Economy

Markets

Industries

Insights

Reports

Events

Warm current of trade in cold winter of crisis

By Chen Yuanting (China Daily)
Updated: 2009-05-20 07:41

Economic and trade ties between China and Brazil have got a big boost in this year's first four months despite a recession in the world's economy.

As two emerging economies, China and Brazil have different degrees of foreign trade dependence for their economic development, with the ratio of foreign trade to the gross domestic product being 66 percent and 20 percent respectively in the two countries.

Nevertheless, the ongoing global financial crisis has inflicted enormous pressures on the exports and imports of both countries. According to the General Administration of Customs statistics, the total volume of China's import and export in the first four months was $599.4 billion, a 24.3 percent decrease from a year earlier. Among the trade value, export was $337.4 billion and import $261.986 billion, down 20.5 percent and 28.7 percent respectively from the same period last year.

Related readings:  $10b loan-oil deal lubricates trade  China, Brazil have huge trade potential: former ambassador  China surpasses US to become Brazil's biggest trading partner  China, Brazil sign oil deal

Statistics from Brazil also indicate that the trade volume of the largest South American economy declined by 19.5 percent from the previous year to $80.276 billion. Out of that, the country's exports were $43.499 billion and imports $36.777 billion, decreasing by 16.5 percent and 22.8 percent respectively.

Compared with cold winter their foreign trade has encountered, Sino-Brazilian economic and trade ties have experienced a warm current in the same period. According to Brazil's industrial and foreign trade authorities, the country's export to China in March was $1.737 billion, a 134.6 percent leap from a year earlier. That makes the Asian nation transcend the United States and become Brazil's largest export market. Brazil's exports to the US in March were $1.270 billion. The value of China-Brazil trade increased to $3.2 billion in April, more than Brazil's trade of $2.8 billion with the US.

Owing to a tangible increase in its export to China, Brazil also witnessed a first-ever trade surplus in March. The booming trade ties between the two countries are rooted in the well-performing bilateral relationship of recent years.

Since 2002, bilateral economic and trade ties have witnessed sustained improvement, with the trade volume reaching $48.497 billion last year, 12 times that of 2002 at $4.074 billion. In the previous four months, this year, trade volume between China and Brazil increased to $10.2 billion, a 13.9 percent growth from a year earlier. Trade with China in Brazil's foreign trade year on year has increased from 3.78 percent in 2002 to the current 12.7 percent.

Such a good bilateral trade performance has benefited a lot from the great importance the two countries have attached to ties with each other. China's importance to Brazil has increased on a daily basis, and so has Brazil's to China.

"As two influential emerging powers in the world, China and Brazil should further strengthen cooperation", as Vice-president Xi Jinping put it. "Bilateral cooperation should go beyond the bilateral field and is of global and strategic significance," Xi told Brazilian President Luiz Inacio Lula da Silva during a visit to the South American nation in February. Meanwhile, Brazil regards the strengthened ties with China as an important part of its pursuit of closer cooperation among developing countries.

Strong economic complementarity between the two countries has bolstered the booming bilateral economic and trade cooperation.

What China imports from Brazil are mainly some resource products, ranging from iron ore to soybean, which cannot be provided by other markets. While China remains the largest buyer of Brazil's CVRD, the world's largest iron ore manufacturer and supplier, CVRD's sales to China account for 43.6 percent of its total sales volume. In the first quarter, Brazil's export of iron ore to China reached $1.9 billion, up 89.8 percent from a year earlier. In the context of the world prices of soybean suffering a drastic decline, China's increased soybean import from Brazil, which stood at $560 million in the first quarter - or a 104.7 percent growth year on year - has contributed a lot to the agricultural sector's development in this country.

Despite a high degree of economic complementarity they have enjoyed, the high concentration on a few products in Sino-Brazilian trade will also leave some uncertainties to bilateral economic and trade ties. In Brazil's export to China, mineral products account for 56.1 percent, followed by soybean-dominant agricultural products making up about 16.5 percent. What Brazil imports from China mainly center on mechanical and electrical appliances, chemical products, textiles and their raw materials, which accounted for $2.38 billion in the first quarter, or 65.7 percent of its import from the Asian nation. Such an unbalanced trade structure is likely to give rise to some trade friction and will have a negative effect on bilateral economic and trade ties. Hence, it remains necessary for the two countries to expand areas of bilateral investment and trade to boost the scale of bilateral trade.

Compared to the growing clout the two countries enjoy in their respective regions, the current scale of trade between China and Brazil remains trivial. In China's foreign trade, Brazil's share is only 1.8 percent.

China and Brazil should try to expand the scope of bilateral cooperation to areas such as reconstruction of the global financial system. The potential for bilateral cooperation should be 10 times that of the trade volume, as Brazilian president has put it.

The author is a scholar with the Institute of Latin American Studies under the Chinese Academy of Social Sciences.