Latin America in China's contemporary foreign policy

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Latin America in China's contemporary foreign policy.(Free Trade Agreement for the Establishment of the Free Trade Area of the Americas, 1998)
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Publication:Journal of Contemporary Asia
Publication Date: 01-OCT-06
Delivery: Immediate Online Access
Author: Cheng, Joseph Y.S.
Full Article:
Two and a half centuries ago, the French Sinologist De Giognes proposed that the New World was discovered not by Columbus, but by the Chinese. Proven contacts between China and Latin America can be dated back to the 1570s, when trade between them started to flourish across the Pacific (Jiang, 2003: 3). In the 18th and early 19th Century, hundreds of thousands of Chinese labourers were transported to Latin America to serve as contracted workers (kulil" coolie"), some of them being sold by Western colonialists; their labour contributed to local economic development.
There were no close tics between China and Latin America in the 1970s and 1980s. Trade was limited, and high-level diplomatic contacts were few. In the first two decades of the People's Republic of China (PRC), contacts between China and Latin America were limited to the non-governmental level. Cuba was the first country in the region to establish diplomatic relations with China in September 1960. In 1970, Chile became the first South American country to establish diplomatic relations with China. Subsequent to China's admission into the United Nations in 1971, many Latin American countries followed the examples of Cuba and Chile; by the mid-1980s, all countries in South America except Paraguay had diplomatic relations with China (Liu, 2003:11).
Before the 1990s, Sino-Latin American trade was insignificant. In October 1952, China and Chile signed a bilateral trade agreement, the first trade agreement between China and a Latin American country. In 1955, Sino-Latin American trade was about US$7 million, which grew to over US$30 million in 1960. In 1970 and 1978, it surpassed the US$100 million and US$1 billion marks respectively. This expansion in bilateral trade in the 1970s was a result of the establishment of diplomatic relations between China and the major Latin American countries in the decade following China's entry into the United Nations in 1971 and the Nixon visit to China in February 1972. (1-A) In the 1970s, the annual average trade between China and Latin America amounted to US$1.028 billion; in the following decade, the average annual trade reached US$1.73 billion, with an annual average growth rate of 2.2%. The 1980s was a lost decade for the Latin American economy which suffered from heavy external debt and other problems.
In the 1990s, the Latin American economy improved and China's external trade expanded in an impressive manner. As a result, China's exports to Latin America rose 5.19 times in the decade. Before 1994, China had suffered a deficit in the bilateral trade; since the mid-1990s, China enjoying a trade surplus, until 2002. In 1998 and 1999 when China's imports from Latin America stagnated because of the Asian financial crisis, its exports continued to grow. In the 1990s, China still had a trade deficit with the resource-rich Latin American countries like Brazil, Argentina, Chile and Peru. On the other hand, China had a trade surplus with Mexico, Columbia and Panama. Panama served as an entrepot; a considerable portion of its imports from China was substantially re-exported to other Latin American countries.
In the early years of the 21st Century, China's imports from Latin America increased substantially (see Tables I and 2). From 2000 to 2003, China's imports from Latin America increased 80.9%, 23.9%, 24.4% and 80.3% respectively; and Latin America's share of China's imports rose from 1.8% in 1999 to 2.98% in 2003.
In 1999, the growth rate of China's heavy industries surpassed that of its light industries for the first time in its era of economic reforms and opening to the external world, indicating the beginning of China's second phase of expansion in heavy industries. (2) Investment has been flowing to heavy industries such as coal, automobile, iron and steel, petrochemicals and machinery, paving the way for the above-average growth rates in the heavy industrial sectors. It is expected that this trend will continue for at least ten years, following the precedents of Japan and South Korea in the previous century. As China lacks the natural resources in support of its second phase of heavy industrialisation, it will have to secure their supply through approaching new sources, and resource-rich Latin America will be able to export more to China in the foreseeable future. Iron and steel, soybeans and related products, iron ore, copper, timber, fish products and sugar, are the major items of China's imports from Latin America. These items will continue to have a strong demand in the China market.
Trade began to pick up in the 1990s (see Tables 1 and 2). In May 1990, the then PRC President, Yang Shangkun, paid a state visit to Mexico, Brazil, Uruguay, Argentina and Chile; Yang was the first Chinese head of state to visit Latin America. In 1992, then Chinese Premier Li Peng went to Brazil to attend the United Nations Conference on Environment and Development. In November 1993, the then President Jiang Zemin visited Cuba and Brazil. Jiang again visited Chile, Argentina, Uruguay, Cuba, Venezuela and Brazil in 2001. In November 2004, President Hu Jintao too visited Brazil, Argentina, Chile and Cuba. These visits revealed China's priorities in Latin America. Today, China enjoys "strategic partnerships" (3) with Brazil, Argentina, Venezuela and Mexico (Zhang, 2004: 12-13).
This article intends to examine the role and significance of Latin America in China's foreign policy framework summarised as the "peaceful rise" strategy (see below). It attempts to analyse issues concerning Sino-Latin American economic relations, including trade, the impact of the Free Trade Area of the Americas (FTAA), and investment. Diplomatic competition with Taiwan is also considered because, in the eyes of Beijing, this is an important aspect of Sino-Latin American relations.
Traditionally, Chinese literature divided the Americas into North America (from Greenland to Panama) and South America (all countries south of Panama). This division actually split Latin America. In recent years, Chinese literature in English tends to divide the Americas into North America (the US and Canada), and Latin American and Caribbean countries. (4) In this article, "Latin America" is used to cover Latin American and Caribbean countries. The focus of the discussion is actually on South America, though Central American and Caribbean countries are the important actors in China's diplomatic competition with Taiwan.
China's Foreign Policy Framework
Chinese leaders were acutely aware of China's backwardness at the end of the Cultural Revolution (1966-1976), and they wanted to secure a peaceful international environment to concentrate on China's modernisation programme. Beginning in 1982-83, Chinese leaders pursued what they called an independent foreign policy of peace (Cheng, 1989: 161-201). In his report to the Fourth Session of the Sixth National People's Congress (NPC) on March 25, 1986, following the Chinese leadership's usual practice, Premier Zhao Ziyang provided a detailed account of the ten principles guiding China's independent foreign policy line of peace (Ta Kung Pao, 14 April 1986). Besides reaffirming the general principles of defending world peace, opposing hegemonism, observing the Five Principles of Peaceful Co-existence (5) and supporting the Third World, China also reiterated its position on arms control and disarmament as well as its open-door policy and support for the United Nations. As regards China's position of never establishing an alliance or strategic relationship with any big power, the Chinese Premier further stated that China's relations with various countries would not be determined by their social systems and ideologies, and that China's position on various international issues would be guided by the criteria of defending world peace, developing friendship and co-operation among various countries and promoting international prosperity. Premier Zhao also stressed China's emphasis on various exchanges at the people-to-people level.
After Deng Xiaoping's death in early 1997, Jiang Zemin's statements on Chinese foreign policy repeatedly emphasised continuity and peace. The basic rationale for this continuity in Chinese foreign policy has been China's demand for a peaceful international environment to concentrate on economic development, as the Chinese leadership appreciates that the legitimacy of the Chinese Communist regime depends on its ability to improve living standards. Striving for a peaceful international environment certainly involves establishing friendly relations with one's neighbours and avoiding conflicts with them. Advancing China's national interests by force and the threat of force will be very costly. This has probably been China's most important foreign policy objectives since 1982-83, and it has been achieving satisfactory results. From an idealistic point of view, Chinese leaders' conception of peace is more than an absence of war and violence; it is related to North-South issues and the elimination of social injustice arising from the gap between the rich and poor. Peace should be based on an equality of states, while hegemonism is seen as a threat to peace (Chart, 1998: 35).
In the view of China's still limited military and economic capacities, a multipolar world in the 21st Century would provide the most favourable environment for it to exert its influence in international and regional affairs as a major power. The Chinese leadership sees the predominance of the US as the sole superpower in the world as unacceptable, both from an ideological and national interest point of view (Bernstein, 1997). The perception that the US does not want to see a strong China and that it wants to "contain" China has reinforced the above view. (6) Chinese leaders therefore would like to work to facilitate the emergence and consolidation of multipolarity in the global power transfiguration in the present century.
The Chinese leadership prefers a multipolar world in which the major powers can develop friendly ties with each other and in which non-zero-sum games are the norm (Beijing Xuexi Shibao, 23 November 2004; Peng and Liu, 1999). Power blocs and security alliances tend to exacerbate tension and eventually limit the options of the major powers involved (Ding, 2004; Gao, 2000). Rapid economic growth is essential for China to maintain its major power status. China is still under acute pressure to catch up with the developed countries; diversified sources of capital, technology, management know-how, etc. as well as a broad spectrum of partners for economic co-operation constitute part of Chinese leaders' preferred scenario. Strategic partnership provides the standard mode of behaviour governing relations among major powers in a multipolar world (Cheng, 1999:85-110). In contrast to the Five Principles of Peaceful Co-existence, strategic partnerships imply that China looks upon itself as a major power and pursues the legitimate interests of one in a multipolar world.
