The China Signal - December 11
Welcome to The China Signal! If you’ve received this in your inbox, it’s because you’ve signed up to my other newsletter, Mundo, and I know you have an interest in Latin America and/or China.
What is The China Signal? I started publishing this on my website and LinkedIn in October 2020 as a spin-off from my primary newsletter, Mundo. In recent years, I’ve had an interesting vantage point to witness the growing U.S.-China rivalry. Walking the corridors of the Pentagon, the United Nations, board rooms, and parliament houses for meetings and briefings with politicians and officials in the U.S. and Australia, talk of this rivalry was unavoidable.
Yet throughout my frequent visits to Colombia and elsewhere in Latin America over the past decade, I was surprised at how little awareness there was of China’s growing presence in Latin America in conversations with officials, professionals, and the general public.
The China Signal works to fill this gap. Each week, I draw on my background analysing U.S.-China relations, combining it with my experience in Latin America. The result is a concise briefing of the most important political and economic news between China and Latin America, tailored for businesses, investors, and political risk analysts.
I’ll be sending The China Signal out every 1-2 weeks. Your feedback and input is always welcome.
This week, U.S. and Chinese aid is pledged to Colombia’s communities devastated by Hurricane Iota; Brazil looks for legal options to block Huawei; a third Confucius Institute opens in Chile; and an assessment of China’s engagement with Latin American and Caribbean countries at the sub-national level.
Colombia
La carrera entre China y Estados Unidos por reconstruir Providencia - Las2orillas - December 1, 2020
What strikes me most about this article is the superficial examination of the announcements, and the lack of primary sources, something I’ve noticed a lot with reporting on China in local Colombian press…
~Rough Translation~
The U.S. Ambassador to Colombia, Philip Goldberg, announced his government will contribute USD 100,000 (COP 366 million) to purchase communication equipment, debris clearing equipment, and critical relief supplies for those most affected. Also, the United States loaned various military aircraft to transport supplies for reconstruction.
From Beijing, Chinese Vice Minister Zheng Zeguang announced last Friday November 20 a cash donation of USD 500,000 on behalf of his government to close the 10th meeting of political consultations. Meanwhile from the Chinese Embassy’s social media, the Chinese Ambassador to Colombia, Lan Hu, announced a donation of USD 100,000 to the Red Cross for the care of those affected and the reconstruction of Providencia.
Colombia’s Chinese community also took action and collected an additional donation of COP 144 million [approx. USD 42,000].
***
El embajador de Estados Unidos en Colombia, Philip Goldberg, anunció que su gobierno contribuirá con USD 100.000 dólares, (es decir, más de $ 366 millones) para comprar equipos de comunicaciones, para limpieza de escombros y suministros de ayuda crítica para los más afectados. Además, Estados Unidos hizo préstamo de varios aviones militares para transportar insumos para la reconstrucción.
Por su parte, desde Beijing, el viceministro chino Zheng Zeguang anunció el pasado viernes 20 de noviembre la donación en efectivo de 500.000 dólares por parte de su gobierno al cierre de la X reunión de Consultas Políticas. Mientras que, desde las redes sociales de la embajada, el embajador chino en Colombia, Lan Hu, anunció la donación de 100.000 dólares adicionales a través de la Cruz Roja de ese país para la atención de afectados y la reconstrucción de Providencia.
Por otro lado la comunidad china residente en Colombia decidió tomar cartas en el asunto y recolectó entre sus integrantes una donación adicional de 144 millones de pesos.
Brazil
Brazil looks for legal options to ban China's Huawei from 5G: sources | Reuters - December 8, 2020
A presidential decree is being studied by Bolsonaro’s national security adviser Augusto Heleno and the ministry of communications who are looking at security provisions that telecoms and their suppliers must comply with, the sources said.
…Industry representatives said such a presidential decree could lead to a legal battle with telecom companies that already use Huawei equipment and oppose a ban on the Chinese company because it would force them to make costly technology swaps.
Most Brazilian telecommunication firms use Huawei equipment on their 3G and 4G networks. According to lobby group Conexis, the largest cellphone company Vivo, owned by Telefônica Brasil, uses Huawei equipment in 65% of its networks. Claro’s equipment is 55% from Huawei, while Oi has 60% and TIM has 45%.
A legal dispute could delay the auction of 5G spectrum frequencies planned for June next year and set back Brazil’s transition to fifth-generation technology.
