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Into Latin America
President Xi's three-nation trip consolidates ties with LAC
By Yu Lintao | NO. 48 December 1, 2016

  

Chinese President Xi Jinping and his Chilean counterpart Michelle Bachelet attend a welcoming ceremony in Santiago, capital of Chile, on November 22 (XINHUA) 

When a 7.8-magnitude earthquake hit Ecuador on April 16 this year, the first four of the eight turbines at the new China-invested Coca Codo Sinclair hydroelectric plant had only been operational for three days. The catastrophic quake crippled the Ecuadorian power system, leaving the country with an extreme shortage of power supplies. Upon the request of the Ecuadorian Government, the hydroelectric plant restored power generation after hours of maintenance to meet the country's power demands.

Now, all eight turbines from the power plant, the largest clean-energy project in Ecuador's history, which provides 7,000 jobs for local people, are fully operational, generating power that accounts for nearly 40 percent of the country's electricity demand.

The hydropower plant is a small sample of Chinese investment in Latin American and Caribbean (LAC) countries and is part of the fast growing China-LAC economic relations in the past decade.

Currently, over 120 Chinese industrial and business entities have registered with the Chinese embassy in Ecuador. Their businesses range from hydraulic electricity generation and road and bridge construction to communication and financial services.

  

The first batch of relief supplies offered by the Chinese Government arrives in Ecuador on April 27, 10 days after a 7.4-magnitude earthquake struck the nation (XINHUA) 

Common development 

Chinese President Xi Jinping just wrapped up his third LAC trip since assuming office by visiting Ecuador, Peru and Chile from November 17 to 23, following trips in 2013 and 2014.

China, the largest developing country, and LAC countries, largely developing ones, share many similarities during their pursuit of economic development.

Xi's latest visit intends to further enhance cooperation. During his stay in Ecuador, the two governments decided to upgrade bilateral ties to a comprehensive strategic partnership, which aims at boosting cooperation in a broader range of areas.

Due to the major decline in global oil prices in recent years, Ecuador, which is heavily reliant on oil exports, has suffered from a severe economic downturn. The United Nations Economic Commission for Latin America and the Caribbean estimated that Ecuadorian economy would plunge 2.5 percent this year .

Under these circumstances, "support from China is very important," José M. Borja, Ecuadorian Ambassador to China told China National Radio a few days before Xi's visit. Borja candidly remarked that support means more funding and technology. He added that his country is undergoing an energy transformation as it is trying to reduce its reliance on oil and concentrate on new and clean energy development.

The Ecuadorian ambassador also noted that among the nine hydroelectric plants that have already been built or are currently under construction in Ecuador, eight are from Chinese companies.

These plants are expected to enable Ecuador to transform from a power-hungry country into a clean energy exporter and help expand its economy. For instance, statistics provided by PowerChina show that the Coca Codo Sinclair hydropower plant is able to generate 8.8 billion kilowatt-hours of electricity every year.

The success of the hydropower projects in Ecuador has helped Chinese enterprises to explore other LAC markets. According to Zi Jiquan, an official with Sinohydro Corp., many companies from other LAC countries, including Honduras and Dominica, showed interest in cooperation after visiting their facilities in Ecuador.

The Ecuadorian ambassador also hailed the efforts Chinese enterprises and Chinese funds have made in infrastructure construction. Besides hydropower exploration, Chinese companies also invest heavily in highway construction, wind power stations, and provide public security services.

Currently, Ecuador is a top destination for Chinese investment and financing in Latin America. Chinese investment and financing has exceeded $10 billion, supporting hundreds of projects. For instance, 85 percent of Coca Codo Sinclair is financed by the Export-Import Bank of China through a $1.68 billion loan. And data provided by PowerChina shows the Chinese company has carried out projects worth a total of $3.5 billion in Ecuador since entering the market in 2009.

In the joint statement released during Xi's visit, the two countries pledged to boost production capacity and investment cooperation and to implement major projects in oil and gas, mining, infrastructure, water conservancy, communication and finance.