In view of the Asia-Pacific financial crisis in 1997-1998 and China's increasing dependence on international trade, the Chinese leadership now places considerable emphasis on China's "economic security." It is believed that because of the keen competition for markets and resources in the context of globalisation as well as the enhancement of regionalism, the economic development of one individual country will be more vulnerable to the influence of external factors. Hence the strengthening of coordination among governments concerned will become all the more essential. This implies that Chinese leaders will attempt to further develop China's dialogue and multilateral Co-operation first with the major powers, its Asian neighbours, and eventually with all countries in the world, including those in Latin America and Africa (Ma, 1998: 32-34). The latter are now perceived as important suppliers of resources essential to the support of China's industrialisation and expansion to potential markets.
China's joining the World Trade Organisation (WTO) symbolises China's response to globalisation. There is an appreciation that isolation will only exacerbate China's backwardness. Despite the economic and political costs, China's policymakers see no alternative but to accept world-wide competition according to the rules defined by the developed countries; China can only catch up with developed countries through global competition. The ultimate challenge of engaging in global competition to the Communist Party of China (CPC)'s monopoly of power is not to be under-estimated; and multilateral economic diplomacy will be more significant in China's foreign relations in the future. The perception of a "China threat" in the post-Cold War international community and the danger of separatism, including that in Taiwan, are seen as two significant problems by the Chinese leadership. Since the early 1980s, Chinese leaders have been trying to improve relations with China's neighbours to secure a peaceful international environment and avoid any attempt to "contain" China. While the leadership has been successful so far, many challenges are yet to come. At the same time, the Taiwan question remains a serious source of friction in China's relations with many countries.
Globalisation and China's deepening integration with the international economy mean that the management of its international financial and trade risks has become a much more important and difficult task. China's Impressive economic growth has increased its influence in the Asia-Pacific region, and to a lesser extent, in the global economy. This implies influence as well as responsibilities. In this connection, Chinese foreign policy researchers have been engaging in discussions of interdependence in international relations as well as the relationship among interdependence, international organisations and state sovereignty since the early 1990s (Renmin Ribao, 8 December 1997; Peng and Liu, 1999; Wu and Yi, 1997). Despite the Chinese leadership's emphasis on state sovereignty, it became aware that some adjustments had to be made. As Samuel S. Kim (1994: 431) pointed out, in the 1980s and 1990s, the Chinese authorities' approach to international organisations was one of "system-maintaining and system-exploiting"; and the organisational learning derived from China's participation in international organisations involved some elements of cognitive learning while instrumental learning dominated. In recent years, China has gradually become more active in multilateral diplomacy and in international organisations. Instead of remaining aloof as in the 1970s and 1980s, it has been ready to co-ordinate with other major Third World countries to push for the building of a more equitable international economic order (People's Daily Online, 12 and 17 November 2004; BBC Monitoring International Reports, 2005). Major countries in South America, especially Brazil, Venezuela, etc., are important partners in this pursuit. China's more proactive position in the WTO ministerial meeting in Cancun in 2003 is a good example.
China's Rise
Paul Kennedy discussed in his book The Rise and Fall of the Great Powers the emergence of China as a major power. He indicated that China was the poorest among the world's major powers and at the same time probably located in the worst strategic position. He believed that two conditions would be essential to China's rise as a major power, namely, a visionary strategy formulated by the Chinese leadership and sustainable economic growth (Kennedy, 1987: 447-457).
At the end of 2003, the new Chinese leadership began to articulate the concept of China's "peaceful rise" publicly. On December 26, 2003, in commemoration of the 110th anniversary of Mao Zedong's birthday, Hu Jintao, General Secretary of the CPC Central Committee, stated that China had to "insist on following the development path of a peaceful rise" (Renmin Ribao, 27 December 2003). About two weeks earlier, in a speech delivered at Harvard University in the US, Premier Wen Jiabao elaborated on the concepts as follows:
In expanding our opening up to the external world, we, at the same time, have to adequately and more self-consciously rely on our own institutional innovations; rely on our developing and expanding domestic market; rely on transforming the huge savings of the residents into investment; and rely on the raising of the nation's quality and the progress of science and technology to resolve our resources and environmental problems. The gist of China's development path of a peaceful rise lies in the above" (Renmin Ribao, 12 December 2003).
Chinese academics in the international relations field consider China's "peaceful rise" as a long-term project. It focusses on the status and function of China in the international system and world market, including its adaptability, integration, influence and creativity (Zhang, et al., 2004: 1-15). Through active participation in the processes of economic globalisation, China has captured the opportunity to rise as a major power. The contribution of China's economic growth to the world economy lies in the following areas: first, it leads to the stable improvement of the living standards of China's 1.3 billion population; second, it constitutes important momentum pushing for Asia's economic development, and in return serves as a positive factor in global economic development; third, it facilitates the allocation of resources in the world market through China's participation in the international division of labour; and finally, it helps China assume a constructive role in the international economic mechanisms, and as a linkage between developed countries and developing countries.
The rapid increase of the weight of China's economy in the world market has generated some maladjustment between the external world and the China market, including the exchange rate of the Renminbi (RMB), China's huge trade surpluses, large-scale re-location of industries to China, and so on. Chinese leaders have pledged to tackle these issues when China's economic structure stabilises and when China can absorb the shock of these adjustments (Agence France-Presse, 27 November 2000; Beijing Xuexi Shibao, 23 November 2004). They also indicate that investment outflow from China will gradually accelerate. This investment outflow is aimed at opening up markets for China's exports including the securing of access to advanced technology, management, etc. through acquisitions and the establishment of brand names, wholesale and retail networks, and so on. It is also directed at securing a stable and expanding supply of energy resources and raw materials in support of China's industrialisation. Latin American countries rich in resources are expected to attract a substantial share of the latter Chinese investment.
The Chinese leadership is acutely aware of the danger of the spread of the "China threat" perception. They understand that the rise of a new major power will probably be perceived as a challenge and threat by the existing major powers. Chinese leaders are concerned that such perception will lead to the "containment" of China. In fact, they believe that the US has been engaging in such "containment", which in fact is the main cause of the conflicts in Sino-American relations (Christensen, 2001: 5-40; The Economist, 29 July 1995:11-12; Shambaugh, 1996:180-209). Chinese academics explain that China's "peaceful rise" involves a re-definition of national interest and national security by the Chinese authorities as common interest and a new concept of security (Sa, 2000: 50-2; Chu, 1999: 11-15: Tao and Zhang, 2004).
According to this new concept of security, China's security is not an isolated issue; it is mutually interdependent with that of the Asia-Pacific region and indeed of the entire global community. This new concept of security involves non-traditional security and human security, and in fact can serve as the basis for co-operation between China and the other major powers. In this connection, Chinese leaders will attempt to establish a new framework for international relations, but they understand that they only have limited support. It is hoped that this new framework will expand the strategic space for China's "peaceful rise." (Xinhuanet, 19 February 2004; Xinhua, 23 April 2004; Medeiros, 2004) To secure another 20 to 50 years for China to develop its economy and to catch up with the advanced countries is the most important strategic objective to facilitate China's "peaceful rise." China therefore is willing to make concessions to secure this strategic space. This is probably most conspicuous in Sino-American and Sino-Japanese relations; indeed, Chinese leaders have often been criticised by the domestic intelligentsia for being weak in dealing with these two countries.
In a speech at the Institute of International Relations in Moscow on May 28, 2003, and in another speech on the following day addressing the Moscow summit meeting of the Shanghai Co-operation Organisation, Chinese President, Hu Jintao, explained China's position. Hu stated,
China advocates the establishment of a new concept of security, building security through mutual trust, and promoting co-operation through dialogue. Military measures may win temporary victory, but will not bring long-lasting security. History and reality repeatedly demonstrate that force cannot establish peace, and power cannot ensure security. Only through the enhancement of mutual trust, consultation on the basis of equality and broad co-operation can universal and lasting security be realised" (Renmin Ribao, 29 and 30 December 2003).
This approach arguably is the strategy of the weak, and is in line with the Chinese leadership's objective of gaining time. Chinese leaders typically appeal for overcoming differences through dialogue and negotiation. As an implicit critique against US unilateralism and Samuel P. Huntington's (1996) thesis of "the clash of civilisations," the Chinese public information machinery preaches mutual respect, exchange and learning among various civilisations, different social systems and development paths while engaging in peaceful competition. In line with China's relative weakness, Chinese leaders have been eager to promote multipolarity and the strengthening of the role of the United Nations.
Within this framework, the Chinese leadership considers that priority should go to China's neighbours. According to Chinese official materials, the major powers are considered the key to foreign policy, while developing countries are its foundation. As China's influence rises in the international community, it will seek to strengthen its foundation, and relations with Latin America and Africa will assume greater significance.
Chinese leaders want to distinguish China's emergence as a major power from that of Germany before World War I and Japan before World War II. They emphasise the themes of peace and development, arguing that China needs a peaceful international environment for its modernisation and that China embraces globalisation, as symbolised by its joining the WTO in 2001. The high mobility of factors of production facilitated by globalisation is perceived to have provided the strategic opportunities for China to exploit the advantage of its abundant cheap labour supply adopting an export-oriented development strategy and emerging as "the workshop of the world". This development poses China as a keen competitor to many developing countries which also depend on labour-expensive exports--Mexico in Latin America is a good example. Chinese academics, however, point out that the processes of the international division of labour including the international intra-industry division of labour are controlled by multinational corporations. China is eager to move up the value-added production chain and develop more technology-intensive industries. Moreover, it also wants to establish its own brand names, its own Sony- or Samsung-type of enterprises, and its own international distribution networks. Otherwise, China's share of the profits will remain small. At the same time, Chinese leaders try to identify China with the Third World and suggest that all developing countries still have a long way to go to secure relative economic autonomy.
