China and Latin America's 'shared destiny'

By John Ross
0 Comment(s)Print E-mail China.org.cn, July 24, 2014
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Chinese President Xi Jinping (L) is awarded Cuba's Jose Marti Medal by Cuban President Raul Castro in Havana, capital of Cuba, July 22, 2014. [Xinhua/Liu Weibing]

Chinese President Xi Jinping (L) is awarded Cuba's Jose Marti Medal by Cuban President Raul Castro in Havana, capital of Cuba, July 22, 2014. [Xinhua/Liu Weibing]



President Xi Jinping's visit to Latin America illustrates that from both the economic and political viewpoint the relations between China and Latin America is becoming one of the most important in the world. Although Xi Jinping specifically used the phrase "community of shared destiny" to describe China's relations with Brazil, the term equally applies to the relations between China and the Latin American continent as a whole.

Economically a key and specific basis for the importance of this relation is that China and Latin America are now regions of the developing world at similar stages of development. Adjusting for different price levels, calculating in World Bank parity purchasing powers (PPPs), Latin America's per capita GDP in 2013 was slightly under US$15,000 and China's slightly under US$12,000. Both were substantially higher than South Asia's US$5,000 or sub-Saharan Africa's US$3,400.

That China and Latin America are both at significantly higher levels of economic development than other major regions of the developing world means they have more areas for trade and cooperation. This also helps explain why trade between China and Latin America as a whole is almost exactly in balance – evidently substantially limiting any trade frictions.

Naturally, within that overall positive framework, individual issues in trade between China and Latin America remain. Manufacturing exports from China to Latin America are much more developed than those in the opposite direction. China's rapid growth in the last decade played a major role in helping most Latin American countries develop, by creating high demand and high prices for their energy and other commodity exports, but over the longer run Latin America will want to develop its own manufacturing exports to China. China's purchase of US$3.2bn of regional range aircraft from Brazil's Embraer, announced during Xi Jinping's visit, is an example of this trend. Furthermore, China's relations with Latin America interrelate with a key strategic question for that continent's own development – Latin American economic integration.

China's economy is much larger than any individual Latin American countries – giving China a much larger market than theirs, and therefore creating the potential for huge developments in economies of scale and geographical specialization in different economic sectors. Measured at current exchange rates, China's GDP in 2013 was US$9.2 trillion compared to US$2.2 trillion for Brazil – Latin America's largest single economy.

This means that the strategic question of Latin American integration is linked with its relation to China. For Latin America to develop relations firmly based on equality with China the continent as a whole has to relate to it, while China would benefit from the much greater size of market and economic dynamism Latin American economic integration will create.

Simple numbers dictate this reality. China has approximately twice Latin America's population, and its economy is approximately twice as large as Latin America's, no matter how measured – in current exchange rates Latin America's GDP is US$5.6 trillion and China's US$9.2 trillion, and in PPPs China's GDP is US$16.2 trillion and Latin America's US$8.5 trillion.

If relations are only between China and one Latin American country, it is therefore objectively difficult to keep them balanced. But greater Latin American integration fits with China's own strengths. A large part of China's extraordinary economic development, an average 9 percent a year economic growth for over 35 years, is due to huge infrastructure investment. From 1992-2011 China spent an average 8.5 percent of GDP a year on infrastructure.

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