, China’s relations with Latin America in the political fields, such as the establishment of strategic partnership, also contribute to world peace and South-South cooperation.

Many Chinese scholars believe that, although the cold war ended many years ago and Latin America has become more and more diplomatically independent, the U.S. still keeps great influence over its “backyard” on many issues, even including the possibilities of establishing diplomatic relations between China and the Central American and the Caribbean countries that have ties with Taiwan.  One web article predicted that the next country in Latin America “that may switch recognition from Taiwan to China may be El Salvador. Recently, the El Salvador Foreign Minister Francisco Lainez admitted that his country was considering establishing diplomatic links with China owing to lobbying by the local business community that was anxious to profit from the China market.”[14]  Many Chinese scholars argue that, without the U.S. nod, El Salvador and other countries might not dare to establish diplomatic relations with China.   

                 IV.  Prospects of Sino-Latin American Relations 

The recent two official visits to Latin America by Chinese President Hu Jintao and Vice President Zeng Qinghong signified a new stage of the Sino-Latin American relations.  This bilateral relationship has also promoted the South-South cooperation.

Addressing the Brazilian Congress on November 12, 2004, Visiting Chinese President Hu Jintao proposed several measures to boost ties between China and Latin America. He said that the two sides should strengthen strategic common ground and enhance mutual political trust, take practical and at the same time creative steps to tap potential for economic cooperation, and attach importance to cultural exchanges to deepen mutual understanding.

Many people have noted that, while Latin America is relatively labor-intensive, this advantage has been fading away since China and India, among others, have entered the world market with cheaper labor. Indeed, China and Latin America might face friction in competing for world market shares in the sense that China’s labor cost is lower than that of Latin American countries. However, this kind of friction is unavoidable insofar as competition is becoming ever fiercer in the age of globalization. But friction can be resolved through dialogue and mutual understanding.

Another way to promote Sino-Latin American cooperation is in the field of science and technology. In this regard, China and Brazil may serve as good examples. Two satellites have been sent into orbit jointly by the two nations, and it is reported that a third launching is planned for the near future.

The movement towards regional economic integration in Latin America, exemplified by MERCOSUR and the would-be FTAA, offers both opportunities and challenges for China. On the positive side, it is likely that highly competitive Chinese enterprises will take advantage of the free movement of goods and capital among the Latin American countries. On the negative side, however, there is the possibility of trade diversion, which is not favorable to China and other Asian countries. As a matter of fact, most scholars in China argue that the would-be FTAA could entail more trade diversion than trade creation for Chinese exports.