The yuan weakens to its lowest in 14 years, why?
8:05
(CNN Spanish) --
Since Xi Jinping, president and leader of China, was ratified for a third term as general secretary of the Communist Party - an unprecedented move that shows a concentrated power not seen in decades - the world wonders how it will affect this fact to the global role of the Asian giant, whose importance has not stopped growing in recent decades.
And when images emerged of former president and Xi's predecessor, Hu Jintao, apparently being removed against his will from the 20th Congress of the Communist Party, a symbol of the China we knew - characterized by high economic growth and a "peaceful rise "as a power, even cooperating with the United States—seemed to vanish forever.
ANALYSIS |
Xi Jinping became simply untouchable.
And investors are scared about the future of China's economy.
Thus, Xi Jinping's China seems to be entering a new era marked by conflict with the United States and the West, while trying to cope with a slowdown in its economic growth and its ability to continue investing and buying around the world.
How could this impact the world and Latin America?
Chinese President Xi Jinping at the 20th Communist Party Congress
The growing conflict with the United States
China and the United States began a strategic rapprochement in the early 1970s, in the context of the Cold War and the growing disputes between Beijing and Moscow, Washington's main rival.
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In 1979, three years after the death of Mao Zedong, China and the United States reestablished their diplomatic relations —broken since the triumph of the communist revolution in 1949—, and began a long process of cooperation and commercial exchange, to the point of becoming in first-order partners in the midst of a process of economic opening on the part of Beijing.
In recent years, however, the relationship has deteriorated amid growing trade tensions—which have led to the progressive "decoupling" of the two economies—and the expansion of Chinese investment around the world, as the United States United States, together with the European Union, and China are configured as the two great global blocs and "systemic rivals".
Thus, the Chinese policy of "peaceful rise", by which China promised the international community that its economic and political growth would be based on international peace, cooperation and security, a pillar of the Hu government, seems to be being dismantled. by Xi.
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This could mean a new era of rivalry and tensions not seen since the Cold War, and, as at that time, maintaining good relations with the United States and China at the same time could be increasingly difficult for countries around the world and beyond. Latin America.
China and Latin America
Relations between China and Latin American countries are primarily commercial and economic, and Beijing's presence and investment has been accelerating since the early 2000s. But there have also been political rapprochements.
China is the main destination of exports from Brazil, Chile, Peru, and also the main origin of imports from these three countries, according to 2020 data from the Observatory of Economic Complexity.
It is also the second destination of exports and the second origin of imports for Argentina (after Brazil) and Colombia (after the United States), the second origin of imports for Mexico (behind the US), and an important trading partner also for Bolivia, Ecuador and Costa Rica, among others.
According to the Council on Foreign Relations, a New York-based
think tank
, China is, by total trade volume, the second largest trading partner of Latin America and the Caribbean after the United States, but the first in magnitude in South America, where the weight of Brazil is greater.
A ship loaded with soybeans imported from Brazil at a port in Nantong, east China's Jiangsu province, in 2018. (Credit: STR/AFP via Getty Images)
The region mainly sells food, fuel and raw materials to China, while it supplies itself with manufactured products, machinery and technology from the Asian giant.
At the moment, in addition, 21 countries in Latin America and the Caribbean have joined the Belt and Road Initiative, also known as the "New Silk Road", a global infrastructure development promoted by China since 2013 that has been become one of the flags of the Xi Jinping government.
They are Antigua and Barbuda, Argentina, Barbados, Bolivia, Chile, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, El Salvador, Granada, Guyana, Jamaica, Nicaragua, Panama, Peru, Suriname, Trinidad and Tobago, Uruguay and Venezuela, according to the Green Finance and Development Center of Fudan University, in Shanghai.
In 2019, Latin America received US$6.4 billion in foreign direct investment from China, 5% of the country's total that year, according to data from the International Monetary Fund.
