China, the new world order

INTERNACIONAL

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Foto: Christoph Scholz

* Atención para nuestros lectores. Por considerar de particular interés el artículo publicado por el especialista ─abogado de larga experiencia─ en negociaciones internacionales Carlos Alfaro, publicamos hoy este comentario sobre la participación de China en un Nuevo Orden Global. Los interesados pueden solicitar la traducción a LaCity.com.ar.

 

Lectura: 5 minutos

China and Chinese companies could play a positive role in a new world order. Due to the size of China’s economy, its success will be instrumental in revitalizing the global economy as a whole – and with the virus under control, China appears well-positioned to accomplish just that.

Despite the contraction in China’s economy during the first quarter of 2020, the IMF still projects the economy to grow by 1.2 percent for this year. For 2021, the IMF predicts China’s economy will grow by 9.2 percent, leading all major economies.

China unveiled its 2020 economic policy plans on May 21, 2020 and approved a 4 trillion yuan (US$562 billion) stimulus package in the wake of the global financial crisis. Connectivity through infrastructure and technology are the main features of the program.

The stimulus package will be focused on developing “new infrastructure”, such as 5G networks, NEV charging stations, energy efficiency programs, and other initiatives that will help build China’s economy of the future. If China’s stimulus policies are effective, they will not only stabilize the economy in the short-term but help transition the country towards a high-tech and service-driven economy to set the stage for the coming decade.

In contrast to this promising future for China, economists predict most major economies to contract in 2020. Although the US has already pumped massive amounts of money into stabilizing the economy, such as a US$2.3 trillion financing package, the IMF projects the US to contract by 5.9 percent in 2020 and grow by 4.7 percent in 2021.

For Latin America, China is an important economic development partner. Latin America is a region rich in mining products, agricultural industries, and a market of more than 600 million people. Latin America has become one of the main destinations for China’s foreign investments. China is Latin America’s second-biggest trading partner with a trade volume of $307.4 billion in 2018, up 18.9 percent year-on-year. Chinese companies are helping build some mega-infrastructure projects including roads, railways and power plants in Latin America. The region is also seeing a growing demand for high-tech Chinese products, electrical and mechanical equipment. But most important the access to capital investment and financing by China could play the difference.

One probably reason for Latin America to look to China for solutions is that western institutions (i.e. IMF) have played a controversial role in the debt burden and lack of development of many countries in Latin America (like Argentina and Ecuador) by recommending that governments implement extreme austerity measures to boost the economy divorced from the social structure of the country. These austerity measures, in many cases, created hardship, by reducing budgets in infrastructure development, education and health care for the only purposes of enhancing it financials by paying debt and bank interests rather than growing its economies and improving people’s lives and livelihoods.

By contrast, Chinese investors and lenders have not interfered in Latin American countries’ internal economic and political affairs or the foreign debt (they are not holders of public debt bonds). As a result, Chinese funding can be used to growth and development in Latin America. The improvements in infrastructure in the region, thanks to China’s efforts, will make life easier for the more than 600 million people, a substantial percentage of whom are young.

The Belt and Road Initiative place emphasis in “connectivity”, the basis needed to intensify trade and investments exchanges between China and Latin America and reduce the distribution costs of goods and services. The UK played a similar connectivity role when Latin American countries became independent from Spain (railways, ports, shipping, telegraph).

China has largely contained the novel coronavirus outbreak at home, and Chinese companies have ramped up production of medical products, which can be sent to other countries so as to help them fight the outbreak. Actually, China has sent medical supplies to more than 150 countries, with Latin American countries such as Argentina, Brazil, Peru and Ecuador welcoming China’s generous contribution, which includes ventilators, test kits, face masks and gloves, to contain the coronavirus pandemic. This generosity will pay off in the future.

One of the consequences of the pandemic is that China could play an even bigger role in world affairs. China and Latin America will be natural partners. A China – Latin American cooperation agreement could become the “new normal” because of China’s financing, innovation and technological capability and Latin America because of its natural resources and fast developing market.

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