The China Signal - August 19
Guyana to join BRI, Tesla drives Chinese EV parts makers to Mexico, Infinix eyes major expansion
G’day, and welcome to The China Signal. I’ve been back in Colombia this past week, and it’s been great to catch up with some readers. In this edition, Guyana moves forward to join the BRI, Tesla attracts Chinese EV component makers to Mexico, smartphone maker Infinix in talks for a major expansion into Mexico, Uruguay’s Luis Lacalle Pou hopes to travel to Beijing by year-end to move FTA talks forward, plus more.
Also, Florida International University have released two reports that are well worth reading:
Read on.
Diplomacy 🕊️
Guyana 🇬🇾
Guyana has agreed to join China’s Belt and Road (BRI) Initiative, according to a joint statement issued by the two countries on July 30 to mark the end of President Irfaan Ali’s July 25-August 1 official visit (see TCS July 28) to China on the sidelines of the 31st FISU World University Games in Chengdu.
The two countries signed a Memorandum of Understanding (MoU) in July 2018. More in detail:
…“Both sides agreed to investigate the prospects for collaboration in the development and construction of critical infrastructure projects, leveraging China’s experience, expertise and finance capacity” China and Guyana said.
…China and Guyana also signed a MoU on the establishment of an investment and economic cooperation working group.
The two countries agreed to explore the possibility of expanding trade in a variety of industries, including agriculture, [renewable] energy, mining, and manufacturing.
Driven by an unprecedented jump in Guyanese crude petroleum exports, trade between the two countries increased seven-fold between 2018 and 2022 from US$265 million to US$1.9 billion. Guyana is now China’s largest Caribbean trading partner.
Last September, Chinese pharmaceutical giant Sinopharm was awarded the contract to construct six new regional hospitals in various parts of the country.
During an interview with Chinese state-controlled media CGTN on August 2, Ali added that there are “tremendous opportunities [for Chinese companies] to get involved” in the auction of 14 offshore oil blocks, whose deadline was extended to this September (see TCS July 28 for further background). (RP)
Electric Vehicles 🚗 🔋
Mexico 🇲🇽
Chinese car component makers are rushing to build production plants in Mexico so they can supply parts to Tesla’s new factory in the Central American nation.
At least seven mainland-listed companies have already announced their plans to expand in Mexico after Elon Musk’s Texas-based carmaker started construction of the “Gigafactory 6” near Monterrey in May.
Three executives with Chinese car component firms told the Post that they were invited by Tesla to build factories in Mexico after the premium EV builder decided to set up the new facility.
…Ningbo Xusheng Group, which makes aluminum alloy parts, Zhejiang Sanhua Intelligent Controls, a manufacturer of heat control components, and Tuopu Group, which deals with chassis production, are among the Tesla partners that will make a foray into Mexico.
Xusheng said in late March that it would spend US$276 million to build a production line in the country bordering the US. Sanhua announced in June that its plant in Mexico, with an annual capacity of 8 million heat control systems, would cost US$146.2 million. Tuopu has set aside US$200 million to build a factory in Mexico.
…Chinese vendors already supply almost half of the world’s vehicle parts. They sold US$710 billion out of the US$1.51 trillion worldwide total in 2021, according to a report in February by Beijing-based Insight and Info Consulting.
La marca china de vehículos Dongfeng entrará a México | La Jornada | August 3, 2023
Chinese state-owned automobile manufacturer Dongfeng Motor Corporation Ltd. announced it will start selling its vehicles in Mexico in November. The company’s heavy vehicles, SUVs, and cars will be sold under the brand Jungfeng by auto importer Grupo Magna.
This announcement follows a similar move into the Guatemalan market a week earlier. Dongfeng ranked 188th in the 2023 Fortune 500 list with revenue of over US$68 billion. (RP)
Finance 💸
Argentina 🇦🇷
The Argentine government has reached an agreement with the People’s Bank of China to secure US$1.7 billion in yuan through currency swaps to meet its US$2.7 billion payment obligations to the International Monetary Fund, its economy minister said on July 31.
The remaining balance of the payment will be covered by US$1 billion loaned by the Development Bank of Latin America, also known as CAF.
Sergio Massa, the Argentine economy minister, thanked the PBOC and Chinese government “for making the decision to authorize the disbursement”, saying it would “ensure that Argentina can continue its exports while meeting its payment obligations” to the IMF.
For additional context regarding Argentina's payment obligations to the IMF and Chinese yuan swaps, please refer to TCS July 28. (NRM)
Infrastructure 🏗 🚆 🏟️
Chile 🇨🇱
China’s CRRC wins US$170mn rolling stock contract in Chile | BNamericas | August 11, 2023
The China Railway Construction Corporation (“CRRC”) won a US$171mn rolling stock contract for Chile’s US$1.5bn Melipilla-Alameda and US$705mn Santiago-Batuco services. CRRC’s winning bid was part of a consortium with Brazilian railcar services company Temoinsa.
This is CRRC’s third rolling stock contract in the country. It involves 22 units for the Melipilla-Alameda line for US$118mn and 10 for the Santiago-Batuco service for US$53mn, the transport ministry and state rail company EFE said in a statement.
The contract represents EFE’s largest ever rolling stock purchase.
In 2018, CRRC won contracts to supply 12 trains for the Biotren and Corto Laja services in the Biobío region and in 2020, a contract to supply six diesel trains for the Santiago-Chillán line.
CRRC increased its stake in Chile’s route 5 highway in February 2023. China Road and Bridge Corporation (CRBC) and China Railway 16th Bureau Group are involved in the Maule hospital network and a section of metro line No. 7 projects, respectively. See TCS May 27, 2022 for further background on CRRC. (RP)
El Salvador 🇸🇻
Construction of El Salvador’s new national sports stadium, financed by a donation agreed with China in 2019, will start in the coming months, according to the country’s ambassador to Beijing, Aldo Álvarez.