Brazil concentrates most of these investments, but Venezuela, Argentina, Ecuador and Peru are also important beneficiaries, according to the same source.
China has free trade agreements with Chile, Costa Rica and Peru, and a joint action plan with the Community of Latin American and Caribbean States (CELAC).
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Not everything is trade, and since Xi came to power China has signed comprehensive strategic association agreements with Argentina, Brazil, Chile, Ecuador, Mexico, Peru and Venezuela.
China facing the middle income trap?
China's economy had an impressive performance in the 2000s and 2010s, leading a large part of its population to levels of consumption and well-being that had not been seen in the country, and that achievement came hand in hand with industrial production and the exports.
But in recent years signs of a slowdown have begun to worry.
This slowdown has been interpreted as the "middle income trap," a phenomenon described by World Bank economists Homi Kharas and Indermit Gill as a moment of stagnation that comes after a low-income economy has made the jump. middle or upper-middle income.
But moving to high income then becomes extremely difficult for economies that have been based on low labor costs and whose competitiveness has been reduced by rising wages.
The changes needed to make that leap, including promoting innovation instead of investment, specializing instead of diversifying, and promoting creativity over flexibility, become almost unattainable, according to the authors.
The "middle income trap" is a problem China shares with many Latin American countries, including Argentina, Mexico and Brazil.
For others in the region, who have been trying to reach middle income thanks in part to trade with China, the Asian giant's slowdown could have complex effects, especially if they have received their investments, which could slow down.
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In the midst of this process, the consolidation of Xi in power, which meant the rise of officials loyal to the president who are not necessarily the most competent or the most open to the markets, also generated concerns in the markets.
Chinese stocks fell in Hong Kong and New York after the Communist Party Congress, and the yuan hit its lowest level in 15 years, as analysts question the economic impact of Xi's new China.
Latin America's economy is expected to grow 3.5% this year, according to the International Monetary Fund, while the projection for China is 3.2%, its lowest growth since 1977.
How strong is this slowdown?
Between 2003 and 2013, at the time of the famous "Chinese rates" of growth -which led in a few decades to lift 800 million people out of poverty-, the country's GDP rose on average more than 10% per year, according to data from the World Bank.
Global tensions over Taiwan
Despite the reestablishment of relations between the United States and China, Washington has always maintained close relations with Taiwan, an island formally known as the Republic of China that Beijing considers part of its territory and has promised to recover.
The very close commercial, political and military relations between Washington and Taipei are at the center of the latest escalations with Beijing, especially after the president of the United States House of Representatives, Nancy Pelosi, visited the island in August to which the People's Republic considered a rebel province since 1949.
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Beijing's response was remarkable: sanctions on Pelosi, launching ballistic missiles, military exercises, and sending warships and planes to the region.
It is not the first time that the situation has escalated like this: in 1996, after the visit of the then president of Taiwan, Lee Teng-hui to the United States, China also fired missiles in waters near the island and Washington sent two aircraft carriers to the area. in support of Taipei.
But friction over Taiwan has been on the rise in recent years.
And at the opening of the Communist Party Congress, Xi first said that China "will strive for peaceful reunification" with Taiwan, after which he warned that "we will never promise to renounce the use of force and reserve the option of taking all necessary measures".
“The wheels of history are moving towards the reunification of China and the rejuvenation of the Chinese nation.
The complete reunification of our country must be achieved,” Xi said to applause.
In this grand scheme, Latin America is one more region in the world where China tries to find support for its claim on Taiwan.
In fact, most of the countries in the region fully recognize the People's Republic of China and do not maintain relations with Taipei, and in the case of the Dominican Republic and Nicaragua, they recently severed their relations with the island.
But Taiwan maintains allies in the region: Honduras, Haiti, Guatemala, and Paraguay are the only Latin American countries that recognize the island's legitimacy, as do Belize, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines in the Caribbean.
With information from Laura He, Nectar Gan, and Simone McCarthy.
Latin AmericaChina