China has moved into the US’ backyard. The Asian superpower has replaced the US as Brazil`s biggest trading partner, and has expanded across the region successfully. China’s trade with Latin America has risen from USD 10 billion a year in 2000 to a whopping USD 100 billion today.
In an exclusive interview with Kamna Arora of Zeenews.com, Dr Yiyi Lu, an expert on China, discusses Beijing’s economic expansion in Latin America.
Dr Yiyi Lu is an associate fellow of Chatham House`s Asia programme.
Kamna: Chinese companies are making huge investments in Latin America. How is China’s expansion helping Latin American economies?
Yiyi: I think that overall China’s expanding economic role in Latin America is positive for the region, because it brings new investment, stimulates the local economies, creates more jobs, allows the region to export more goods to China etc.
There may be concerns about Chinese investments, eg, they harm the environment, they put pressure on local companies, but these problems are not unique to Chinese investments. Any foreign investment in any part of the world may cause concern. China itself has received lots of foreign investments and they have been controversial in China all along, with critics raising all sorts of concerns. The overall effect of foreign investments in China, however, has been positive. I think it is the same with regard to Chinese investments in Latin America.
Kamna: What will be the challenges faced by Latin American economies in the wake of rising Chinese significance?
Yiyi: Latin American countries need to use the investments in a way that allows them to draw maximum benefit while minimising the negative consequences. That is the challenge for them. I think the countries in the region are capable of managing Chinese investments in such a way, or at least are potentially capable of managing the investments.
Kamna: How do you gauge Beijing’s political as well as economic influence in the region?
Yiyi: Although Beijing’s economic influence in Latin America has expanded, it has not yet translated into greater political influence. Economic influence can be separate from political influence. Many western countries have huge investments in China, but they don’t think they have massive political influence. The two don’t necessarily go together. For the moment at least, I don’t think China’s political influence in Latin America has increased much. The countries in the region may show more interest in China and may attach more importance to their relations with China, but this doesn’t mean China has more political influence. At the moment, I would say China’s political influence in Latin America is still quite limited.
Kamna: Do you think India is losing out to China in Latin America? If yes, how can New Delhi make its place in the region?
Yiyi: I don’t think India is losing to China in Latin America. I think the question implies that if China goes to a certain country and makes investment or if China increases its trade with a certain country, then somehow India must do the same and must also invest the same amount or even more than China in that country, and India must also increase its trade with that country. If India fails to do that, then it is “losing to China”. Winning and losing shouldn’t be defined this way. Ultimately, we need to think if the investment or trade benefits India/China. It may make sense for Chinese companies to invest in Latin America because that will bring them better returns than, say, investing in East Asia, but it may make more sense for the Indian economy and Indian companies to invest in East Asia than in Latin America. In this case, Indian companies should focus on East Asia rather than Latin America. Or, Indian companies may gain more by investing domestically instead of overseas at the moment.
In short, the comparison between India and China shouldn’t be in terms of who invests and trades more with Latin America. Chinese and Indian economies are different. They have different needs and advantages. We can’t say one country is winning or losing simply because at a particular point in time it invests/trades more in Latin America.
I think New Delhi should design its policies by thinking what will benefit India most, rather than worrying about competing with China. There is no worry of not being able to find a place in any part of the world. Before Chinese investments in Latin America, many other countries (US, Europe, Japan, etc.) have invested there, but when China wants to go there, it can easily find space. So, it is not as if there is limited space and India must occupy that space now, or else, it will be occupied by China forever.
Kamna: China’s thirst for energy has wide implications for the US foreign policy. Comment.
Yiyi: Your question is really too big, so I don’t know what to say. The US is watching China’s search for energy globally very closely, but so far I don’t think it has significantly affected US interests or agendas. I think the US is probably concerned that potentially China’s thirst for energy will have wide implications for its foreign policies, but the keyword is “potentially”. We haven’t observed any major direct impact yet.