Editor's Note:
Sergio Marcelo Cesarín is a specialist in China issues and is currently working as a researcher at the National Council for Scientific and Technological Research of Argentina.
He has a degree in International Relations from Universidad del Salvador (USAL), Buenos Aires, Argentina (1989).
The opinions expressed in this comment are solely those of the author.
(CNN Spanish) -
In a slow economic year for the Asian regional and world economy, China appears to be the exception.
According to the Asian Development Bank (ADB), the region will suffer the worst economic contraction in six decades with the exception of China, whose Gross Domestic Product will grow 1.8% in 2020. A similar estimate is presented by The Economist Intelligence Unit, with 1, 7% expansion for the «Asian dragon».
As a result, the recovery scenario reverses negative expectations and determines macro and microeconomic decisions under the premises of a greater jump in growth for 2021 (7.7%, according to the ADB).
These trends are based on several factors.
First, a broad menu of government incentives applied to moderate the impact of the pandemic;
made up of tax exemptions, direct transfers to vulnerable households, special issuance of bonds and investments in urban infrastructure in order to regain employment.
All this adds up to a package equivalent to 4.5% of GDP, according to the Peterson Institute for International Economy (PIIE).
As a direct consequence, the Chinese economy is growing sustained by greater domestic activity, improvements in construction and, as shown by the Industrial Activity Indicator, in April the normalization of productive circuits, manufacturing production and logistics chains rose again.
A third recovery channel is verifiable through the gradual increase in domestic consumption (38.8% in 2019), particularly of luxury goods (property and cars) and basic products (food, beverages, alcohol and tobacco).
Services such as catering, tourism and entertainment have also been favored by greater internal mobility and the end of isolation in large urban centers.
With US $ 10,261 of GDP per capita (PPP, World Bank), increases in domestic consumption are driven by a dynamic urban middle class.
Other indicators confirm the path of recovery.
According to the General Administration of Customs of China, as a result of increased industrial activity, exports grew 9.5% during the month of August;
on the other hand, imports fell 2.1%, reduced by lower activity.
No less data in the external sector arises when observing the economic relationship with the United States.
Despite the escalating “trade and technology war”, and according to August statistics from the World Bank, the United States is the country that receives the most Chinese exports and ranks fourth as the origin of its imports, which configures an environment of Limited negative impact due to barriers and penalties.
In this phase of economic recovery for China, the role played by the private sector has been decisive, which contributes 60% of GDP, contributes 70% of innovations, 80% of urban employment and 90% of new ones. Job positions.
In line with the economic recovery scenario in V, the central government promotes a greater opening of the financial sector to foreign capital, accelerates the automation (robotization) of production processes, encourages digitization in government, companies and education through the use of artificial intelligence (AI) and 5G technologies.
These impulse dynamics are fed back by the persistence of medium and long-term plans on innovation and developments in S&T such as Made in China 2025, Standards 2035 and High Technology Society in 2050. In this order, the Legislative Power (APN) approved in May of 2020, a package of investments in new technologies for the next five years worth US $ 1.4 trillion.
All in terms of gaining economic competitiveness and closing the technological gap that still separates China from the West.
Obviously, risks persist for the Chinese economy such as greater aversion to risk due to the breakdown of supply chains, possible withdrawal of foreign firms and their relocation to economies with lower labor costs such as those in Southeast Asia, trade disputes with the United States or geopolitical tensions;
However, cost-benefit analysis has so far dictated that, far from "leaving China", most foreign firms (especially the United States, Europe, and Japan) aspire to maintain operations in China and thus capture benefits derived from the new phase of growth.
China: a lifeline for Latin America and the Caribbean?
As a counterpart, the Economic Commission for Latin America and the Caribbean (ECLAC) forecasts the worst regional economic contraction accompanied by an estimated 23% drop in international trade.
As a direct consequence, in Latin America and the Caribbean structural problems of unemployment, precarious and informal work, poverty, marginality and inequity will worsen.
In this context, the Chinese recovery may mitigate adverse effects, but it will not function as a locomotive for a rapid recovery as it did at the beginning of the 20th century.
