CHINA Y AMERICA LATINA: RELACIONES COMERCIALES Y

ECONOMICAS

RHYS JENKINSSCHOOL OF DEVELOPMENT STUDIES

UNIVERSITY OF EAST ANGLIA

Presentación al CECHIMEX, 6 de septiembre 2006

CHINA’S GLOBAL SIGNIFICANCE

GDP growth > 9% p.a since 1980Fourth largest economy in GDPShare of world trade increased from 1% in 1980 to >6% in 2004Approx 7% of world FDI flows since 2000

IMPACTS OF CHINA ON DEVELOPING COUNTRIES

Direct effectsIncreased market for exports to ChinaIncreased competition from China in domestic marketIncreased bilateral FDI flows

Indirect effectsCompetition from China in third marketsDiversion of FDI to ChinaTerms of trade effects

CHINA’S TRADE WITH LATIN AMERICA

China's trade w ith Latin America, 1985-2005

0

5000

10000

15000

20000

25000

30000

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

US$

mill

ion

China's Imports from LA China's Exports from LA

MAJOR PRODUCTS IMPORTED BY CHINA FROM LATIN AMERICA

75% primary products and resource-based manufactures

SoyaIron oreCopperWood pulpFishmealLeather

Concentration in a small number of products

DETERMINANTS OF THE GROWTH OF LATIN AMERICAN EXPORTS TO CHINA

Marked acceleration since 1999 – for region as a whole and major countries

Growth of Chinese economyIncreased openness of Chinese economy especially with WTO membershipChinese demand for primary products outstripping domestic demandLow but increasing Chinese elasticity of demand for Latin American exports Increased outward-orientation of Latin America

EXPORTS TO CHINA AS SHARE OF TOTAL EXPORTS, 1995, 2005

0%

2%

4%

6%

8%

10%

12%

14%

Arge

ntina

Boliv

iaBr

azil

Chile

Colom

biaCo

sta R

icaCu

ba

Domi

nican

Rep

.Ec

uado

rEl

Salva

dor

Guate

mala

Hond

uras

Mexic

oNic

aragu

aPa

nama

Parag

uay

Peru

Urug

uay

Vene

zuela

Shar

e of

tota

l exp

orts

1995 2005

INTER-COUNTRY DIFFERENCES IN EXPORTS TO CHINA

Gravity type modelGeography – distance; Pacific Coastline; land-locked – not significantEconomic factors – more open economies export morePolitical factors – recognition of Taiwan lowers exports

LATIN AMERICAN IMPORTS FROM CHINA

Steady growth from late 1980s to early 2000sAcceleration of imports from 200390% of imports manufactures

Almost half low-tech/labour-intensiveTechnology level increasing over time

DETERMINANTS OF THE GROWTH OF LATIN AMERICAN IMPORTS FROM CHINA

Increased competitiveness of ChinaGrowth of Latin American economiesParadox – China’s membership of WTO not significant (or even negative)Increased openness of Latin America not significant (China displacing other imports?)

IMPORTS FROM CHINA AS SHARE OF TOTAL IMPORTS, 1995, 2005

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Arge

ntina

Boliv

iaBr

azil

Chile

Colom

biaCo

sta R

icaCu

ba

Domi

nican

Rep

.Ec

uado

rEl

Salva

dor

Guate

mala

Hond

uras

Mexic

oNic

aragu

aPa

nama

Parag

uay

Peru

Urug

uay

Vene

zuela

Shar

e of

tota

l im

ports

1995 2005

INTER-COUNTRY DIFFERENCES IN IMPORTS FROM CHINA

Differences not so marked as for exports

Gravity modelGeographical factors not significantPolitical factors – unlike for exports, recognition of Taiwan not significantSocial factors – existence of Chinese population increases imports (cf. Rauch and Trindade, 2002)

CHINA’S THREAT TO LATIN AMERICAN EXPORTS

Conventional wisdomSeen as mainly affecting Mexico and Central AmericaSeen as mainly affecting labour-intensive products esp. garments

EXPORT SIMILARITY INDICES BETWEEN LATIN AMERICA AND CHINA, 1990, 2003

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Mexic

o

Pana

maCo

sta R

icaDo

minic

an R

epub

licEl

Salv

ador

Braz

ilGu

atema

la

Colom

bia

Urug

uay

Arge

ntina

Hond

uras

Peru

Para

guay

Boliv

iaNi

cara

gua

Chile

Ecua

dor

Cuba

Vene

zuela

1990 2003

CRITIQUE OF ESI

Inappropriate where level and concentration of exports differ between countries being comparedMisleading for comparing the threat to different countriesMisleading for looking at changes in competitive threat over time

