Despite a slow recovery of the world economy, 2015 has witnessed growing ties between China and Latin America, with an increasingly solid political foundation and enhanced economic and trade cooperation.
In the past year, China and Latin America have given strategic priority to bilateral cooperation through establishing a comprehensive cooperation mechanism, upgrading production capacity cooperation, furthering cooperation in trade, investment and finance as well as increasing cultural exchanges.
ESTABLISHING COMPREHENSIVE COOPERATION MECHANISM
On Jan. 8-9, the first ministerial meeting of the Forum of China and the Community of Latin American and Caribbean States (CELAC) was held in Beijing to map out the future of China-Latin America cooperation. The fruitful meeting showed that cooperation between China and Latin America has entered a new stage, with an overall bilateral cooperation mechanism established between the two sides.
In fact, China-Latin America comprehensive cooperation came true thanks to the steady development of bilateral ties in recent years. In 2008, the Chinese government issued its first-ever policy paper on Latin America and the Caribbean region, expressing its strong intention to forge overall cooperation with the region.
In the following seven years, China and Latin America have made rapid progress in enhancing political mutual trust, economic and financial cooperation, and cultural exchanges. Meanwhile, fast-growing Latin American economies are inclined to unite in development efforts. CELAC was established in December 2011, creating favorable conditions for China and Latin America to carry out comprehensive cooperation.
In January 2014, the second CELAC summit adopted the Special Declaration on the Establishment of the China-CELAC Forum, expressing their aspiration for deepening cooperation with China as a whole. In July 2014, Chinese President Xi Jinping visited Latin America, proposing building a new Five-in-One pattern of relations between China and Latin America.
By that he meant both sides will sincerely trust each other in politics, cooperate toward a win-win outcome in economy and trade, learn from each other through people-to-people and cultural exchanges, closely cooperate in international affairs, and promote overall cooperation and bilateral relations, so as to forge a hand-in-hand community of common destiny.
The establishment of a comprehensive cooperation mechanism between China and Latin America, as marked by the first China-CELAC Forum ministerial meeting, has laid a solid foundation for bilateral mutually beneficial cooperation, which shows that China-Latin America cooperation has reached maturity.
Moreover, this mechanism has contributed to China's all-round diplomacy with developing countries and regions. Ecuadorian President Rafael Correa has said that CELAC's strengthening links with China could be regarded as a historical turning point in bilateral ties and even the world order.
UPGRADING PRODUCTION CAPACITY COOPERATION
Starting at the turn of the new century, China and Latin America expanded their trade volume from 12.6 billion U.S. dollars in 2000 to 261.2 billion dollars in 2012. However, from 2012, that fast pace has significantly weakened, with bilateral trade lingering at around 260 billion U.S. dollars for three consecutive years. The anemic global trade environment is somewhat to blame, but the root cause is insufficient driving forces for competitive advantages in bilateral trade, making upgrading cooperation more pressing.
With China and Latin America highly complementary in their economies, the latter needs to improve its industrial competitiveness through productive investments and to adjust its economic structure to get rid of its reliance on raw materials. China's measures to increase domestic demand will boost Latin America's exports. Meanwhile, capital, technologies, and industrial advantages accumulated during China's reform and opening-up will provide strong support for Latin America's industrialization.
Against this backdrop, industrial capacity cooperation is the direction where the two sides could raise the quality of cooperation. In May, Chinese Premier Li Keqiang visited Brazil, Peru, Colombia and Chile, during which he promoted bilateral cooperation in industrial capacity and international equipment manufacturing.
"My current visit will focus on consolidating our traditional friendship, and deepening our practical cooperation in the context of enhanced global cooperation with priority given to breakthroughs in production capacity cooperation, transformation of China-Latin America trade and economic relations, and upgrading of China-Latin America cooperation," Li said during his visit to Brazil. Latin American experts speak highly of the prospects of China-Latin America industrial capacity cooperation.
Matias Carugati, an economist at Argentinean think tank Management & Fit, believes that if the spare capacity of China could be transferred to Latin America by direct investment, it could greatly boost the industrialization of Latin America and reduce its excessive reliance on exports of primary goods such as minerals. Today, local projects in industrial capacity cooperation between China and Latin America are gradually advancing.
On Nov. 2, an auto manufacturer jointly constructed by Chinese bus company Yutong and the Venezuelan government was put into operation in San Felipe, central Venezuela, with production capacity estimated to exceed 3,000 units per year. Such projects could enhance the manufacturing capacity of Latin American countries and also greatly contribute to China's export of excessive capacity.
In fact, Chinese companies have been active in Latin America for years, providing high-quality industrial products, gradually merging with the local industrial chains, and promoting local industrial upgrade.
FURTHER COOPERATION IN TRADE, INVESTMENT, FINANCE
Motivated by trade, China's investment in Latin America experienced a roughly twelve-fold increase in a decade, from 8.2 billion U.S. dollars in 2004 to 98.8 billion U.S. dollars in 2014. Today China is Latin America's second largest trading partner and third largest investor. Fast growing bilateral trade investment comes with an increasing demand for financial services.
In recent years, branches of Chinese banks have been set up in Latin America, bilateral currency swap agreements are increasing, and more platforms for financial cooperation have been established. In 2015, Premier Li and Chilean President Michelle Bachelet signed a currency swap deal in May during his Chile visit, making the Chilean capital of Santiago the first renminbi (RMB) clearing bank location in Latin America.
China has also agreed to grant 50 billion yuan (8 billion U.S. dollars) to RMB qualified foreign institutional investors in Chile. Chile, with its open financial environment, is expected to be the financial portal of infrastructure and industrial capacity cooperation between China and Latin America in the future, according to local media. The RMB's internationalization has also made breakthroughs in Latin America.
China's central bank authorized the Industrial and Commercial Bank of China (ICBC) to clear renminbi business in Argentina on Sept. 18.ICBC announced on the same day the launch of local RMB clearing services in Buenos Aires, the capital of Argentina, marking an important step in the RMB's internationalization in Latin America and the Caribbean region.
In 2015, Chinese enterprises in Latin America showed strong momentum with rising investment. The China Three Gorges Corporation on Nov. 25 won the bid for the 30-year concessions of two hydropower stations in Brazil. A day earlier, Brazilian airline Azul announced that it had sold 23.7 percent of its shares to China's Hainan Airlines for 1.7 billion reais (460 million U.S. dollars).
Analysts say that the mergers and acquisitions, or buying stakes, in large local enterprises and projects through capital operations, and the upgrade in the value chain through local management demonstrate Chinese enterprises in Latin America are experiencing a transformation from trading partners and construction contractors to investors and business managers. The increase in these types of business and projects will enhance the overall output of China's relevant sectors and the international standards of Chinese enterprises in Latin America.
INCREASING CULTURAL EXCHANGES
Primarily based on economic and trade cooperation, with industrial capacity cooperation as a breakthrough, the upgrading of China and Latin American cooperation has been accompanied by cultural exchanges being stressed in bilateral relations. During his visit to Latin America in May, Premier Li attended cultural events in Colombia and Peru, and signed a series of cooperation agreements in culture and education.
"The cultural resonance between China and Latin America across the vast Pacific is the spiritual bond uniting the peoples of both sides," Li told a seminar on China-Latin America people-to-people and cultural exchanges in Colombia.
"I believe that both sides can, with an open mind, respect each other and facilitate exchanges and mutual learning for common progress so as to establish a solid public opinion foundation for continuously deepened practical cooperation," he said. With 2016 declared the Year of China-Latin America Cultural Exchange, a solid foundation of public support will definitely give new impetus to the fast-growing cooperation between China and Latin America.
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