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The China Signal - April 7
Chery Holding Group announces plans for $3bn EV plant in Mexico, Goldwind to build wind turbine plant in Brazil
G’day, and welcome to The China Signal. This week, state-owned electric vehicle maker Chery Holding Group announces plans to build a $3 billion EV plant in Mexico, Goldwind signs a $28 million deal to construct a wind turbine factory in Brazil, Taiwan’s president Tsai Ing-wen visits Guatemala and Belize, China’s 2022 lending to Latin America and the Caribbean analysed, Lula to travel to China on April 11, plus more. Read on.
Electric Vehicles 🔋🚙
Chinese automaker Jetour announced it will build a $3 billion automotive plant in Mexico by the end of 2024, with the aim of manufacturing electric and gasoline-powered cars for the North American market.
As part of its investment in Mexico, Jetour is partnering with LDR Solutions Co., a conglomerate of Chinese automotive companies doing business in the country. Both Jetour and LDR Solutions are owned by the Chinese government.
Jetour is planning to sell 20,000 units of its X70 and X90 SUV models throughout the first 12 months in Mexico by establishing 30 distributors.
CEO of Jetour Mexico, Víctor Villanueva, confirmed that the company is currently in talks with various state governments to decide where the automotive plant will be built. According to El Economista, Jetour has been lobbying the governors of Aguascalientes and Guanajuato in its search, both of whom belong to AMLO’s main opposition party–Partido Acción Nacional (PAN).
Jetour’s expansion into the Mexican market comes at a time where numerous Chinese companies are relocating to Mexico to benefit from the Biden Administration’s push for nearshoring.
Background: Chery Holding Group (“Jetour”) 🔎
Chinese state-owned automobile manufacturer Chery Holding Group is the parent company of Jetour. Headquartered in China’s Anhui Province, Chery Group has over 50,000 employees and a global presence in 80 countries.
Since its founding in January 2018, Jetour has sold approximately 660,000 vehicles and expanded into Central and South America, the Middle East, and Africa. (VV).
Wind Power 🔋🌬
Chinese wind turbine maker Xinjiang Goldwind Science & Technology Co Ltd intends to pour RS$150 million (US$28.6 million) to create a manufacturing base in Brazil, and to set it up in the state of Bahia.
Goldwind Energias Renovaveis, a unit of the Chinese company, has signed a Protocol of Intent (POI) with state authorities, the press office of Governor Jeronimo Rodrigues announced …The wind turbine maker’s plan is expected to open around 250 direct and 850 indirect jobs.
Goldwind’s plan was unveiled following negotiations with three Brazilian states - Bahia, Ceara, and Pernambuco (see TCS October 21 for further background on the project and on Goldwind). Deliveries are expected to start in 2024.
According to a 2021 investigative report by the Tech Transparency Project, Goldwind discussed using workers from Xinjiang province in one of their factories in 2016. Although it’s not known if these discussions progressed, the request was interpreted as seeking to use forced labor of ethnic minorities from Xinjiang province. Goldwind also maintains a relationship with the Xinjiang Production and Construction Corps (“XPCC”), a “quasi military” entity that administers much of the province that was blacklisted in July 2020 by the US Department of Treasury over its “connection to serious human rights abuse against ethnic minorities”.
Goldwind has commercial relationships with Apple and Microsoft, and its shares are held by several European investment funds. These companies have been criticized by European lawmakers and media outlets for their relationship with Goldwind. (RP)
Taiwan Diplomacy 🇹🇼🤝
Taiwan's President Tsai Ing-wen completed a three-day trip to Guatemala on Sunday where she offered more cooperation with Guatemalan President Alejandro Giammattei's government.
…While visiting Guatemala, Tsai signed a $4 million agreement to modernize rural areas and promised to promote and increase cooperation between the two countries.
Guatemala is set to hold its presidential election this June. If elected, the country’s main opposition has pledged to sever ties with Taiwan and recognize China. (VV).
The prime minister of Belize gave Taiwanese President Tsai Ing-wen a welcome diplomatic boost during her visit on Monday, underlining his nation's support for Taiwan…
Briceno [thanked Tsai] for scholarships, farming programs and a $16.5 million grant to build a hospital in the island town and popular tourist hub of San Pedro.
In her remarks, Tsai spoke of "expansionist threats from authoritarian regimes," adding that "the people of Taiwan face constant threats from the neighbor on the other side of the Taiwan Straits," referring to China.