AN ALTERNATIVE MEASURE OF COMPETITIVE THREAT

Share of country’s exports threatened by China

Static measure – products in which China’s RCA>1Dynamic measure – products in which China’s world market share is increasing

A MEXICAN ILLUSTRATIONMexica n Export s and Compe t it ion wit h China

0.01

0.1

1

10

100

0.01 0.1 1 10 100

C h i n a R C A

COMPETITION FROM CHINA –STATIC MEASURE

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

Domi

nican

Rep

ublic

Pana

ma

Mexic

oCo

sta R

ica

Urug

uay

El S

alvad

orCo

lombia

Nica

ragu

a

Peru

Guate

mala

Braz

ilHo

ndur

as

Ecua

dor

Arge

ntina

Chile

Boliv

iaPa

ragu

ay

Cuba

Vene

zuela

1990 2003

COMPARING ESI AND ALTERNATIVE MEASURE

ESI underestimates the competition faced by small countriesESI shows that most countries face declining competition from China; alternative shows that competition increased in half the countries

IMPACTS ON THE TERMS OF TRADE

China not a “small country”Chinese demand for primary products and current commodity boomFalling prices of manufactured goods exported by ChinaTerms of trade of main Latin American countries improved, 2000-2004

TERMS OF TRADE OF MAJOR LATIN AMERICAN ECONOMIES

TRADE BALANCE OF LATIN AMERICAN COUNTRIES WITH CHINA

Trade Balance of Latin American Countries with China, 2005

-5000 -4000 -3000 -2000 -1000 0 1000 2000 3000 4000 5000

Argentina

Brazil

Colombia

Cuba

Ecuador

Guatemala

Mexico

Panama

Peru

Venezuela

US$ million

LATIN AMERICA’S TRADE BALANCE WITH CHINA

Trade surplus or trade deficit?Five countries have surpluses -Argentina, Brazil, Chile, Costa Rica and PeruAll others have deficits - Mexico and Panama have large deficits

Need to take account of impact on exports to third markets

FUTURE RESEARCH: DIRECT EFFECTS

Latin American exports to China:Why concentrated in so few countries?Why concentrated on so few products?What are the prospects for future export growth?

Imports from ChinaHow far are these displacing other imports or domestic production?What are the implications for employment in Latin America of Chinese competition?

FUTURE RESEARCH:INDIRECT EFFECTS

Exports to Third MarketsMore disaggregated analysis by markets and productsDevelopment of alternatives to ESIEstimating impact of China on level of Latin American exports

FUTURE RESEARCH:CASE STUDIES

Focus on 4 countries:ArgentinaBrazilChileMexico

Studies of 2 value chains in each country

CHINA Y AMERICA LATINA: RELACIONES COMERCIALES Y ECONOMICASCHINA’S GLOBAL SIGNIFICANCEIMPACTS OF CHINA ON DEVELOPING COUNTRIESCHINA’S TRADE WITH LATIN AMERICAMAJOR PRODUCTS IMPORTED BY CHINA FROM LATIN AMERICADETERMINANTS OF THE GROWTH OF LATIN AMERICAN EXPORTS TO CHINAEXPORTS TO CHINA AS SHARE OF TOTAL EXPORTS, 1995, 2005INTER-COUNTRY DIFFERENCES IN EXPORTS TO CHINALATIN AMERICAN IMPORTS FROM CHINADETERMINANTS OF THE GROWTH OF LATIN AMERICAN IMPORTS FROM CHINAIMPORTS FROM CHINA AS SHARE OF TOTAL IMPORTS, 1995, 2005INTER-COUNTRY DIFFERENCES IN IMPORTS FROM CHINACHINA’S THREAT TO LATIN AMERICAN EXPORTSEXPORT SIMILARITY INDICES BETWEEN LATIN AMERICA AND CHINA, 1990, 2003CRITIQUE OF ESIAN ALTERNATIVE MEASURE OF COMPETITIVE THREATA MEXICAN ILLUSTRATIONCOMPETITION FROM CHINA – STATIC MEASURECOMPARING ESI AND ALTERNATIVE MEASUREIMPACTS ON THE TERMS OF TRADETERMS OF TRADE OF MAJOR LATIN AMERICAN ECONOMIESTRADE BALANCE OF LATIN AMERICAN COUNTRIES WITH CHINALATIN AMERICA’S TRADE BALANCE WITH CHINAFUTURE RESEARCH: DIRECT EFFECTSFUTURE RESEARCH:INDIRECT EFFECTSFUTURE RESEARCH:CASE STUDIES