Chile
Third Confucius Institute opens in Chile - Xinhua | English.news.cn - December 11, 2020
Note: Xinhua is a Chinese state-owned media outlet.
Chilean and Chinese officials on Thursday inaugurated the Confucius Institute at southern Chile's La Frontera University (UFRO), the third one of its kind in the South American country.
General Latin America / South America
Chinese local-level outreach is apparent across the entire region, including in smaller countries. But the bulk of activity appears to be focused in those countries where local leadership has considerable authority over foreign policy and/or commercial deal making. China’s outreach at the local level is also prominent in countries, whether in LAC or elsewhere, that have strained relations with China.
The rationale for local engagement:
In practice, China’s “multi-tiered” diplomacy in LAC, and especially growing local-level outreach, achieves a range of objectives. Much of this outreach, especially when carried out by Chinese companies, is aimed at securing key contracts in various LAC sectors. For China’s tech firms, in particular, which are marketing safe city and smart city technologies and services, administrative-level governments are natural partners. A considerable portion of China’s local-level undertakings should be also viewed as exploratory in nature, however. As independent researcher on Chinese affairs Ricardo Barrios noted in an interview with the author, China’s administrative level activity “is as much a commercial reconnaissance mission as anything else.”
Conclusions:
There is ample evidence of outreach from both LAC and Chinese actors to advance clearly articulated projects, for example, as exemplified in the Jujuy case study. In other instances, China’s local-level activity in LAC is seemingly undertaken without specific commercial objectives in mind, but rather as a long-term exercise in trust- and network building. Chinese quasi-governmental and even company representatives have been present in certain communities for many years, for example, developing key linkages to prominent and up-and-coming government officials, business leaders, academics, and others who may eventually be in a position to facilitate key deals or else to support Chinese policy-related objectives.
…China’s approach at the local level is not an efficient or even necessarily sustainable one, employing a wide range of government and quasi-governmental representatives to shape views of China in distinct localities and over the course of decades, in some cases. Indeed, the current extent of Chinese engagement at the local level, in addition to broader diplomatic initiatives, will be challenging to maintain. For one thing, the human resource allocation is extensive. In addition, China’s outward foreign direct investment (OFDI) has slowed for several years now.
…Local-level outreach remains appealing to Chinese entities, however, especially amidst growing U.S.-China competition. Administrative-level deal making isn’t as high profile as central-government negotiations have tended to be, obscuring some of these deals from the international “spotlight.” Moreover, LAC local-level officials have in many cases been less sensitive to geopolitical constraints, sometimes engaging with Chinese government officials and commercial representatives regardless of the state of their country’s bilateral relations with China. São Paulo Governor João Doria’s outreach to China is among the more prominent examples.
OPINION: U.S. and China Need to Prevent Emerging-Market Debt Crisis - Bloomberg - December 7, 2020
Meanwhile, with over $31 billion in outstanding claims, China … has loaned more money to these low-income nations than all other bilateral creditors — combined.
…The Chinese government is now coming to terms for the first time with what it means to be a dominant creditor in the face of a systemic debt crisis.
The scores of loans that were a boon to Chinese construction firms working abroad and burnished the reputation of China’s government in infrastructure-starved countries have now become a burden for many of the borrowers and a prudential risk for Chinese lenders. While a go-it-alone strategy may have served China well in normal times, it is now untenable as default risks spike across the developing world and China’s every move is under intense scrutiny globally.
On the surface it appears as if the Caribbean does $35 billion in trade with the United States; but a large proportion of this is “phantom trade.” That is, most everyday goods in the Caribbean are produced in China but appear as U.S. exports. The U.S. is essentially a transshipment point for Chinese goods and including all of this as U.S. trade is misleading. As a result, the Caribbean can potentially create direct trade links with China and bypass the U.S.
…A systematic analysis of Chinese loans across the Caribbean has not yet been published; but one can arrive at a somewhat crude estimate of the realities on the ground. In 2018, based on available data in China’s bulletin of outbound foreign direct investment, the Caribbean Community (CARICOM) collectively received approximately $207 million of Chinese foreign direct investment (FDI), and amount equivalent to just 0.3 percent of the region’s GDP.
Jamaica provides a useful case in point, having consistently maintained diplomatic relations with China since 1972. The China-Latin America Finance Database indicates that since 2005, China’s Export-Import Bank has loaned Jamaica $2.1 billion for various infrastructure projects. As a raw number this may seem large but as of 2018 the amount of debt Jamaica owed to China was just 4 percent of total national debt.