The Chinese leadership is aware that developing countries perceive the attraction of foreign investment by China as being at their expense (Cheng, 2001: 434-7). It is apparent that China recognises the contribution of foreign investment to its modernisation. Arguably, at its present stage of development, China values more the advanced technology, management and access to the international market brought by foreign investment. At the same time, China has attempted to maintain a balance between increasing foreign investment and avoiding foreign control while also showing an awareness that competition for foreign investment among China's provinces has been counter-productive. China has been careful in protecting its strategic sectors, and the central government has been keen to direct foreign investment, at least official development assistance, to the interior provinces. In recent years, China has also encouraged outward investment from China, to secure supply of energy and industrial raw materials, and to enhance its market access.
As economic globalisation progresses and international competition intensifies, regional integration also accelerates. Since China's priority lies in the Asia-Pacific region, its co-operation with ASEAN and the ASEAN+3 framework are the most important regional integration processes to China. The development of the European Union is also perceived by the Chinese authorities in a positive light in promoting multipolarity. Similarly, regional integration among developing countries is supported because it enhances their bargaining power and facilitates the emergence of multipolarity. In the WTO ministerial conference in Cancun, Mexico in September 2003, China assumed an active role in the Group of 20 in support of the leadership of Brazil, India and South Africa in fighting for the interests of the developing countries. Chinese leaders now take greater interest in the gap between the North and South as well as in South-South co-operation in related international organizations and forums.
Latin America in China's Foreign Policy
A survey of China's media reports over the last two or three years demonstrates the Chinese leadership's perception of the Latin America and the Caribbean region (Policy Research Office, 2004:17-18). These reports tend to show that political patterns and development models are changing and adjusting. Even so, social and political tensions are said to have been reduced, although social contradictions remain. For example, in 2003, the media reported relatively smooth changes of government in Brazil, Ecuador, Argentina and Paraguay, and that these new governments adopted pragmatic policies to maintain or restore domestic and international confidence. Even so, the media also reports economic and social contradictions that emerge in the development process. The poor in Peru and Ecuador are shown to be involved in anti-government protests, while in Bolivia in 2003, protests led to the fall of the president. The Chinese media also observe that some traditional political parties are declining, while some centre-left and independent parties have been strengthened and have won national elections.
The Chinese media note that the Latin American economies have been recovering, but reforms still encounter many difficulties. Most countries have adopted tight fiscal policies in order to improve the macro-economy and restore market confidence. Brazil and Argentina have been recovering from their earlier financial crises. But foreign debt in Latin America remains substantial; tight deflationary policies suppress consumption and investment. Economic growth is still low, and the room for manoeuvre in economic structural adjustments and institutional reforms is limited.
Multilateral diplomacy of the Latin American countries is perceived to be active, with Brazil playing a prominent leadership role. Regional integration has demonstrated new momentum. The Chinese media are pleased to report that on issues relating to Iraq, WTO and negotiations on the FTAA, many Latin American countries are willing to oppose the US position. But co-operation remains the predominant aspect of US-Latin American relations; both parties accord priority to this co-operation based on self-interest. Latin American countries are seen to be interested in broadening their diplomatic horizon through developing better relations with the European Union, the Asia-Pacific region and the major countries in the developing world. Mexico, Chile and Peru actively participate in the Asia-Pacific Economic Co-operation (APEC) forum, and they also plan to reach bilateral free trade agreements with selective Asian countries. Brazil's role within the Group of 20 in WTO negotiations and the establishment of a dialogue forum at the foreign minister-level with India and South Africa are interpreted as positive trends in international relations. Similarly, integration within the MERCOSUR and its negotiations with the Andean Community to form a Free Trade Area of South America, as well as the building of a single market in the Caribbean region are supported by the Chinese authorities.
In the early years of the PRC, there was limited interest in Latin America. It was said that at a meeting in the late 1950s, Chairman Mao Zedong pointed to a map of the world, and asked if there were researchers studying the two large regions of Africa and Latin America in China (Jiang, 2003: 3). The Cuban revolution in 1959 naturally prompted Chinese leaders to take a new look at the revolutionary movements on the other side of the Pacific. In the early 1960s, researchers in China mainly concentrated on Latin America's revolutionary movements, agrarian reforms and US intervention in the region. Today Chinese researchers on Latin American affairs focus on projects including Latin American development prospects in the 21st Century, economic reforms in Latin America, Latin America's modernisation path in the 20th Century, Mexico after the fall of the Institutional Revolutionary Party (PRI), development of science and technology in Latin America, social security reforms in Latin America, and ethnic issues in Latin America. There are very few media comments on radical and self-proclaimed Maoist groups.
The only research institute in China devoted to Latin American studies is the Institute of Latin American Studies under the Chinese Academy of Social Sciences. There is also a small group of researchers studying Latin America in the Division of the Americas at the Institute of Contemporary International Relations in Beijing. Scattered researchers in this field work in Beijing University, Fudan University (Shanghai), Nankai University (Tianjin) and Hubei University (Jiang, 2003: 1). The Chinese authorities attempt to develop Macau as China's window to the portuguese-speaking world--in Latin America, Brazil--and a number of international forums have been held on this theme. But the academic resources in Macau are limited.
The development experience of Latin America is of some relevance to China today because the academic community in China is concerned with the country entering into a complicated and challenging stage of development. In 2003, per capita GDP in China amounted to US$1,090. Chinese academics are aware of the historical experiences of many countries in the world that after reaching the level of US$1,000 per capita GDP, a number of phenomena had emerged including the deepening of social stratification, expansion of the middle-class and its influence, the rise and development of various lines of cultural thought, exacerbation of the widening gap between the rich and poor, and the like. These phenomena in turn had led to political turmoil, sharpening of social contradictions, rising tension among ethnic groups, and so on. The lessons drawn are that in this stage of development, the risks of high disharmony in society would be considerable. Chinese academics are eager to learn from the experiences of various countries in dealing with such risks (Xiao and Sui, 2005: 35-9).
They observe that since the 1970s, economic growth in a number of countries and regions including the "four little dragons of Asia," Malaysia and Thailand further accelerated after their per capita GDP had surpassed the US$1,000 level. But in other countries such as Brazil, Argentina, Mexico, Indonesia and the Philippines, economic development stagnated after their per capita GDP had reached the US$1,000 mark. Argentina, for example, reached the significant mark in 1961, but its per capita GDP growth rate was only around 1.9% in the following four decades and more. The situations in Brazil and Mexico were similar. They too reached the significant level in the 1970s; but subsequent economic growth has remained low, with average annual rates of about 3%. Chinese scholars are especially concerned with the expanding gap between the rich and the poor. They note that after reaching the per capita GDP level of US$1,000, the respective Gini co-efficients were between 0.35 and 0.45 in Brazil, Mexico and Argentina. Then the situation further worsened, and their Gini co-efficients rose to the range of 0.45 to 0.6. Today, the Gini co-efficient in China is approaching 0.47 (Gu and Yang, 2004: 222), which obviously is a dangerous level especially in view of China's claim to be a socialist country. Moreover, with corruption rampant, Chinese scholars are concerned that China should not repeat Latin American mistakes.
In recent years, Latin America is also seen to be important to China for a number of pragmatic reasons (Jiang, n.d.: 1). In the first place, as a developing country, China finds it ideologically and politically necessary and advantageous to stand alongside Latin America in the Third World's struggle for the establishment of a new international economic and political order. Further, in order to diversify China's export markets and sources of imports, China values the development of economic relations with Latin America. China is eager to secure access to the rich natural resources in Latin America to support its rapid economic growth. In the process of moving towards the next stage of economic development, China also hopes to be able to learn from the experiences of some Latin American nations. Finally, the Taiwan issue remains conspicuous in China's approach to Latin America (see the following section on competition with Taiwan). In mid-2005, Taiwan maintains formal diplomatic relations with twenty-six countries, and twelve of them are in Central and South America. (7)
Influenced by the Maoist Third World struggle perspective, Chinese researchers consider that in the process of globalisation, developed countries, especially the US, and international financial institutions have been able to impose constraints on the economic policy-making of several Latin American countries, thus compromising their economic sovereignty. Speculative flows of international capital exacerbate the risks of financial crises in the region, while rapidly expanding multinational corporations will likely prevail over the national industries of Latin American countries. Social problems in the continent will deteriorate, and its cultures will be "Americanised." There is a danger that Latin America will be further marginalised and pushed to the periphery in the globalisation process. In the view of these Chinese scholars, Latin American countries therefore have to strengthen their solidarity and co-operation in order to protect their autonomy, and secure a more equitable way of integrating into the international economic system.
