Panorama of Copacabana, Bolivia. Wikimedia Commons.
For years, China’s economy remained stagnant.
The United States dominated the world market, manifesting a GDP over twice the size of Japan’s, its nearest competitor. The Cold War era distinguished the drive of the American economy and underscored the significance of open market practices.
Distressed by its poor economic performance, the People’s Republic of China faced dilemmas in maintaining its closed communist economy. In 1978, Deng Xiaoping assumed power and carried out significant institutional and economic reforms. The changes enabled market principles that propelled the Chinese economy. According to the World Bank, in 1978, China’s GDP was 149.5 billion USD compared to the U.S.’ 2.4 trillion USD GDP. Since Chinese markets have opened, the nation has experienced incredible commercial development and growth. As of 2016, China’s GDP was 11.2 trillion USD--second in the world, rivaling the U.S.’ 18.6 trillion USD.
As China achieves the status of a stable economic power, its massive growth rates are now decelerating. To counteract this, China is constantly redirecting its federal funds into foreign investments. This has been observed extensively in Africa, where there is low cost entry and high development opportunity due to developing countries’ lack of infrastructure. Nations that accept Chinese investments are often linked to Chinese institutions through their financial debt and obligation to be of service to China in the future. For instance, one of the numerous major projects is Kenya’s Standard Gauge Railway line. China has offered two loans at a total amount of 3.2 billion USD to fund the infrastructure project under the condition that Chinese firms are contracted for the work. Chinese support through investments might originally seem beneficial, but in reality, nations--like Kenya--that accept support will be restricted to transactions that might ultimately benefit China.
China increases investment and trade globally and its pivot towards Latin America is becoming evident.
According to AidData, a research lab at the College of William & Mary, China’s total official international finance was 354.3 billion USD from 2000--2014. In Latin America and the Caribbean (LAC) alone, the data shows that total Chinese financial involvement has vastly expanded in both the number of transactions and the amounts negotiated, with a total amount over 50 billion USD. In 2000, observed trade volume between China and the LAC was only 12 billion USD. While in 2013, at over 21.7 times its previous size, the trade volume had increased to 260 billion USD.
China’s contemporary advances to Latin America and the Caribbean reform the geopolitical structure of the world, and compel us to evaluate the nature of Chinese interests in the region. After assessing the nature of the transactions, it is seems that China’s commercial interests in LAC vastly outweighs its foreign development financial aid. China’s primary commercial interests mostly revolve around nations with larger oil reserves and larger economic markets. Commercial related finance in LAC concentrated in Venezuela, Ecuador, Brazil and Argentina emphasizes this feature. What stands out is Chinese investment in development aid, as a great deal of these concessional finances were granted because they are related to Chinese commercial interests.
AidData’s dataset, China’s Global Development Footprint, details transactions tracked from Chinese firms. It seems that China often disguises a large commercial deal amidst several smaller investments classified by AidData as Official Development Assistance (ODA). These investments are granted for internal commonwealth affairs, such as education and infrastructure development. The larger investments appear to be heaviest in energy generation and transportation projects, which open commercial opportunities for the China in the long-term.
Expanding Diplomatic Relations and Exchanging Natural Resources
The most Chinese ODA was concentrated in Cuba, with 6 billion USD in debt forgiveness granted by the the Chinese government.This assistance might serve as an act of good faith in expanding commercial and diplomatic relations with Cuba, pressuring the U.S. on both fronts. Costa Rica, Guyana, Ecuador, and Peru are other major benefactors of China’s ODA. Chinese financed projects within these countries include pipelines and transportation systems that are key to exchanging natural resources and goods. For example, in 2013, China’s Export-Import Bank committed 296 million USD for expansion of Costa Rica’s Route 32. The highway is important to the Costa Rican business sector because of its connection to the port at Limón. The Export-Import Bank’s loan to expand the Cheddi Jagan International Airport in Guyana is another exemplary move. The airport is in Georgetown, the capital city of Guyana, and can facilitate the shipment of goods internationally. Overall, Chinese financing under the alias of developmental assistance is China’s main objective to control its geopolitical profile as a cooperative leader of the world.
Bolivia, the most significant target of true ODA investment, follows behind Cuba at 966.4 million USD. Bolivia is the target of a major transportation project, The Twin Ocean Railway, which would allow access to the borders of two major markets: Brazil and Argentina. The main route will likely run from the Peruvian Pacific coast through Bolivia to the Brazilian Atlantic Coast. Argentina and Chile will be incorporated through integrating railway routes.
Securing Access to Oil Reserves
With the Twin Ocean Railway in mind, it is important to notice that Argentina and Brazil both have the highest recorded GDPs in the LAC and are in the top five countries in regards to proven oil reserves. The direct railway lines to the Peruvian port might provide China access to 2.4 billion proven barrels of crude oil in Argentina and 16 billion of Brazilian crude, necessary to maintain its industrial growth. The railway will also be an efficient way to access Argentina’s 316.4 and Brazil’s 429.9 billion cubic meters of proven natural gas reserves. This is significant as China accounts for more than a quarter of the world’s natural gas consumption and is projected to have the most natural gas consumption growth from 2015 to 2040.
China is the world’s largest net importer of oil with growing demand and the LAC could prove to be a major endeavor for China to secure access to oil reserves. China’s Global Development Footprint indicates that China’s transactional profile appears to revolve around securing its sources of energy. Of the 354.3 billion USD in Chinese official finance 134.1 billion was attributed to energy generation and supply. The massive amount of energy-related financing could be telling of China’s future in the LAC.
Upon further evaluation, Chinese ODA financing takes on a larger role than simply embracing a “harmonious rise” approach to global relations. The People’s Republic of China’s concessional transactions are not aimed to simply help the most underdeveloped. Nations receiving the most ODA financing are a part of a greater economic agenda, and will serve Chinese self-interest and preservation as a major power.
Felix ClevengerFelix is a third-year undergraduate student studying |  |
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