China Signal - January 12

$6.5 billion currency swap with Argentina suspended, potential China Southern Power infra bid in Chile

G’day, and welcome to The China Signal. Here’s what you need to know:

1. Finance - Argentina. Beijing has suspended a US$ 6.5 billion currency swap line to Argentina in an act of coercion over the new Milei Administration. Despite this, mutual strategic economic interests should keep the bilateral relationship operational.

2. Infrastructure - Chile. China Southern Power is considering increasing its stake in Chilean power-transmission company Transelec. This will raise national security concerns in Santiago.

3. Public Health - Colombia. Sinovac wants to move forward with a vaccine producing arrangement with the city of Bogota—further evidence of China’s increased scientific collaboration with the region post pandemic.

4. Police Cooperation - Trinidad & Tobago. An MOU for a new police “forensic science” center was signed. Details are light, but the development could have surveillance components similar to Ecuador and Panama.

Plus more. Read on.

Finance 💸

Argentina 🇦🇷

Beijing has reportedly frozen a US$ 6.5 billion currency swap line in apparent response to hostile comments Javier Milei made during the presidential election campaign. Argentina’s new Foreign Minister Diana Mondino was expected to meet with China’s Ambassador to Argentina Wang Wei on December 11 or 12 to address the matter. Similar tactics of economic coercion were directed at the Bolsonaro Administration in Brazil during the covid pandemic, following derogatory comments made by Bolsonaro. Although Beijing’s coercion, always executed with plausible deniability, is a warning to Milei, expect a functional bi-lateral relationship due to Argentina’s heavy reliance on China for agricultural exports, and Beijing’s lithium and food security interests.

• Argentina has approximately US$18 billion in swap lines with China. Almost all of Argentina’s exported beef, soy, barley, and sorghum is sent to China.

• Milei’s reliance on Beijing for financial support and export growth will become more important if Milei fails to pass his sweeping reform package, which would trigger political gridlock and further economic deterioration.

• Milei's pledge to remove subsidies from its emerging electric vehicles supply chain would hurt Western companies and potentially benefit Chinese firms, backed by Beijing with state support. (MH)

Infrastructure 🔌⚡️

Chile 🇨🇱

China Southern Power is reportedly mulling a bid to increase its stake in Transelec, Chile’s largest power-transmission company. Per Bloomberg, China Southern Power may launch a joint bid “to ease regulatory concerns,” likely a reference to competition or national security sensitivities in Chile. This could indicate a more nuanced approach from Chinese SOEs pursuing electricity assets in Chile, following State Grid’s acquisition of CGE in 2021, which raised national security concerns. 

• Three Canadian pension funds: Canada Pension Plan Investment Board, British Columbia Investment Management Corp., and Public Sector Pension Investment Board hold a 72% stake in Transelec, and announced an interest in selling their stake in October 2023.

• China Southern Power is a Chinese state-owned entity and is China’s second largest electricity supplier. It purchased a stake in Transelec in 2018.

• China’s State Grid purchased a 96% stake in Chilean electricity utility company CGE in March 2021. Through its ownership of CGE and Chilquinta, another electricity company, State Grid controlled over 57% of Chile’s power distribution network.  The announcement has sparked debate in Chile, which does not have laws to review foreign investment on national security grounds. Read more in TCS April 2, 2021. (MH)

Public Health 🏥

Colombia 🇨🇴

Sinovac has confirmed plans to produce vaccines in a manufacturing facility constructed by the city of Bogotá. Vaccine production is set to begin in 2027 and is expected to include covid-19 vaccines.

• Sinovac Group President and Chairman Yin Weidong was in Bogotá, and framed the agreement as a “commitment to technology transfer, technical assistance, and training of local talent.” 

• Four Sinovac vaccines are slated to be produced at the facility: covid-19, Hepatitis A, polio, and chickenpox.

• The size of Sinovac’s investment in the project was not publicly disclosed. Sinovac planned to invest US$100 million in a similar vaccine plant in Chile, before it was canceled in October 2023 (see TCS October 31, 2023).

• Sinovac and Colombia signed an MoU for the project in December 2021 (see TCS December 3 2021). (RP, MH)

Bogotá’s mayor, Claudia López Hernández, and Sinovac’s president, Yin Weidong, during their meeting. Source: Claudia López Hernández, (@ClaudiaLopez, Twitter/X). 

Critical Minerals 🪨

Colombia 🇨🇴

Cordoba Minerals Corp.’s Alacran copper project in the Córdoba department of Colombia has entered its development stage following the completion of its feasibility study. China’s JCHX Mining Management owns 50% of the project and a 19.9% stake in Cordoba (see TCS December 19, 2022).

• The initial project cost is expected to be US$420 million. 

• Cordoba received a second installment of US$40 million from JCHX as part of its joint venture agreement established in December 2022. The final $20 million payment is due once the environmental impact study is approved by the Colombian government.

• The project, part of the broader San Matias copper-gold-silver project complex, will take approximately two years to construct and has an expected life of 14 years. (RP, MH)

Police Cooperation 🕊️

Trinidad and Tobago 🇹🇹

Trinidad and Tobago signed an MoU with China for the construction of a new forensic science center. Details are scarce, however the center could be similar to Chinese-backed surveillance systems deployed in Panama and Ecuador.

• The center will be funded by “China Aid”, likely a reference to China’s International Development Cooperation Agency. 

• The roots of the MoU lie in a 100 million RMB (~US$14 million) 2018 bilateral technical economic cooperation deal. (IB)

Trade ⛴️ 🚛

Regional (Colombia, Ecuador, Mexico)

New maritime routes from the ports of Dalian and Tianjin were launched in the past month for trade routes to Colombia, Ecuador, and Mexico, according to state-backed outlet Global Times. 

• Average shipping times from Dalian will be 25 days, seven days faster than previous trade routes.  

• Trade from these ports is expected to include basic manufactured goods and automobiles from China, and fruit, seafood, and beef from the South American nations. (IB)

Migration

Mexico

Via CNN:

These arrivals are part of a staggering new trend. In the first 11 months of 2023, more than 31,000 Chinese citizens were picked up by law enforcement crossing illegally into the US from Mexico, government data shows – compared with an average of roughly 1,500 per year over the preceding decade.

Their numbers are still dwarfed by those from regional neighbors like Mexico, Venezuela, and Guatemala, and they are not alone in coming from other parts of the world. But the influx of people from China making that crossing spotlights the urgency many now feel to leave their native country, even in the midst of what leader Xi Jinping has claimed is a “national rejuvenation.” (MH)

Diplomacy 🕊️

Brazil 🇧🇷 + Jamaica 🇯🇲

Chinese Foreign Minister, Wang Yi, will visit Brazil and Jamaica between January 18 and 22.

• Wang’s visit to Brazil comes as the two countries celebrate the 50th anniversary of diplomatic ties. 

• Also China and Jamaica celebrate an anniversary, the fifth since they established a strategic cooperative partnership in November 2019

• Brazil and Jamaica will be the final stops of a tour starting off with four African countries, Egypt, Tunisia, Togo and Ivory Coast. (RP)

Honduras 🇭🇳

The president of Honduras’ National Congress led a delegation to China from December 4 to 9 last year. 

• The visit, at the invitation of China’s National People’s Congress Standing Committee, occurred amidst ongoing Free Trade Agreement negotiations (see TCS November 14, 2023). (IB)