Chinese leaders want to see a reduction of Latin America's dependence on the US. In this connection, they welcome Latin America's trade diversification and multilateral diplomacy. In terms of trade, the 21st Century, the European Union has become the second largest trade partner of Latin America and its largest aid donor. Central American countries have been able to send over 90 percent of their exports to the European Union tariff free. In March 2000, Mexico and the European Union concluded the first bilateral free-trade agreement between the two countries. They both hoped to secure market access to each other according to the conditions set for the members of the FTAA. In the beginning of the post-Cold War era, Russia had "withdrawn" from Latin America; but since 1996, the Russian government has indicated its interest to develop Russian-Latin American relations (Li, 2001: 13-15). Such developments are seen as positive for reducing dependence on the US.
In terms of multilateral diplomacy, Latin American countries noted the impressive economic growth in the Asia-Pacific region, and the latter valued the Latin American market. In this context, Mexico, Chile and Peru joined APEC in 1993, 1994 and 1998 respectively, and Colombia and Panama have also expressed an interest to participate. In September 1999, twenty-seven East Asian and Latin American countries held their first Senior Officials Meeting of the East Asia-Latin America Forum in Singapore. In March 2001, the first foreign ministers conference of the forum was held in Santiago, Chile. China supports these moves.
Regarding Sino-Latin American relations, Chinese researchers are very fond of the following quotations of Deng Xiaoping stated in 1988: "People are saying that the twenty-first century will be the Pacific era.... I firmly believe that at that time there will also be a Latin American era, and I hope the Pacific era, the Atlantic era and the Latin American era will appear at the same time." He then went on to say: "China's policy is to develop and maintain good relations with Latin American countries, and make Sino-Latin American relations a model of South-South co-operation." (Jiang, n.d.: 17).
As Sino-Latin American relations have developed, Chinese leaders have tended to emphasise multilateral diplomacy and relations with regional organisations. Since the establishment of a political dialogue between China and the Rio Group in 1990, over ten meetings have been held at the foreign ministry-level. The Chinese propaganda machinery often praises the important role of the Rio Group and considers it to be an important force among developing countries, as well as a reliable partner of China in international affairs. In June 1994, China became the first Asian country to join the Latin American Integration Association, as an observer. In May 1997, China was admitted into the Caribbean Development Bank; and earlier in September 1993, China successfully applied to join the Inter-American Development Bank. China recognises MERCOSUR as an important vehicle promoting economic integration in Latin America, and it has held a number of official talks with this group after establishing a dialogue mechanism with it.
Party-to-party diplomacy constitutes an important aspect of Sino-Latin American relations. The CPC advocates the following four principles in its relations with political parties in various countries: autonomy, full equality, mutual respect and mutual noninterference. In the first place, the CPC pursues friendly ties not only with ruling parties, but also opposition parties. Two examples often cited by China's researchers on Latin American affairs are interesting. In Argentina, before the presidential election in 1983, most people believed that the Radical Party did not have a good chance. But the CPC nonetheless invited the party's leader, Raul Alfonsin, to visit China. After winning the presidency, Alfonsin sent an important delegation to visit China. Meanwhile, the CPC continued to maintain good relations with the Peronist Party, whose leader Carlos Menem won the presidential election in May 1989. In November 1989, only five months after the Tiananmen Incident on June 4, President Menem sent his brother, Senate-President Eduardo Menem, to visit Beijing when western countries were sanctioning China (Jiang, n.d.: 10-11).
Party-to-party diplomacy has been particularly important to Latin American countries without formal diplomatic relations with China. Before the PRC established formal diplomatic relations with Bolivia and Uruguay, the CPC had already cultivated good relations with the political parties in the two countries. Today, the CPC has established relations with various political parties in majority of the Latin American countries which have no diplomatic ties with China. For example it has good contacts with the major parties in Paraguay, the only South American country which recognises Taiwan.
Sino-Latin American Economic Relations
Trade: It is interesting to note that in recent years, China's exports to Latin America have grown at a rate below that of the expansion of China's overall exports.
China's researchers on Latin America affairs are eager to re-assure Latin American countries that China will not use the bilateral trade and its investment in the continent to make unreasonable political demands, engage in economic, cultural and social infiltration, or attempt to create relations of dependency (Zhu, 2004: 13-14). They argued that bilateral trade is based on comparative advantage; and that China probably depends more on Latin America because of its resource needs. These researchers claim that China's imports will enhance Latin America's foreign exchange earnings and improve the terms of trade regarding their exports of primary products.
In view of multinational corporations' investment in Latin America and China in the past decade and more, some manufacturing industries in both regions have been involved in multinational global production chains and the international division of labour. For example, Germany's Volkswagen has major investment projects in both Brazil and China, and many models developed by the Volkswagen joint venture in China contain components developed by the Volkswagen subsidiary in Brazil, including the Santana 2000 model launched by the Volkswagen plant in Shanghai in the late 1990s and the Polo model marketed by the same plant in 2003. This trend will probably become more significant after the operation of the FTAA in the beginning of 2006.
The development of Sino-Latin American trade encounters serious obstacles too. There is no direct air link between China and any Latin American country; and the limited maritime routes are affected by long distance, weather and other factors so that delays are very common. The exchange of market information is difficult, compounded by the differences in languages, cultures and customs that have handicapped mutual understanding. There is a lack of expertise on Latin America in China, and vice versa. Moreover, the few graduate students in Latin American studies in China do not often pursue careers related to their disciplines after their graduation.
The exploitation of anti-dumping measures against Chinese exports by Latin American governments has been an issue of concern. In April 1993, Mexico decided to levy anti dumping tariffs on ten categories of imports from China. This precedent was soon followed by Argentina, Brazil, Chile, Columbia, Ecuador, Venezuela, etc. Such anti-dumping measures cover a wide range of Chinese products, and the tariffs levied are high. In some instances, the exorbitant rates (1,105% on Chinese shoes by Mexico in one case) amount to imports bans. There is also a tendency to impose tariffs before actual investigations, thus violating international norms. It is only in recent years that China has secured the recognition of its market economy status from major Latin American countries including Brazil, Argentina, Chile, Peru, Venezuela, and Antigua and Barbuda; this recognition may reduce the potential impact of anti-dumping measures on cheap Chinese imports (Thomson, 2004; BBC Monitoring International Reports, 5 February 2005).
The Impact of the FTAA: In anticipation of the operation of the FTAA in 2006, Chinese experts in Latin American affairs expect that more than 30 states would be able to share the "trade creation effect" in the US market, while China would suffer from a greater "trade diversion effect" than in the launch of the North American Free Trade Arrangement (NAFTA) (Yang, 2003: 2-3). These experts indicate that China lost its share of textile and apparel imports by the US to Mexico in the 1990s after the implementation of the NAFTA. Moreover, the export structures and the export markets of many Latin American countries are very similar to those of China. Hence, keen competition is inevitable. According to a report released by the Inter-American Development Bank in March 1998, Asian countries' products posed a threat to 58% of Latin American countries' exports to Organisation of Economic Co-operation and Development (OECD) countries; and competition was most severe in the apparel and electronics industries. There is also a concern in China that US investors will lose some interest in the Asia-Pacific region, and that there will be a trade diversion to Latin America, which could also be accompanied by similar investment diversion.
Chinese economists expect that China will continue to upgrade its export structure and concentrate more on high value-added and high-tech products, especially information technology products. In this way, China can reduce competition with the Latin American countries in the labour-intensive industrial sectors. But this is an optimistic scenario. While China's coastal provinces will upgrade their exports, its interior provinces will be eager to follow the path of the coastal provinces and engage in the exports of labour-intensive products.
To reduce the impacts of these potential reverses, South Korea's conclusion of a bilateral free trade agreement with Chile in April 2003 may be an example for China. Chile, Brazil and other Latin American countries have expressed an interest in concluding bilateral free trade agreements with China; and China may attempt to negotiate similar arrangements with the MERCOSUR, the Andean community and the Caribbean community. Meanwhile, China has concluded a framework agreement with ASEAN to launch a China-ASEAN Free Trade Area initially involving the five original members of ASEAN in 2010, with the participation of the other five members in 2015. Economic integration in the Asia-Pacific region is perceived as a response to the challenge of the FTAA, as it will strengthen the bargaining power of the Asian countries concerned.
Investment
With the significant exceptions of the Cayman Islands and the British Territories, China's investment in Latin America remains relatively small (see Tables 3 and 4), but the potential is not to be under-estimated. (8) In recent years, major Chinese state-owned enterprises (SOEs) have been investing in Latin American countries to ensure China's access to the continent's natural resources. Shougang Group's acquisition of a major Peruvian iron mine company by tender in 1992 was a significant example. Shougang Group's subsidiary in Peru now produces more than 5 million tons of iron ore per annum which are exported to the US, Japan, South Korea and Mexico. It claims that in the period 1993-2003, it paid taxes and levies to the Peruvian government amounting to US$126 million. In 1997, China National Petroleum Corporation secured by tender the exploitation rights of two oilfields in Venezuela which produced 31,400 barrels of oil per day at the end of 2001. In the beginning of 2003, China National Petroleum Corporation had invested US$660 million in the oilfields; and because of the increase in production and the rise in oil prices, the SOE expected to earn back the investment in the following year. This investment also led to a number of business and technological co-operation projects between China and Venezuela (Guo, 2003: 26-30).
