A boost for South-South ties

President Xi Jinping's third trip - the first time as president - to the Caribbean and Latin America, during which he will visit Trinidad and Tobago, Costa Rica and Mexico, is expected to take the multilateral relationship to greater heights.

Speaking at the UN Economic Commission for Latin America and the Caribbean in Santiago, in June 2011, Xi, then China's vice-president, had said that Beijing would continue broadening and deepening cooperation with the region to give the multilateral relationship "a fresh starting point and raise it to greater heights". Relations between China and the region have indeed gained momentum since then and new mechanisms and funds covering a wide range of areas have been proposed.

Set against increasing trade, which has made the region China's most dynamic trading partner, Xi's visit is important for at least two reasons.

First, his visit comes at a time when China and the region's countries are seeking ways to raise the quality of their overall engagement. Since most of the trade between the two sides remains inter-industrial in nature, commodities-rich countries, mainly in Latin America, have benefited from rising exports to China. The goods they export to China, however, are confined to a few low value-added products. In fact, Mexico and other Central American countries' trade deficits with China have increased rapidly.

Second, as China deepens its economic reforms, public as well as private Chinese enterprises look for investment opportunities abroad. As a result, Chinese investments in the Latin American and Caribbean region could throw up new business models and complement the trade and investment links between the two sides.

Since international transportation costs are rising, building such links makes perfect economic sense because they would help diversify exports, promote transfer of technology and improve the quality of jobs. For that, however, better policy coordination is needed among both public and private players in China and across the region. After all, joint ventures and partnerships forge closer trade and investment links and bring mutual benefit.