During Tsai’s visit, the two leaders attended a donation ceremony, in which Belize received 5,000 laptops made by Taiwanese manufacturers, intended to “help Belize improve learning resources for vulnerable groups, including children and women in rural areas,” as well as the signing of a technical cooperation framework agreement by the foreign ministers of Taiwan and Belize.
Since Honduras’ departure from Taiwan, Belize has strongly reaffirmed its position in favor of Tsai’s government, issuing a declaration last month recognizing Taiwan’s sovereignty as an independent state. In a speech before Belize’s National Assembly, Prime Minister Johnny Briceño praised lawmakers’ declaration recognizing Taiwan’s sovereignty, and emphasized his government’s desire to promote shared values of democracy and international law.
Last month, the Ministry of Foreign Affairs and Foreign Trade of Belize stated that both countries will continue to work to strengthen its bilateral relations based on respect for the rule of law, human rights, and self-determination. (VV).
The deal will enable China and Brazil, the biggest economy in Latin America, to conduct their massive trade and financial transactions directly, exchanging yuan for reais and vice versa instead of going through the dollar.
The Industrial and Commercial Bank of China (ICBC) and Bank of Communications (BOCOM) will execute the transactions, officials said.
The two countries signed a Memorandum of Understanding (MoU) earlier this year (see TCS February 16 for further background). Additional details about the swap line are yet to be released.
According to a Banco Central do Brasil report quoted by Reuters, the US dollar still dominates its foreign reserve holdings with 80% of the country’s foreign reserves held in the currency. The yuan trails with approximately 5%, ahead of the euro (approximately 4%), which it recently surpassed.
Brazil is not the only Latin American country with a similar currency swap arrangement. In January, China increased its currency swap agreement with Argentina by an additional US$5 billion (equivalent) to a total of US$24 billion. In July 2020, Chile increased its swap arrangement from US$3 billion to US$7.2 billion, following an initial 2015 agreement. (RP)
Broader Latin America and the Caribbean 🏔️🏝️
As noted in previous Inter-American Dialogue and Boston University Global Development Policy Center briefs on Chinese development finance in LAC, China’s DFIs—China Development Bank (CDB) and China Export-Import Bank (Eximbank)—are no longer issuing the sorts of multi-billion-dollar, oil-backed loans that once characterized Chinese financial engagement with the region.
However, CDB and Eximbank remain active in the region, and are likely to continue to lend—though still in relatively small amounts—to LAC governments and SOEs in 2023. The possibility of Chinese DFI support to further expand Argentina’s Cauchari Solar Park—a project initially funded by Eximbank in 2017—is still on the table. Likewise, Bolivia is anticipating a US$422 million loan from Eximbank in the coming months for the construction of two zinc refineries. Also, having recently signaled interest in cutting ties with Taiwan, Honduras is reportedly negotiating a credit line with China for the development of the Patuca II hydroelectric dam.
The Caribbean remains a region of focus of China’s DFIs—especially Eximbank. The Caribbean has been a top recipient of the DFIs’ most recent loans to LAC, including two in 2022.
China’s DFIs have spent considerable time in recent years renegotiating the terms of existing agreements with the region. There are indications that China’s banks will be engaged in even more negotiations on the terms of public and publicly guaranteed debt in the coming months and years.
Total combined Chinese finance to the region is unlikely to ever approximate the previous peaks of policy bank lending. However, the combined effect of Chinese policy bank activity, co-financing initiatives, commercial bank finance, private equity investment, and other forms of engagement will ensure a sizable Chinese financial presence in the region for years to come.
President Luiz Inácio Lula da Silva has rescheduled his trip to China for April 11, the presidential office tells The Brazilian Report. The trip will last until April 14 and will include visits to both Beijing and Shanghai. Further details have yet to be announced.
Because of the postponement, Lula missed the inauguration of his one-time protégé, former President Dilma Rousseff, as head of the Shanghai-based New Development Bank (NDB), also known as the “BRICS bank”. Still, an inauguration ceremony is set to take place in April, with Lula in attendance.
Lula’s trip was originally scheduled for March 27-31, but was postponed for illness (see TCS March 29). His delegation will include more than 240 business leaders - with over a third of this delegation from Brazil's farming sector - and several cabinet ministers.
Several agreements are expected to be discussed, including a possible Chinese green-light to new passenger jet purchases from Embraer, the world’s third largest aircraft supplier. (RP)
Trade 📊 💸
~ Paraphrased translation ~
Uruguay’s Minister of Foreign Affairs, Francisco Bustillo, will travel to China next week [April 13] to meet with Chinese authorities and assess the state of FTA negotiations between the two countries.