Technological co-operation between China and Latin America has also been highlighted by the Chinese mass media to show that Sino-Latin American relations can be a model of South-South co-operation. An example of this is Embraer of Brazil--the fourth largest civil aircraft manufacturer in the world, and the second largest branch-route aircraft manufacturer. In 2000, it formed a joint venture with Harbin Aircraft Industry Group (now Harbin Aviation Industry [Group] Co. Ltd. after a merger) to assemble 50 of its ERJ-145 model. The first aircraft produced by the joint venture successfully conducted its first test flight in December 2003. At the governmental level, China and Brazil have been co-operating in the development of satellites for surveying the earth's resources. Satellites were successfully launched in October 1999 and at the end of 2003; agreement has also been reached on the launch of the third and fourth satellites.
China's SOEs have also been reaching out and engaging in overseas investment in recent years to develop foreign markets, including the setting up of wholesale, retail and after-sale service networks. It is anticipated that China's investment in Latin America will increase substantially in the agriculture, forestry and fishery sectors as well as in the textile, apparel and household electrical appliances industries. The Chinese government will encourage major SOEs and private enterprises to enter into Latin America; at the same time, these enterprises will try to form joint ventures with local corporations. The Chinese authorities plan to assign a major SOE to mobilise investment in a specific Latin American country, and to generate linkage effects in the form of related projects. They hope that such investment activities will increase Sino-Latin American trade to US$80-100 billion within three to five years, about 6% to 8% of the total trade of either side (Latin American Research Group, 2004: 11). The establishment of a China-Latin American Association of Industry and Commerce has been suggested.
President He Jintao's Latin American visit in November 2004 involved many investment pledges in the region. In Brazil, Hu promised that China would invest US$100 billion in Latin America in the coming decade. The investment projects highlighted in the media during President Hu's trip to Latin America included railway, oil exploration, and construction projects in Argentina; a nickel plant in Cuba; copper mining projects in Chile; and a steel mill, railway and oil exploration projects in Brazil. Sino-Brazilian energy projects amounted to US$10 billion; Brazil's state-owned oil company, Petrobras, and the China National Offshore Oil Corporation reportedly are studying the feasibility of joint operations in exploration, refining, and pipeline construction around the world. China is exploring energy deals in Ecuador, Bolivia, Peru and Colombia, as well as offshore projects in Argentina too. In January 2005, Venezuelan President Hugo Chavez travelled to China to sign 19 co-operation agreements, including plans for Chinese investment in oil and gas exploration. Colombian President Alvaro Uribe also visited China in April 2005 to promote increase in investment in his country (Dumbaugh and Sullivan, 2005: 3). In Argentina, China indicated that it would invest US$20 billion over the next ten years.
For the Latin American economies, the attraction of investment from China is further enhanced by the decline in net foreign investment flows to Latin America in recent years, from US$78 billion in 2000 to US$36 billion in 2003 (Economic Commission for Latin America and the Caribbean, 2004: 13).
To date, Latin American investment in China has been limited in scale (see Tables 5 and 6), and the potential for significant expansion is not promising. It is interesting that Panama, the Cayman Islands and, to a lesser extent, the British Virgin Islands, as well as the Bahamas, have often been used to provide camouflage for investment in China from Taiwan, Southeast Asia, and even "round-tripping" investment by Chinese enterprises.
Competition with Taiwan
Taiwan maintains formal diplomatic relations with eleven countries in Central America and Paraguay in South America. In terms of trade, China has obviously become a much more significant partner to the Central American and Caribbean countries. In 2003, China's trade with the Central American and Caribbean countries amounted to US$9.019 billion (see Table 2); while Taiwan's trade with the same region only amounted to US$2.342 billion in 2004 (see Table 7). Both China and Taiwan maintain a healthy trade surplus in the bilateral trade; China's trade surplus in 2003 reached US$3.8 billion, while that of Taiwan amounted to US$1.087 billion. China's trade surplus predominantly comes from Mexico and Panama, though the latter re-exports much of its imports from China to other countries in the region. Taiwan's major sources of its trade surplus are the same two countries.
Taiwan's investment in the Central American and Caribbean region has been much exaggerated by its investment in the British Territories (the Cayman Islands and the British Virgin Islands), and to a lesser extent Panama (see Tables 8 and 9). Basically such investment ultimately goes to China (see Table 6). While the relative weight of Taiwan's trade with and investment in the Central American and Caribbean region has been in decline, its investments in some of the small countries such as Dominica, Costa Rica, Honduras, Nicaragua, Panama and El Salvador still contribute considerably to Taiwan's diplomatic influence in these countries. The Democratic Progressive Party, while in opposition, severely criticised the Kuomintang government for wasting resources in maintaining Taiwan's diplomatic relations with the small Central American and Caribbean countries. But the Chen Shui-bian administration has not cut back the efforts and financial resources spent on these countries since coming to power in 2000. In that year, Chen attended the inauguration ceremony of the President of the Dominican Republic and made state visit to Nicaragua and Costa Rica. Vice-President Annette Lu followed with a second delegation one month afterwards to El Salvador, Honduras, Belize and Guatemala. These state visits also offer opportunities for Taiwanese leaders to visit the US informally in transit.
In August 2003, Chen Shui-bian held a summit in Taipei with the presidents from seven Central American countries. A joint communique was released and a free trade agreement was concluded (Taiwan Shin Sheng Daily News, 22 August 2003). In the following November, Chen visited Panama and participated in the centennial celebrations of the founding of the country. Chen joined the presidents from thirteen Latin American countries in signing a document in commemoration of the occasion. He was able to meet the then US Secretary of State, Colin Powell, too (Taiwan Daily News, 4 November 2003). There are not many international occasions in which Chen can assume the formal role of a head of state. Chen believed that the Panama visit had improved his image at home and constituted a part of his preparations for the presidential re-election campaign in March 2004.
Apparently Chen Shui-bian has no intention of changing Taiwan's pattern of relations with Central America and the Caribbean. In late September 2005, Chen visited Nicaragua to participate in a summit meeting with Taiwan's Central American allies. He announced an offer of US$250 million of aid to them under a "co-prosperity" programme. While the opposition attacked the programme as "spending big bucks to buy foreign relations," Chen defended that his programme would be an investment scheme to create a "win-win" situation. Chen's trip highlighted a US$27 million "Friendship Bridge" linking the Costa Rican city of Puntarenas with the Nicoya peninsula on the Pacific Ocean; and the Instituto Technologico de las Americas, a large cyber park-cum-technical college project in the Dominican Republic (South China Morning Post, 24 September, 27 September and 2 October 2005).
The Central American and Caribbean states maintaining diplomatic relations with Taiwan have been the key supporters for these efforts of Taiwan to expand its "international space." Since 1993, the Taiwan government has begun actively promoting the membership of the Republic of China in the United Nations. This campaign is opposed by the PRC and the proposal has not even succeeded in going through the United Nations General Assembly's General Committee to be included in the United Nations agenda for discussion. Further, beginning in 1997, the Taiwan government has been trying to secure observer status in the World Health Organisation. The Chinese leadership is acutely concerned with the Chen administration's design to seek independence for Taiwan, and it has been working hard to "contain" Taiwan's diplomatic efforts. Hence the Central American and Caribbean region has been the major battle ground for the diplomatic contest across the Taiwan Straits. It has been suggested that the PRC is now interested in diplomatic relations with the Vatican because the Chinese leadership believes that they will facilitate formal diplomatic relations between the PRC and the Catholic countries in the Central American and Caribbean region.
Taiwan has also been engaging in "informal diplomacy" with Latin American countries having formal diplomatic relations with China. One aspect of such an endeavour has been the establishment of parliamentary co-operation and exchanges. Taiwan succeeded in establishing parliamentary friendship associations with Argentina in 1997, Brazil and Peru in 1999 and Chile in 2000. Taiwan, under the name of the Republic of China, has observer status at the Central American Parliament and the Forum of the Presidents of the Legislative Powers of Central America. In February 2000, Taiwan, under the name of the Republic of China, became an official observer with the System for the Integration of Central America, the first observer from outside the Western Hemisphere. The International Co-operation and Development Fund (ICDF), the foreign aid organisation of the Taiwan government under the guise of an independent foundation, has been active in Latin America, especially in the Central American and Caribbean region. It has established formal working relations with the Inter-American Development Bank and the Central American Bank for Reconstruction and Development (Government Information Office, 2002). ICDF, for example, contributed to the relief and reconstruction programmes in the Central American and Caribbean region in the aftermath of Hurricane Mitch (International Co-operation and Development Fund, n.d.).
In addition, more than twenty Taiwanese private international charity organisations such as the Tzu Chi Foundation, World Vision Taiwan, the Taiwan Root Medical Peace Corps and the Chinese Fund for Children and Families have been providing humanitarian assistance directly to Africa, Latin America and Oceania. Another increasingly popular form of international assistance among Taiwanese people is individual sponsorship for poor children, and a number of private organisations are working in this area. Usually these humanitarian efforts are mainly directed to countries maintaining formal diplomatic ties with Taiwan (Government Information Office, various issues).