According to the same organization, although exports to China fell by less than 2% between January and May, they show signs of recovery consistent with greater domestic activity in that country.
Trade between China and Latin America and the Caribbean increased from US $ 17,000 million in 2002 to US $ 315,000 million in 2019 and our region plays a “contributor or subsidiary” role with respect to the respective strategies on food and energy security that govern foreign purchases. Chinese.
For Latin America and the Caribbean (LAC), China is a "strategic partner" in the commercial sphere, source of investments and provider of financing directed to hard and digital infrastructure projects.
For China, LAC stands out for its natural assets;
Considered a “natural extension” of the Silk Road (OBOR), LAC presents a scenario of opportunities for the deployment of 5G networks.
In agribusiness, China has been and is a key destination for exports from producing economies, particularly South America.
According to the US Department of Agriculture (USDA), China is the world's largest agricultural importer, surpassing the European Union (EU) and the United States in 2019 with imports totaling US $ 133.1 billion;
the composition of your purchases reveals a growing proportion of consumer-oriented products.
Rising incomes and living standards, growing urbanization, and concerns about “food security” favor Latin American economies that export soybeans, grains, oils, and meats.
In accordance with this, several reports from the Inter-American Institute for Agricultural Cooperation (IICA) show that China's annualized total agri-food imports (May 2019 - May 2020) increased 11.1%, while the increase from LAC was 2.5% .
Favored by the recovery, Brazil and Argentina have their main trading partner in China.
The Free Trade Agreements signed by China, with Chile and Peru in South America continue to be dynamic instruments for bi-regional trade.
China represents 32.4% of its total exports from Peru and the first destination in foreign sales.
The Chinese reactivation boosts exports of minerals, copper and by-products with the consequent increase in the international price of these raw materials (Peruvian Foreign Trade Society, Comex Peru).
According to data from the Chilean Customs Service, China is Chile's main trading partner and, despite the retraction resulting from the pandemic, the first half of 2020 shows a 1.1% rebound in trade between the two countries, Compared to the same period of the previous year.
Mexico continues to play a central role for Beijing's interests in the region as a suitable platform for the entry of products to the US market under the preferences of the T-MEC.
With regard to Chinese investment flows to Latin America and the Caribbean, it remains to verify the transfer of benefits resulting from the recovery.
However, it is difficult for Chinese corporations -private and / or state- to give up regional positions in the hydroelectric energy sector of Venezuela, Colombia and Argentina, stop investment plans within the framework of the OBOR Initiative (a Chinese initiative called "One Belt, One Road ”to connect with bi-oceanic corridors, waterways, and ports to their country with European countries) or renounce to exploit opportunities in regional urban markets in the automotive and information and communication technologies sectors.
Currently, several Chinese firms participate in infrastructure projects in Colombia (Metro line in Bogotá and railway lines that interconnect peripheral regions with Bogotá), exploit gold and participate in retail trade activities.
According to the official Chinese news agency Xinhua, the accumulated Chinese investments in Brazil total US $ 80,000 million, mostly in infrastructure and in areas such as railways, roads, airports and ports.
The channeling of Chinese financing to ACL (whose main destination has been Venezuela, US $ 67.2 billion according to the Center for Inter-American Dialogue Studies) is part of a south-south cooperative agenda defined by China together with Celac;
It is to be expected that, given the current Latin American recession, loans will flow with greater intensity from 2021. However, we must wait to find out how the IDB's regional commitment will evolve under the direction of a US official in response to the America Initiative. It grows.
In summary, the Chinese economic recovery favors the economic recovery of Latin America, but it is far from offsetting the negative impacts derived from a deep recession.
The slow export recovery and the increase in the international prices of raw materials boost bilateral trade.
The interest in regional infrastructure projects by Chinese firms, the consolidated regional operations of state and / or private corporations in sectors such as electronics, telecommunications and automotive, as well as the attractiveness of urban consumer markets, will continue to function as incentives to maintain the China's broad portfolio of regional businesses.