The country’s Minister of Livestock, Agriculture and Fisheries, Fernando Mattos, is expected to visit China this May. Mattos and Beijing’s ambassador to Montevideo, Wang Gang, visited several Uruguayan production plants earlier this year (see TCS February 16) as Uruguay is working to obtain sanitary permits to export poultry and equine products to China.
See TCS January 30 for further background on the FTA negotiations and its disapproval from Uruguay’s fellow MERCOSUR members. (RP)
~ Paraphrased translation ~
Ecuadorian pitahaya obtains sanitary authorization to enter China
China joins the 58 countries that this fruit reaches. The United States is the main destination market with 84% of the total volume exported, followed by Canada, Colombia and Singapore.
In July 2012, Ecuador requested access to pitahaya from China. This process consisted of 8 phases and the last one was carried out when the Chinese technicians carried out a virtual inspection on February 16 of this year… (NRM)
Note: Prensa Latina is Cuba’s state-sponsored media outlet.
On Monday of this week, representatives from China and Cuba got together in Beijing to sign a joint agreement on cybersecurity. The content of the agreement has yet to be publicly shared, however, Minister of Communications, Mayra Arevich, stated that this agreement “ratifies the will to work for a cyberspace based on the development and well-being of its people.”
The agreement was signed by Mayra Arevich, and Cao Shuming, China’s Vice Minister of Cyberspace Administration. A high-level delegation from Cuba led by Deputy Prime Minister, Jorge Luis Perdomo, is currently visiting China with the aim of strengthening bilateral cooperation in strategic areas of telecommunications, digital television, cybersecurity, biotechnology, and health. (VV).
Illicit Trade 💊
Mexico’s president has written to China’s leader Xi Jinping to ask for help controlling shipments of fentanyl, as the Latin American country faces US pressure over the opioid that kills tens of thousands of people in the US a year.
In the letter, President Andrés Manuel López Obrador asked for information on shipments of the synthetic drug to Mexico, including who is importing it and in what quantities.
The US has encouraged Mexico’s previous efforts to set up trilateral co-operation with China on precursor chemicals for fentanyl and methamphetamines, said Vanda Felbab-Brown, a senior fellow at the Brookings Institution, but the efforts had little success.
She said: “China has been unresponsive. Essentially China’s attitude has been that the problems of smuggling in Mexico are the problems of the Mexican government, their poor controls of customs and poor law enforcement.”
China suspended co-operation with the United States on narcotics trafficking after a high-profile visit by former House Speaker Nancy Pelosi to Taiwan in August 2022.
[Joyvio Food Co Ltd (“Joyvio”)] the China-based owners of Chilean salmon producer Australis Seafoods (“Australis”) plan to sue the company's former owners and management for US$1.2 billion, claiming they routinely hid cases of overproduction.
Chilean billionaire Isidoro Quiroga held a 94.47% share in Australis at the sale’s time.
…"We have evidence from communications between directors and executives from the company prior to the acquisition and during the due diligence process that they decided to hide the information," Australis CEO Andrés Lyon told Chilean publication El Mercurio.
Joyvio, established in 2012 as a subsidiary of Chinese group Legend Holdings Corporation (“Legend”), acquired Australis in a deal worth US$921 million in July 2019. The price was over US$40 million more than the initial US$880 million offer.
…Lyon alleges that production systematically exceeded limits at the five farming sites and that levels of overproduction ranged between 20% and 80% thus violating “environmental regulations”.
Quiroga replied to the accusations via El Mercurio, claiming that Joyvio “took on scandalous over-indebtedness to buy Australis, on the basis of expectations that were impossible for any company to meet [and added that accusations] make no sense after 4 years… nothing was ever hidden from Joyvio".
Background: Legend Holdings Corporation (“Legend”) 🔎
Chinese privately-owned company Legend is the controlling shareholder of Fortune Global 500 technology company Lenovo Group Limited. Headquartered in Beijing, Legend operates as a holding company with subsidiaries in finance (eg. Hony Capital, Legend Capital, and Legend Star), real estate, chemicals (Levima Advanced Materials Co., Ltd.), and healthcare.
Legend was founded in 1984, and listed on the Hong Kong Stock Exchange in June 2015. It reported US$71 billion in revenue in 2021. (RP)