Besides trade, investment, and official and private assistance which are naturally attractive to small, poor countries with small populations, the Taiwan government apparently has some "secret weapons" too. In May and June 2004, there were reports in Taiwan and Costa Rica that from 1986 to May 2003, the foreign ministry of Costa Rica received US$22,000 per month from the Taiwan government for the salary of its officials. It was also said that the daughter of the president, who was working in the Costa Rican embassy in Mexico, also received her monthly salary of US$1,500 from Taiwan (Oriental Daily News, 27 May 2004; Renmin Ribao, 2 June 2004). Earlier in August 2003, newspapers in Taiwan quoting newspapers in Costa Rica reported that two Taiwan enterprises contributed US$500,000 to President Abel Pacheco de la Espriella for his presidential campaign in the previous year. In Costa Rica, accepting campaign contributions from foreign sources is a violation of the constitution (United Daily News, 22 August 2003). Similarly, in Panama, Mireya Moscoso, President of the Republic from 1999 to 2004, was accused of receiving US$1 million from Chen Shui-bian as a birthday present (Gonzalez and Gueren, 2003: 5).
In sum, Taiwan will continue to work hard to maintain diplomatic ties with the Latin American countries. Despite the declining relative weights of its trade and investment in the region, there are ample means through which Taiwan can exercise its diplomatic influence. Hence, the Taiwan issue will continue to be an important factor in China's approach to Latin America, and probably a source of friction.
Conclusion
In view of China's economic growth and rising international status, Latin American countries will accord increasing priority to their relations with the Asian giant. China's permanent seat in the United Nations Security Council is also a factor to reckon with. Today, Brazil, Argentina, Venezuela and Mexico have established strategic partnerships with China. Many Latin American countries, including Chile, have also reached a consensus with China to develop long-term co-operation in the 21st Century. China has signed agreements on economic and technological co-operation or economic co-operation with sixteen Latin American countries, agreements on encouraging and protecting investment with eleven countries in the region, and agreements on avoiding double tax imposition with five other Latin American countries, It has also established joint commissions for scientific and technological co-operation with Brazil, Mexico, Chile, Argentina and Cuba respectively (Zhang, 2004: 12-13). All these reflect the rapid development of Sino-Latin American relations since the early 1990s largely based on expanding trade. As indicated above, the potential for further development of trade, investment and joint ventures across the Pacific will provide a solid foundation for closer Sino-Latin American relations in the years ahead. There is a view that China's approach to Latin America is similar to Japan's "resources diplomacy" in the years after the Yom Kippur War in 1973. But while the expansion in Sino-Latin American trade and investment activities does reflect "resources diplomacy" considerations, Chinese leaders tend to consider that China's developing ties with Latin America demonstrate a global reach corresponding to the improvements in China's economic strength and international status. In September 2004, China sent a "special police" peacekeeping contingent to Haiti (which maintains full diplomatic relations with Taiwan), marking Beijing's first deployment of forces ever in the Western Hemisphere.
The vast distance between China and Latin America generates difficulties in transportation and mutual understanding, but it also means that both parties have no serious conflicts of strategic and political interests. Their "Third Worldist" orientations in diplomacy contribute to an impressive 95 percent concurrence in their votes in the United Nations (Latin American Research Group, China Institutes of Contemporary International Relations, 2004: 5). These broad agreements are expected to be maintained in WTO, APEC, and similar multilateral organisations. As China is prepared to assume a more active role in Third World issuers in co-operation with the leading Third World countries, there will be more diplomatic co-ordination between China and the major Latin American countries, though progress will be slow as this is not of high priority to the parties concerned.
While the Chinese leadership wants to promote multipolarity to curb US unilateralism, it appreciates the limitations in Latin America. Actually, both China and the Latin American countries value good relations with the US, and they want to avoid any sharp deterioration in their relations with the US Beijing understands that it should avoid forcing Latin American countries to choose between China and the US Similarly, Chinese leaders realise that Latin America has no strategic interests in the Asia-Pacific region, and they therefore are more tolerant of the formal and informal ties between the Latin American countries and Taiwan.
China will increase its investment in Latin America and more Sino-Latin American business joint ventures will be formed. These trends, hopefully, will reduce trade frictions such as anti-dumping measures. Distance and language barriers will continue to handicap the development of tourism, and educational and cultural exchanges. In recent years, Beijing has designated many Latin American countries as official tourism destinations for Chinese citizens; but in the near future, few Chinese citizens will be able to exploit the opportunity.
Both China and the Latin American countries hope to see increasing prosperity on the other side of the Pacific because this will mean more trade and rising demand for each other's products. There will be more participation from Latin American countries in APEC, while China will be eager to expand its multilateral diplomatic work in various Latin American regional organisations. Like China, major Latin American countries such as Brazil have both advanced and backward sectors in their economies, hence the scope for co-operation is broader and relations can be more balanced. A model South-South relationship can thus be achieved. It has to be recognised, however, that Sino-Latin American relations remain shallow and this means that, with limited interactions, the maintenance of relatively idealistic mutual expectations is unproblematic.
Preferences
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The Economist 1995, "Containing China," 29 July, pp. 11-2.
Thomson, Adam 2004, "Granting of Market-Economy Status to China Opens Argentina's Door to Investment," Financial Times (London), 18 November.
United Daily News (Taipei), 22 August 2003.
Xiao Guoliang and Fumin Sui 2005, "Chuyu Shizilukou de Zhongguo Jingji--2005 Nian Hongguan Tiaokong Zhengce Fenxi" (Chinese Economy at the Crossroads--Policy Analysis of Macro-Economic Adjustments and Control in 2005)," in Governance in Asia Research Centre, City University of Hong Kong and Centre for Public Policy Study, Chinese Academy of Social Sciences (eds), Zhongguo Gonggong Zhengce Fenxi 2005 (Analysis of Public Policies of China 2005), Hong Kong: City University of Hong Kong Press, pp. 35-9.
Wu Songzhi and Shuguang Yi 1997, "Gongzhu Mulin Youhao Hezuo Guanxi" (Building Together Co-operative Good Neighbourly Relations), Renmin Ribao (Beijing), 22 April.
Xinhua 1996, "PRC: More on Sino-Russian Strategic Partnership," 25 April, FBIS-CHI-96-081.
Xinhua 2004, "China's Road of Peaceful Rise," 23 April, FBIS-CHI-2004-0423, WNC: 0hws5wm046iiof.
Xinhuanet 2004, "China's Peaceful Rise: A Road Chosen for Rejuvenation of a Great Nation," 19 February, http://news.xinhuanet.com/english/2004-02/19/content_1321769.htm.
Yang Zhi-min 2003, "Challenges of FTAA and China's Responses," Beijing: Institute of Latin American Studies, Chinese Academy of Social Sciences, http://ilas.cass.cn/ESPANA/TRABAJOS/ECONOMIA/ FTAA.htm.
Zhang Mingde 2004. "Sino-Latin American Rhythm," Beijing Review, 2 December. pp. 12-3.
Zhang Youwen and Reuwei Huang 2004, "Daolun: Heping Jueqi--Qiangguo Ding Mubiao Tuidong Shijie Gongying (Introduction: Peaceful Rise--Major Power Sets the Objective Pushing for a Global Win-Win Scenario)," in Youweu Zhang and others (eds), 2004 Zhongguo Guoji Diwei Baogao (China's International Status Report 2004), Beijing: Renmin Chubanshe, pp. 1-15.
Zhu Wenhui 2004, "Quanqiuhua xia Zhongguo yu Lamei Maoyi Guanxi de Xin Qushi (New Trends in Sino-Latin American Trade Relations in the Context of Globalisation)," Lading Meizhou Yanjiu (Chinese Academy of Social Sciences). 26, 3, pp. 13-14.
Notes
(1.) In 2004 and the first half of 2005, I visited the Chines Academy of Social Science, Beijing University, the Central Party School, the China Institute for International Strategic Studies, and the Shanghai Institute of International Studies. I held extensive discussions with over 50 academics and research workers on Chinese foreign policy. To facilitate exchange of ideas, they were promised that they would not be quoted directly. Instead, their views will be summarised and presented as those of the Chinese research community on China's foreign policy
(1-A.) China established diplomatic relations with Cuba in 1960, with Chile in 1970, with Peru in 1971, with Mexico, Argentina, Guyana and Jamaica in 1972, with Trinidad and Tobago, Venezuela, and Brazil in 1974, with Surinam in 1976, with Barbados in 1977, with Ecuador and Columbia in 1980, with Antigua and Barbuda in 1983, with Bolivia, Grenada and Nicaragua in 1985, with Belize in 1987, with Uruguay in 1988, and with the Bahamas and St. Lucia in 1997. Grenada, Belize and Nicaragua subsequently switched to recognise Taiwan in 1989, 1989 and 1990 respectively.
(2.) In the 1950s, the PRC adopted a planned economy and accorded priority to the development of heavy industries, in 1979, China under Deng Xiaoping began its economic reforms. It moved towards a market economy and gave priority to an export-orientated development strategy depending on labour-intensive consumer industries.
(3.) In 1996, China and Russia established a strategic partnership which was meant to enhance co-operation and promote multipolarity. Chinese leaders emphasised that the strategic partnership was not an alliance. and was not directed against any third country. Since then, China has established strategic partnerships with a number of major countries (Xinhua, 25 April 1996; Cheng, 1999).
