Change for the good

Chinese investments in Latin America and the Caribbean are increasingly in sustainability

Like few other countries in the world, China has shown an impressive commitment to improving the sustainability of its domestic economy as well as in its foreign cooperation. President Xi Jinping highlighted in his speech at the Boao Forum for Asia in April 2022 — and in the context of the concept of a community with a shared future and the Global Development Initiative launched at the 76th United Nations General Assembly in September 2021 — that "countries around the world are like passengers aboard the same ship who share the same destiny".Health and economic recovery, peace, equity, justice, multilateralism and development, all play a fundamental role in this proposal; a green and sustainable process is fundamental from this perspective. Linking the high-quality component to development, cooperation and environmental needs is a critical aspect of the new development philosophy.

How do these priorities translate for China in its relationship to Latin America and the Caribbean?

First, they have allowed for an important institutional building process between LAC and China. The CELAC-China Forum has, since its existence in 2014 and its first Ministerial Meeting in January 2015, been the main platform of cooperation between China and LAC. In the context of globalization, since 2013 China has maintained a long-term consistent interest in and commitment to the CELAC-China Forum; this regional platform is parallel to bilateral, subregional and multilateral relations with China. China's cooperation strategy with regards to LAC has been in the form of "1+3+6", which stands for: One cooperation plan through CELAC, three driving forces (trade, investment, and financial cooperation), and six key fields of cooperation (including energy and resources, infrastructure projects, manufacturing, and scientific-technical innovation). The wide extension of specific instruments in the CELAC-China Forum since 2015 has resulted in three action plans for 2015 to 2019, 2019 to 2021, and 2022 to 2024. In all the three action plans sustainability aspects have played an increasing role, such as in the 2022 to 2024 agreement explicitly regarding agriculture and food, energy and resources, tourism, infrastructure, in addition to a subchapter on sustainable development and eradication of poverty and a full chapter on sustainable development.

Second, the LAC-China socioeconomic relationship has become increasingly complex, such as in the case of Chinese infrastructure in the region. So far, the topic has not received sufficient attention as a result of different methodological approaches by official sources, but that has been partially overcome by the annual Monitor of Chinese OFDI in LAC.

Chinese OFDI in LAC accounted for 524 transactions through 2021, resulting in $171.9 billion and more than 584,000 jobs.

Chinese OFDI has diversified importantly by country. In the initial period from 2000 to 2004, Brazil was the main recipient, accounting for 76.86 percent of China's OFDI in the region. That fell to 39.09 percent for 2015 to 2021. Brazil is still the main recipient of China's recent OFDI in LAC, but countries such as Chile (with 21.15 percent during 2015-2021), Mexico (17.85 percent), and Peru (16.43 percent), with practically no OFDI in the first decade of the 21st century, have played an increasingly dynamic role as a result of the learning process within LAC and of Chinese companies.

This diversification process has also deepened by sector. Historically Chinese OFDI concentrated in raw materials (with only six transactions during 2000 to 2004 representing 81.39 percent of Chinese OFDI), but this declined to 45.69 percent for the more recent 2015 to 2021 period. On the other hand, transactions oriented toward services and LAC's domestic sector (accounting for 26.8 percent in 2015 to 2021) and manufacturing (23.15 percent) have become the most dynamic recipient recent sectors of Chinese OFDI.

The provided information also allows for a deeper sectorial understanding of China's OFDI in LAC. Energy in the 2015 to 2021 period was the LAC's main recipient of Chinese OFDI with 52 transactions accumulating $36.3 billion and more than 22,000 jobs. The share of non-fossil energy sources — which were practically non-existent before 2015 — was 49.86 percent during 2015 to 2021 and 44.97 percent if we do not include nuclear energy. Chinese non-fossil OFDI in LAC presents different characteristics and in countries such as Mexico increases to 65.43 percent of total OFDI in energy during the same recent period.

This process of sustainable non-fossil Chinese OFDI in LAC is led by State-owned enterprises such as China Three Gorges Corporation, State Power Investment Corporation, and Sinohydro Corporation, but it also includes private companies such as Envision Energy, Risen Energy, JA Solar, and Trina Solar Energy. These companies are accumulating valuable experiences in the LAC-China relationship, particularly regarding non-fossil energy OFDI.

These recent trends reflect decisive new measures by Chinese OFDI and public and private companies to shift their activities to non-fossil energy sources, also as a result of increasing innovation and production in China. Without a doubt, large challenges remain, but these recent performances indicate an important coherence with Chinese global commitments, and specifically in LAC.

The author is a professor at the National Autonomous University of Mexico and coordinator of the Center for Chinese-Mexican Studies at the university. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.