“The stadium´s tender is at the contract awarding stage because one company did the design and another one will build it,” Álvarez was quoted as saying by daily El Economista, without giving a precise date. “The design has been completed and the construction is close to being awarded.”
The construction contractor will be defined by China, and work is expected to last approximately four years.
The stadium could be built on the grounds of the old military academy in San Salvador municipality Antiguo Cuscatlán (see TCS June 20, 2022), the president of the national sports institute (INDES), Yamil Bukele, said. (RP)
Bolivia 🇧🇴
The Chinese government is inserting confidentiality clauses into its investment agreements with the Bolivian government, according to sources close to the deals. Contractors are strictly prohibited from sharing any details about the investment contracts with Congress or the public, unless specifically instructed by the Chinese government.
The confidentiality clauses violate Articles 106, 107, and 242 of the Bolivian Constitution, which guarantees the public and Congress’ right to information critical to the national interest.
According to the sources close to the Bolivian government and the Chinese firms, the confidentiality clauses are being applied to energy and mining contracts. These allegations claim that the Arce government is keeping everyone in the dark about its deals with China, specifically regarding lithium. (VV)
Judiciary ⚖️
Venezuela 🇻🇪
China y Venezuela fortalecen relaciones en el ámbito judicial | Correo Del Orinoco | August 4, 2023
~ Correo del Orinoco is a Venezuelan state-sponsored media outlet. This article is translated from Spanish ~
The president of the Supreme Court of Justice (TSJ), magistrate Gladys Gutiérrez Alvarado, held a working meeting yesterday with Chinese Ambassador to Venezuela, Mr. Lan Hu, in order to strengthen relations in the judicial field between the two nations.
The meeting, which was held at the headquarters of the highest Venezuelan court, saw various issues discussed related to the development of bilateral labor cooperation, as well as in the academic field, to generate programs of training and exchange of experiences between judges and judicial servants of the two nations.
Gutiérrez stated that Venezuela's highest court is working to promote the systematization of judicial processes in the country…expressing that the People's Republic of China is the exemplary benchmark in the matter and constitutes a fundamental ally in this work.
Peru’s top prosecutor Patricia Benavides met with the Deputy Attorney General of China, Sun Qian on July 3. See TCS July 14 for further details. (VV, MH)
Technology 📱
Mexico 🇲🇽
Chinese Smartphone Maker Eyes Retail Deals in Mexico Push | BNN Bloomberg | July 20, 2023
Chinese budget smartphone maker Infinix Mobility is in talks for a slew of retail deals in Mexico as it plans to make the country a key market in the next three years.
The unit of Shenzhen Transsion Holdings Co., a fast-growing Chinese device maker with a market capitalization of US$14.8 billion, Infinix already has a deal with government-run mobile service provider Altan Redes and is in talks with AT&T and Carlos Slim-owned Telcel, said Antonio Tercero, head of Infinix Mexico, in an interview.
The company is also negotiating with Millicom for a partnership to sell phones in Central America.
…Infinix is among a handful of Chinese budget device makers, including Realme and Oppo, that are setting sights on Latin America. The company, which saw growth of 172% in device sales globally during the pandemic, launched Latin America operations in Colombia in 2022 and has since expanded to Brazil, Bolivia, Ecuador, Chile and Central America.
Now, it’s focusing on Mexico, where it aims for a 5% market share, said Yuou Chen, marketing director for Latin America.
…It declined to give an estimate of how much it is investing or how many employees it has in the region
It is not currently assessing manufacturing phones in Mexico, as that would be decided by its parent company Transsion. (RP)
Trade 📊
Uruguay 🇺🇾
Luis Lacalle Pou, the Uruguayan President, is scheduled to travel to China before the end of the year, where he will push for progress in negotiating a Free Trade Agreement (FTA) with China.
Uruguay initiated discussions on a feasibility agreement for the FTA in September 2021. However, progress has been limited since. One of the obstacles is that Uruguay, being a part of the MERCOSUR economic bloc, requires the consent of the other members to engage in trade negotiations (see TCS January 30). Despite this, President Lacalle Pou has been vocal about his interest in pursuing bilateral negotiations with China.
China has been Uruguay's primary trading partner since 2022. Meat exports dominate Uruguay’s trade with China, accounting for 68.7% of its exports to China in the first half of 2023. Uruguay's livestock sector strongly supports an FTA. Uruguay’s Minister of Livestock traveled to China in May to promote the sanitary procedures for meat exports (see TCS May 5, 2023). (NRM)
Defense 🛩️
Argentina 🇦🇷
On July 7 and 13, the Joe Biden administration sent two notifications to the United States Congress regarding proposals for the transfer of defense equipment to Argentina. These proposals include the sale of F-16 combat aircraft from Denmark and P-3 Orion maritime patrol aircraft from Norway. Argentina is yet to make a decision, and is reportedly evaluating alternative purchases such as the China/Pakistan-made JF 17 Thunder or the Indian-made HAL Tejas.
This procurement initiative is part of the ongoing acquisition plans by the Argentine Air Force and Navy, aiming to replace the existing fleet of Mirage III and V,A-4 aircraft as well as the P-3B Patrol aircraft.
For more details on Argentina's previous intentions to purchase military aircraft from China, refer to TCS December 17, 2022 and TCS March 29, 2023.
Marc Stanely, the U.S. Ambassador to Argentina, expressed concern that an acquisition of Chinese aircraft by Argentina could lead to an increased Chinese military presence in the region. (NRM)