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China’s increasing role in Latin America and Europe

Escrito el 5 enero 2011 por Gonzalo Garland en China

By now there is little doubt, if any, of the increasingly important role that China is playing in the world. Fifteen years ago there were discussions about China’s or Chinese firms’ potential worldwide. Today we are clearly not just talking about a potential but a reality. We have seen the growing self-assurance of China in dealing with both internal and external issues, and we have also started to see (and will doubtlessly see much more in the future) an increasing presence of Chinese firms across the world.
Li-Keqiang.JPG

Li Keqiang, viceprimerministro chino. Foto: Bloomberg

With the growth of China in the world economy, it is also natural that Chinese firms will be supported by the government in their internationalization process, and that their actions many times, if not most, are very integrated into the government’s international strategic objectives. A few years ago this coordination was clear when government officials from China visited different countries in Africa, bringing considerable investment from Chinese firms with them. More recently we have seen a similar trend in Latin America, and particularly in South America, where China has not only already become  the largest trade partner with some countries, but also the single largest investor in others. The case of Brazil in 2010 is particularly illustrative. With Sinopec investing in oil and the China State Grid in electricity as possibly the most salient examples, China became the largest foreign investor in Brazil last year. Nor should we be surprised if the same happens in other South American countries.

While these two examples of increasing regional influence may be explained by the huge appetite of a growing China for natural resources, its more recent moves in Europe may be for somewhat different reasons. While Europe continues to constitute a huge market for Chinese firms, there are fewer natural resources that may interest China. Of course there are specific sectors and firms that China will be interested in investing in, but some of the more recent moves may be better understood viewed through a  more political prism. As Europe struggles to overcome major poblems to recover from the Great Recession, while China holds immense reserves, if China comes to help the European countries by, among other things, buying their debt, then it would not only help the perception of China in Europe and in other parts of the world, but may also help to reduce the pressure for the revaluation of the yuan.

Countries that are being “helped” by China would feel somewhat more constrained in applying pressure for currency appreciation. As in the abovementioned cases, therefore, there is a coordinated action that fits very well with China’s increasingly important role in the world. And if trends are anything to go by, we should be prepared to see a stronger global presence of China,  both as a country and through its firms.

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Mark de Zabaleta Herrero 11 enero 2011 - 07:43

Excellent article

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