China will also transfer some of its technological knowledge to its Ecuadorian counterparts. The two sides also agreed to encourage companies and financial institutions to discuss potential cooperation on the Pacific Refinery, a large petrochemical project in Ecuador's northern province of Manabi, which will be a pillar of the petrochemical industry in Ecuador and the region at large.

In a recent article published on WeChat, former Chinese Ambassador to Ecuador and Chile Liu Yuqin said that Xi's latest visit and the large number of cooperation agreements signed show that China-Ecuador relations are being lifted to a new level and will undoubtedly benefit people from both sides.

  

Visitors tour the Chilean Center in the China (Shanghai) Pilot Free Trade Zone on November 22 (XINHUA)  

Fast growing cooperation 

When Peruvian President Pedro Pablo Kuczynski chose China to be his maiden foreign trip as head of state in September this year, Bloomberg news said the leader had broken with tradition saying that, "it is a sign of the times."

With growing investment, trade ties and cultural exchanges, cooperation between China and Peru has entered the "fast lane" in recent years.

Currently, China is Peru's largest trading partner, its largest export market and biggest source of imports. Bilateral trade has remained on an upward trajectory, hitting a record level of nearly $15 billion in 2015. Peru is one of the top regional destinations for Chinese investment. Politically, the two countries have established a comprehensive strategic partnership, the highest level of relations between China and other nations.

During Xi's stay, the two countries inked a slew of procurement agreements worth $2 billion covering light industry, textiles, agriculture, medicine, metals and mining. They also agreed to upgrade their free trade agreement (FTA). President Xi called on both countries to treat industrial capacity cooperation as a new engine for economic ties and to strive for the completion of major projects ahead of schedule.

The two presidents witnessed the signing of a cross-border e-commerce bilateral trade memorandum of understanding, a milestone in their digital trade relations. The major purpose of this is to give Peruvian small and medium-sized companies access to the vast Chinese market and vice versa.

Recently, some Peruvian companies have begun to enter e-commerce partnerships with Chinese counterparts covering trade in ornaments, alcohol, auto parts and machinery. Chinese smartphones, cars and construction machines are popular in the Peruvian market, much in the same way that Peruvian avocados are well received in China.

Data from China's Commerce Ministry shows that at present, over 170 Chinese businesses have invested more than $14 billion in Peru, creating tens of thousands of jobs and new sources of tax revenue for the government.

  

Local students practice Chinese at a class in Marcona, Peru, on November 6 (XINHUA)

A leading model 

Chile was the last leg of President Xi's three-nation visit in the LAC region. The nation was the first from South America to establish diplomatic ties with the People's Republic of China 46 years ago and the first to conclude talks with China on its WTO accession.

In 2006 Chile also became the first LAC nation to sign an FTA with China. According to the FTA, both countries agreed to adopt a zero-duty policy to cover 97.2 percent of products within a decade. Two years after implementation, the bilateral trade volume had increased 66.34 percent and China became (and still is) Chile's biggest trading partner. Boosted by the FTA, the bilateral trade volume reached $31.8 billion last year, nearly five times its level of 10 years ago.

Chilean cherries, blueberries, wine and seafood are more commonly seen in the Chinese market these days, and Chile is China's second largest source of wine imports. Good quality, competitively priced Chinese products are also popular among Chilean consumers. Chinese-made cars have taken up a considerable share of the Chilean auto market.

In a joint statement released during Xi's visit, the two countries agreed to lift bilateral ties to a comprehensive strategic partnership and to begin talks on upgrading the FTA as soon as possible. According to Chilean President Michelle Bachelet, this will catalyze trade cooperation even further.

In talks with Bachelet, Xi said China-Chile ties are entering a new era of maturity and stability based on a high level of mutual political trust and sound economic cooperation. Xi added that from this new starting point, the two countries should actively strive to ensure China-Chile relations and continue to spearhead China's ties with Latin America.

Bachelet said her country is willing to elevate bilateral ties and break new ground for the opportunity to deepen cooperation in various areas. The Chilean president also welcomed Chinese enterprises increasing investments in her country, and expressed the hope that Chile would join the AIIB as soon as possible.

 

Copyedited by Dominic James Madar  

Comments to yulintao@bjreview.com  

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