The China Signal - December 18
Chinese rail loans in Argentina, Brazil's anti-China, anti-vaccination movement, & a scramble for national security powers in Chile
G’day, and welcome to The China Signal! This week - Chinese loans to telecom and railway projects are announced in Argentina, an anti-China, anti-vaccination movement grows in Brazil, and Chilean lawmakers scramble to pass national security review powers in response to Chinese investment. Plus more.
Merry Christmas and Happy Holidays - Mitch
Argentina
Telecom lands loan from China | LatinFinance.com - December 18, 2020
Telecom Argentina said Thursday that it has reached an agreement with China Development Bank (CDB) for a $100 million credit line to finance the purchase of telecommunications equipment, as the company returns to borrowing following two refinancing deals. The company said the credit line from the Shenzhen branch of the bank could be increased to a maximum of $200 million…
Rail companies from China have signed agreements worth US$ 4.7bn with the government of Argentina, aimed at improving the country’s rail system.
Four deals were agreed on Friday to electrify the network, replace diesel locomotives and renew freight railways that connect Argentina’s farmlands in the northwest, west and south of the country with the eastern port region.
The Chinese companies involved included China Railway Construction Corporation (CRCC), China Machinery Engineering Corporation (CMEC), CRRC Corporation Limited and Yutong.
No information available yet on the timeline for this investment and construction.
Brazil
Brazil says China 'not transparent' on COVID-19 vaccine emergency use | Reuters - December 15, 2020
…Sao Paulo Governor Joao Doria, a Bolsonaro enemy, said the state expected to start vaccinating its residents in January, though Brazil’s most populous state will not be able to use CoronaVac until it is approved by Anvisa.
Anvisa is Brazil’s national health regulator.
“Brazil is the international leader in the evaluation process for CoronaVac,” Anvisa said in a statement on its website on Monday.
“The vaccine has had an emergency use authorization in China since June of this year. The Chinese criteria for granting emergency use authorization are not transparent, and there is no available information about the criteria currently in use by Chinese authorities to make these decisions.”
…While Brazil’s health regulator has long been largely apolitical, Bolsonaro has been appointing allies to it in recent months, stoking fears among health professionals that its decisions may be affected by political considerations.
As I’ve noted in earlier editions of The China Signal, Brazil’s hardening China view under Bolsonaro must be understood in the context of his domestic political rivalries, particularly with Joao Doria, the Governor of Sao Paulo.
Vaccine refusal in Brazil grows to 22%, most reject Chinese shot: poll | Reuters - December 12, 2020
The share of Brazilians unwilling to take any COVID-19 vaccine grew to 22% this week, from 9% in August, and most said they would not accept one made in China, a new poll showed on Saturday, as President Jair Bolsonaro’s comments stoked wider skepticism.
…According to Datafolha, only 47% of participants would take a vaccine made in China, while 50% said they would not take it and 3% said they were undecided.
The figures showed a correlation between vaccine rejection and trust in President Bolsonaro. A total of 33% of people who said they always trust Bolsonaro are unwilling to take a shot, against 16% of those who say they would never trust the president.
Chile
Chilean Lawmakers Push for Restrictions on Chinese Buying Spree - Bloomberg - December 14, 2020
Thanks to Diego Rojas for sharing this article with me.
Lower house members from both the opposition and the ruling coalition presented a bill that would allow congress to block acquisitions of strategic assets by foreign state-owned companies, with debate set to begin this week.
State Grid Corp. of China announced in November it would pay Naturgy Energy Group SA $3 billion for control of Chilean utility CGE. If the deal gets final regulatory approval, the company would control 57% of the country’s power distribution -- a move that wouldn’t necessarily hurt existing laws. The Chinese company, the world’s largest utility, currently owns 11% of that market through CGE peer Chilquinta, which it bought in October 2019 from Sempra Energy.
As I mentioned in December 4’s TCS, under current laws, regulators can only reject the CGE acquisition if it is deemed to be anti-competitive. This is unlikely to happen.
…President Sebastian Pinera’s administration hasn’t said if it will back or oppose the power deal or the bill limiting acquisitions. Legislators are putting pressure on the government to create a permanent and independent committee to evaluate future transactions involving foreign investors in strategic areas, said Mellado, a member of a party in the ruling coalition.
Still, restricting Chinese investments may expose Chile to retribution from Beijing. China is Chile’s main trading partner and accounts for about half of the South American nation’s copper shipments. China’s robust recovery is helping cushion Chile from the economic blow of the pandemic.
It’s significant that this legislation (which is driven by growing concern over Chinese investment) has bipartisan support, and isn’t splitting down party lines.
China’s copper imports have exploded this year to all time highs by volume, driven by low prices at the beginning of the pandemic, China’s appreciating Yuan, an inventory shortfall, and a recovering Chinese manufacturing sector. Historically, China has a heavy reliance on Chile for copper imports. The Covid Crisis has increased China’s reliance on Chile, as Peru, the world’s second largest copper producer, suffered an output rut earlier this year due to the pandemic.
After historic price lows in March, the price of copper has surged recently (chart below).
Chilean navy ships monitor huge Chinese fishing fleet - Yahoo News - December 16, 2020
The Chilean navy says it is closely monitoring 11 Chinese fishing vessels in its exclusive economic zone (EEZ).
A Chinese fishing fleet has been accused by conservation group Oceana of "pillaging" the waters off the Galapagos Islands for squid.
The fleet is made up of more than 400 fishing vessels, of which 11 are currently in Chile's EEZ, according to the Chile's navy.
The large Chinese fleet caused concern when it arrived in waters off the Galapagos Islands, a Unesco World Heritage site which forms part of Ecuador, in July.
…Chile, Colombia, Ecuador and Peru issued a joint statement [in November] saying they would work together "to prevent, discourage and jointly confront" any attempts to illegally fish. They did not mention China or the Chinese fishing boats in their statement.
Chile's navy said it was monitoring the vessels in its EEZ. Under the United Nations Convention on the Law of the Sea, coastal nations have jurisdiction over the natural resources within their EEZ, meaning that the Chinese boats are free to pass through the waters but not to fish.
Chile and China also commemorated the 50th anniversary of bilateral ties this week, which included a call between President’s Xi Jinping and Sebastian Piñera. In each government’s official statements of the call, it’s interesting to note the similarities and differences in emphasis from the conversation.
The Chilean government is more specific in mentioning China’s recent commitment to carbon neutrality, to cooperate in creating a new protected marine area in Antarctica (“Dominio 1”), and pursue reform of the World Trade Organisation.
Xi calls for more splendid era of China-Chile ties - Xinhua | English.news.cn - December 16, 2020
Chinese state media quoted Xi’s call for greater “…investment in Chile in agriculture, mining, infrastructure construction and other realms, and cultivate new growth areas of bilateral cooperation such as scientific and technological innovation and digital economy… [and] concerted efforts to deepen exchanges and cooperation in such fields as culture, education, health and tourism and at local levels.” No surprise that Chinese investment wasn’t emphasised by the Chilean government, given the current domestic political tension over Chilean power utility CGE (above). Also note the reference to cooperation at “local levels” - see last week’s newsletter summarising a report on China’s sub-national engagement with Latin America.