(4.) See, for example, the official China's Diplomacy yearbook series edited by the Policy Research Office of the Ministry of Foreign Affairs and published by the Shijie Zhishi Chubanshe in Beijing. See also the titles of the articles in International Understanding and Beijing Review referred to above.
(5.) The Five Principles of Peaceful Co-existence were jointly initiated by China, India and Burma in 1953-54; they were to apply to relations among countries with different social systems. They are: respect for territorial integrity and sovereignty, non-interference in domestic affairs, equality and mutual benefits, and mutual non-aggression and peaceful co-existence
(6.) Chinese media are very sensitive to comments in the US advocating for the "containment" of China or suggesting that the rise of China will be a threat to the US as it realizes that it is still three decades or so behind in terms of advanced technology.
(7.) The twelve countries are Costa Rica, Guatemala, Paraguay, St. Vincent and the Grenadines, Belize, El Salvador, Haiti, Nicaragua, Dominican Republic, Honduras, Panama, and Saint Christopher and Nevis; see Ministry of Foreign Affairs, Taiwan, http://www.mofa.gov.tw/webapp/ct?xItem=11624&ctNode=123.
(8.) Investment in the Cayman Islands and the British Territories by Chinese corporations is obviously meant for other purposes including money laundering.
Joseph Y.S Cheng *
* Dept of Public and Social Administration, City University of Hong Kong, 83 Tat Chee Ave., Kowloon Tong, Hong Kong, Email: reeece@cityu.edu.hk
Table 1: China's Trade with South American Countries, 1991 and 2001-2003 (in US$ million) Country 1991 Exports Imports Total Argentina 51.72 305.45 357.17 Bolivia 4.46 -- 4.46 Brazil 68.03 345.81 413.84 Chile 94.20 106.99 201.19 Colombia 5.03 2.45 7.48 Ecuador 14.05 1.10 15.15 Guyana -- -- -- Paraguay 16.72 19.82 36.54 Peru 31.31 294.41 325.72 Uruguay 10.51 118.13 128.64 Venezuela 32.74 6.17 38.91 Total 328.77 1,200.33 1,529.10 South America as a % of China's Total 0.46 1.88 1.13 Country 2001 Exports Imports Total Argentina 573.70 1,281.03 1,854.73 Bolivia 7.74 9.52 17.26 Brazil 1,350.93 2,347.23 3,698.16 Chile 814.78 1,303.46 2,118.24 Colombia 205.27 26.93 232.20 Ecuador 134.05 28.10 162.15 Guyana 12.41 2.37 14.78 Paraguay 72.10 2.83 74.93 Peru 176.52 498.02 674.54 Uruguay 188.95 95.53 284.48 Venezuela 443.35 145.77 589.12 Total 3,979.80 5,740.79 9,720.59 South America as a % of China's Total 1.50 2.36 1.91 Country 2002 Exports Imports Total Argentina 185.37 1,239.46 1,424.83 Bolivia 9.55 12.08 21.63 Brazil 1,466.38 3,003.02 4,469.40 Chile 998.26 1,567.10 2,565.36 Colombia 287.26 29.12 316.38 Ecuador 194.48 13.57 208.05 Guyana 13.72 4.00 17.72 Paraguay 79.03 7.87 86.90 Peru 246.64 731.61 978.25 Uruguay 94.95 78.07 173.02 Venezuela 332.67 144.96 477.63 Total 3,908.31 6,830.86 10,739.17 South America as a % of China's Total 1.20 2.31 1.73 Country 2003 Exports Imports Total Argentina 447.19 2,729.08 3,176.27 Bolivia 11.84 6.88 18.72 Brazil 2,143.26 5,842.20 7,985.55 Chile 1,283.44 2,248.14 3,531.60 Colombia 398.20 60.46 458.66 Ecuador 239.29 39.73 279.02 Guyana 18.12 0.34 18.42 Paraguay 126.19 12.74 138.93 Peru 353.74 760.01 1,113.75 Uruguay 127.62 75.75 203.37 Venezuela 199.24 542.16 741.40 Total 5,348.13 12,317.56 17,665.69 South America as a % of China's Total 1.22 2.98 2.08 Note: "-" represents that the figure is unknown, unavailable or negligible. Sources: State Statistical Bureau (comp.) (1993, 2003 and 2004). Table 2: China's Trade with Central American and Caribbean Countries, 1991 and 2001-2003 (in US$ trillion) Country 1991 Exports Imports Total Bahamas -- -- -- Dominica 3.93 -- 3.93 Costa Rica -- -- -- Cuba 224.40 201.65 426.05 Curacao 0.71 0.01 0.72 Dominican Rep. 9.51 -- 9.51 Guatemala 10.88 0.23 11.11 Haiti -- -- -- Honduras 4.53 0.28 4.81 Jamaica 5.06 0.03 5.09 Mexico 86.25 148.70 234.95 Nicaragua 0.78 -- 0.78 Panama 87.33 0.57 87.90 Puerto Rico 3.14 2.45 5.59 Saint Vincent -- -- -- & Grenadines El Salvador 5.06 0.23 5.29 Surinam 2.16 - 2.16 Trinidad & 4.03 4.28 8.31 Tobago Other Countries -- -- -- (Regions) in Central America Total 447.77 358.43 806.20 Central America 0.62 0.56 0.59 as a % of China's Total Country 2001 Exports Imports Total Bahamas 34.77 0.02 34.79 Dominica 87.60 0.90 88.50 Costa Rica 63.10 26.51 89.61 Cuba 331.44 114.05 445.49 Curacao 46.54 -- 46.54 Dominican Rep. 38.21 0.22 38.43 Guatemala 162.92 0.21 163.13 Haiti 14.45 0.03 14.48 Honduras 64.84 0.11 64.95 Jamaica 85.14 33.93 119.07 Mexico 1.790 761.28 2,551.50 Nicaragua 34.55 0.09 34.64 Panama 1.239 1.95 1.241 Puerto Rico 75.57 17.43 93.00 Saint Vincent 13.08 -- 13.08 & Grenadines El Salvador 99.59 0.43 100.02 Surinam 12.64 4.08 16.72 Trinidad & 34.94 0.07 35.01 Tobago Other Countries 1.15 0.09 1.24 (Regions) in Central America Total 4,230.38 961.40 5,191.78 Central America 1.59 0.39 1.02 as a % of China's Total Country 2002 Exports Imports Total Bahamas 62.87 0.06 62.93 Dominica 45.43 0.74 46.17 Costa Rica 81.65 184.49 266.14 Cuba 310.66 115.69 426.35 Curacao 41.29 -- 41.29 Dominican Rep. 105.48 1.81 107.29 Guatemala 244.67 0.58 245.25 Haiti 23.47 -- 23.47 Honduras 58.77 0.77 59.54 Jamaica 65.96 48.80 114.76 Mexico 2,863.66 1,114.96 3.978 Nicaragua 49.17 0.03 49.20 Panama 1,272.66 3.72 1,276.38 Puerto Rico 104.30 23.46 127.76 Saint Vincent 8.21 0.02 8.23 & Grenadines El Salvador 132.57 1.90 134.47 Surinam 15.15 2.57 17.72 Trinidad & 42.34 4.81 47.15 Tobago Other Countries 1.22 0.01 1.23 (Regions) in Central America Total 5,529.53 1,504.42 7,033.95 Central America 1.70 0.51 1.13 as a % of China's Total Country 2003 Exports Imports Total Bahamas 121.72 0.78 122.51 Dominica 33.58 0.76 34.34 Costa Rica 98.52 560.90 659.42 Cuba 236.30 120.51 356.81 Curacao 38.83 0.21 39.04 Dominican Rep. 148.15 3.51 151.66 Guatemala 305.62 1.82 307.44 Haiti 26.38 0.02 26.40 Honduras 77.87 3.38 81.25 Jamaica 102.03 105.46 207.50 Mexico 3,267.03 1,676.74 4,943.77 Nicaragua 69.31 0.37 69.68 Panama 1,479.99 28.62 1,508.61 Puerto Rico 159.53 78.07 237.60 Saint Vincent 7.65 -- 7.65 & Grenadines El Salvador 157.56 2.06 159.62 Surinam 19.77 16.09 35.86 Trinidad & 58.52 10.24 68.76 Tobago Other Countries 0.76 -- 0.76 (Regions) in Central America Total 6,409.13 2,609.54 9,018.68 Central America 1.46 0.63 1.06 as a % of China's Total Note: "-" represents that the figure is unknown, unavailable or negligible. Sources: State Statistical Bureau (comp.) (1993, 2003 and 2104). Table 3: China's Investment in Latin American Countries (on an actually realised basis), 2003 (in US$ million) Country 2003 Cayman Islands 807 British Territories 210 Others 23 Total 1,040 Latin America as a % of China's Total 36.5% Source: Foreign Investment Administration (2005). Table 4: China's Accumulated Investment in Latin American Countries (on an actually realised basis) as of 2003 (in US$ million) Country as of 2003 Cayman Islands 3,691 Mexico 97 Peru 126 British Territories 533 Others 173 Total 4,620 Latin America as a % of China's Total 13.9% Source: Foreign Investment Administration (2005). Table 5: South American Countries' Investment in China (on an actually realised basis), 1991 and 2001-2003 (in US$ million) Country 1991 2001 2002 2003 Argentina 0.16 16.38 10.30 18.89 Bolivia 0.91 0.70 6.07 2.90 Brazil 0.34 3.90 15.36 16.71 Chile 0.05 1.33 11.89 8.01 Colombia -- 12.34 -- 0.47 Ecuador -- 1.36 0.27 0.53 Guyana -- 0.69 -- -- Paraguay -- 1.17 1.07 0.60 Peru -- 0.27 1.12 0.90 Uruguay -- -- -- -- Venezuela -- 5.00 2.03 1.28 Total 1.46 43.14 48.11 50.29 South America as 0.012 0.087 0.087 0.090 a % of China's Total Note: "-" represents that the figure is unknown, unavailable or negligible. Sources: State Statistical Bureau (comp.) (1993, 2003 and 2004). Table 6: Central American and Caribbean Countries' Investment in China (on an actually realised basis), 1991 and 2001-2003 (in US$ million) Country 1991 2001 2002 2003 Bahamas -- 59.60 89.90 87.87 Cayman Islands 1.50 1,066.71 1,179.54 866.04 Dominica -- 0.78 0.38 -- Costa Rica -- 1.10 5.98 -- Cuba -- 0.19 -- 14.07 Curacao -- -- -- -- Dominican Republic -- 0.01 7.48 3.07 Guatemala -- 0.78 1.47 -- Haiti -- -- -- -- Honduras -- 1.08 1.06 0.69 Jamaica -- 1.23 -- 0.10 Mexico -- 1.82 7.31 5.55 Nicaragua -- -- -- 1.20 Panama 3.56 57.85 46.46 32.83 Puerto Rico -- -- -- 0.10 Saint Vincent & Grenadines -- 0.29 -- -- El Salvador -- 0.10 -- 0.34 Surinam -- -- -- 2.43 Trinidad & Tobago -- -- -- -- Other Countries -- 0.60 2.78 6.10 (Regions) in Central America Total 5.06 1,192.14 1,342.36 1,020.39 Central America as a % of China's Total 0.04 2.54 2.55 1.91 Note: "-" represents that the figure is unknown, unavailable or negligible. Sources: State Statistical Bureau (comp.) (1993, 2003 and 2004). Table 7: Taiwan's Trade with Central American and Caribbean Countries, 1991 and 2001-2004 (in US $million) Country 1991 Exports Imports Total Bahamas 1.00 0.27 1.27 Dominica 0.41 -- 0.42 Costa Rica 27.17 3.69 30.87 Cuba 0.29 1.06 1.35 Dominica Republic 52.14 0.11 52.25 Guatemala 50.24 1.09 51.33 Haiti 12.79 0.01 12.80 Honduras 15.55 0.17 15.72 Jamaica 10.62 0.04 10.66 Mexico 369.14 178.34 547.49 Nicaragua 1.31 1.73 3.04 Panama 359.52 14.03 373.56 Puerto Rico 61.85 30.70 92.56 Saint Vincent & 0.94 -- 0.94 Grenadines El Salvador 18.09 0.08 18.17 Surinam 4.29 -- 4.29 Trinidad & Tobago 18.73 4.70 23.43 Other Countries 6.12 1.21 7.33 (Regions) in Central America Total 1,010.20 237.23 1,247.48 Central America 1.33 0.38 0.90 as a % of Taiwan's Total Country 2001 Exports Imports Total Bahamas 61.10 0.10 61.19 Dominica 2.06 0.08 2.14 Costa Rica 75.75 13.28 89.03 Cuba 18.94 0.69 19.62 Dominica Republic 77.15 1.11 78.26 Guatemala 79.07 21.51 100.59 Haiti 11.09 0.01 11.10 Honduras 50.96 1.04 51.99 Jamaica 15.95 0.16 16.11 Mexico 1,020.09 417.31 1,437 Nicaragua 48.60 0.74 49.34 Panama 123.96 4.21 128.18 Puerto Rico 52.37 21.57 73.94 Saint Vincent & 4.88 0.66 5.53 Grenadines El Salvador 65.93 1.16 67.09 Surinam 2.91 0.07 2.98 Trinidad & Tobago 24.79 0.30 25.09 Other Countries -- -- -- (Regions) in Central America Total 1,735.60 484.00 2,219.58 Central America 1.41 0.45 0.97 as a % of Taiwan's Total Country 2002 Exports Imports Total Bahamas 49.46 0.07 49.53 Dominica 1.17 0.11 1.28 Costa Rica 59.00 27.86 86.87 Cuba 18.06 2.21 20.27 Dominica Republic 83.58 1.33 84.91 Guatemala 81.29 5.58 86.88 Haiti 9.42 0.07 9.49 Honduras 51.86 0.64 52.49 Jamaica 16.10 0.27 16.37 Mexico 941.41 358.94 1,300.35 Nicaragua 42.98 0.43 43.41 Panama 127.35 4.81 132.17 Puerto Rico 53.35 33.92 87.27 Saint Vincent & 1.14 0.32 1.46 Grenadines El Salvador 60.54 9.05 69.59 Surinam 2.81 0.30 3.11 Trinidad & Tobago 25.59 0.47 26.06 Other Countries -- -- -- (Regions) in Central America Total 1,625.11 446.38 2,071.51 Central America 1.24 0.40 0.85 as a % of Taiwan's Total Country 2003 Exports Imports Total Bahamas 52.58 0.05 52.63 Dominica 1.23 0.03 1.26 Costa Rica 45.09 79.56 124.66 Cuba 19.57 5.16 24.73 Dominica Republic 56.75 2.35 59.10 Guatemala 90.94 1.16 92.10 Haiti 6.70 0.05 6.75 Honduras 37.14 0.86 38.00 Jamaica 14.07 0.35 14.43 Mexico 886.53 331.52 1,218.05 Nicaragua 39.28 0.67 39.94 Panama 121.16 6.01 127.17 Puerto Rico 53.101 52.25 105.35 Saint Vincent & 0.25 -- 0.25 Grenadines El Salvador 74.57 2.32 76.89 Surinam 3.52 0.29 3.81 Trinidad & Tobago 29.12 0.72 29.84 Other Countries -- -- -- (Regions) in Central America Total 1,531.60 483.35 2,014.96 Central America 1.06 0.38 0.74 as a % of Taiwan's Total Country 2004 Exports Imports Total Bahamas 2.30 0.03 2.33 Dominica 1.51 0.04 1.54 Costa Rica 49.71 84.90 134.61 Cuba 13.49 3.64 17.12 Dominica Republic 67.24 11.20 78.44 Guatemala 110.67 4.08 113.15 Haiti 5.20 1.13 6.33 Honduras 33.22 4.91 38.13 Jamaica 16.34 1.47 17.81 Mexico 978.37 413.97 1,392.34 Nicaragua 41.26 2.73 43.99 Panama 246.73 22.63 269.36 Puerto Rico 50.37 71.73 122.10 Saint Vincent & 0.38 -- 0.38 Grenadines El Salvador 58.72 2.88 61.60 Surinam 4.31 0.10 4.41 Trinidad & Tobago 34.88 2.21 37.09 Other Countries -- -- -- (Regions) in Central America Total 1,714.70 67.65 2,342.33 Central America 0.99 0.37 0.69 as a % of Taiwan's Total Notes: (1.) "-" represents that the figure is unavailable or less than US$5,000. (2.) Figures on imports and exports may not add up to the totals due to rounding up. Table 8: Taiwan's Approved Outward Investment in Latin American Countries, 1991 and 2001-2004 (in US$ million) Country 1991 2001 2002 Mexico -- (1) -- 6.61 Panama -- 5.65 66.68 British Territories 267.87 1,693.37 1,575.08 Other Countries 79.05 420.15 245.20 (Regions) in the Americas except the U.S. and Canada Total 346.92 2,119.17 1,893.57 Latin America as a % of Taiwan's Total (2) 20.95 48.25 56.19 Country 2003 2004 Mexico 1.00 2.90 Panama 169.09 55.57 British Territories 1,997.25 1,155.20 Other Countries 96.53 107.86 (Regions) in the Americas except the U.S. and Canada Total 2,263.87 1,321.53 Latin America as a % of Taiwan's Total (2) 57.04 39.08 Notes: (1.) "-" represents that the figure is unknown, unavailable or negligible. (2.) Taiwan's total in this table excludes its foreign direct investment in Mainland China. Sources: Investment Commission (2004 and 2005). Since there are discrepancies between the statistics in the two reports, some figures have been adjusted by the author. Table 9: Taiwan's Accumulated Investment in Central American and Caribbean Countries as of 2003 (in US$ million) Country as of 2003 Dominica 97.4 Costa Rica 147.0 Guatemala 31.3 Haiti 13.0 Honduras 69.2 Mexico 107.8 Nicaragua 218.3 Panama 1,045.8 El Salvador 69.0 British Territories 14,456.4 Total 16,255.2 Central America as a % of Taiwan's Total * 10.5 Note: * Taiwan's total in this table excludes its foreign direct investment in Mainland China. Source: Industrial Development and Investment Centre (2005).

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