IN YR BACK YARD QUIETLY EXPANDING MAH GLOBAL INFLUENCE

June 27, 2007 10:41 AM

China expands its influence in Latin America. Last time we looked, China had become a major investor and player in Africa. But in the last four years, the rise of Chinese-Latin American trade, investment and influence has been nothing short of explosive. And with not just the usual suspects, but many nations, and including sensitive arms deals to Bolivia. A good thing? Opinions differ. The rise of the softer superpower continues. Well, when the world's #1 has other priorities, they're bound to neglect their own back yard...
posted by Bletch (37 comments total)

Also, a really nice interactive map of China.
posted by Bletch at 10:53 AM on June 27, 2007 [1 favorite]

Thank you for this excellent post.
posted by Sangermaine at 10:56 AM on June 27, 2007

One note: the "sensitive arms deal" link goes to something you need to pay to read in full.
posted by Sangermaine at 10:57 AM on June 27, 2007

And for the contrarian view, the Bank of International Settlements, one of the most reputable and credible financial institutions in the world, thinks China is in danger of suffering a 1930's style depression.
posted by Pastabagel at 11:06 AM on June 27, 2007

China is in danger of suffering a 1930's style depression.

But will they have bathtub gin and flappers? I assume they have the gangsters part already covered.
posted by GuyZero at 11:56 AM on June 27, 2007

Interesting post, will have to muse over it fully later.
posted by Vindaloo at 11:58 AM on June 27, 2007

China is in danger of suffering a 1930's style depression.

Sure, and they're full of counterfiters and bla bla bla. The china fud these days is quite obnoxious. While the U.S. wages wars and pisses people off, China is actually using diplomacy and whatnot to increase it's mindshare.

In fact, most world citizens view China as having being a better and more trustworthy nation then the United States.
posted by delmoi at 12:48 PM on June 27, 2007

While the U.S. wages wars and pisses people off, China is actually using diplomacy and whatnot to increase it's mindshare.

Really? Try selling that one to the Taiwanese..
posted by SweetJesus at 12:54 PM on June 27, 2007

1988. I am visiting Peru for the summer. I get in the habit of going to movie theaters and watching mostly American Spanish-subtitled movies for about US$0.25 each, a good cheap way to improve my Spanish vocabulary. The theaters are usually sparsely filled, except for one film which fills the theater to the rafters, standing-room-only, played to a completely rapt and focused audience. The film? The Last Emperor. I suspected then, almost 20 years ago, that China would become a major player in South America.
posted by telstar at 1:00 PM on June 27, 2007 [1 favorite]

Really? Try selling that one to the Taiwanese..

Probably easier then selling the inverse to Iraq, Iran, Syria, Lebanon, Somalia, Cuba, etc. And anyway, nearly half the population there favors unification. It's the basic position of the KMT party.
posted by delmoi at 1:12 PM on June 27, 2007

(nearly half the Taiwanese population)
posted by delmoi at 1:14 PM on June 27, 2007

delmoi
The article PastaBagel links to points out that China's situation today is similar to Japan in the 80s, which I think is apt in both economic and behavioral terms. Japan at that time (and now) built up a huge deal of "soft power" through similar means, and was an economic juggernaut, yet the 90s and 2000s were/are not the Japan-ruled corporate world of Neuromancer. It's wrong to ignore the "soft power" push of diplomacy, aid, and financial deals that China is engaging in right now, but it's also wrong to gloss over China's many, many economic problems.
posted by Sangermaine at 1:19 PM on June 27, 2007

That doesn't sound good. Since the world economy now uses China as it's manufacturing base any financial collapse there would most likely have huge and far reaching effects.
posted by Artw at 1:24 PM on June 27, 2007

Probably easier then selling the inverse to Iraq, Iran, Syria, Lebanon, Somalia, Cuba, etc. And anyway, nearly half the population there favors unification.

I'm not even sure what that means? You said that China is attempting to leverage it's power through diplomacy and other soft tactics. This is not true when it comes to Taiwan (and Tibet, and the Falun Gong, etc), regardless of whatever the United States is doing geopolitically.

Also, where is "there"? Taiwan? If so, you're very wrong. The latest poll that I can find suggests as little as 5-6% support for reunification.
posted by SweetJesus at 1:25 PM on June 27, 2007

Though, to be fair, China doesn't really think of those places as not China.
posted by Artw at 1:29 PM on June 27, 2007

Ah, China. We love to deny the importance of China...

I had a chance to pose a question a few months back to a panel of supposedly learned types (SF writers in the Baen Books mold, mostly). The topic was the next global conflict area. I pointed out that the Chinese were investing heavily and fruitfully in Africa -- making a big impact on the Africans by being businesslike and more ethical than people usually are in Africa. (Something about Africa...)

They looked at me like I'd just been suggesting the next global conflict spot was my toilet tank. After glancing amongst themselves, one replied, in a tone of disbelief: "Who cares about Africa?"

It's not so bad with Latin America, but it can be almost that bad. It's "not here", and it's not Europe, and it's not somewhere that they build our gadgets. (Well, not so that we realize it.) So we don't care. But it is someplace with a shitload of people and tons of natural resources and (unlike Africa) a few strong and resonably stable governments and a few strong economies. And they're building a lot more of our gadgets. Not to mention growing our winter vegetables.

Part of me wishes the Chinese luck.
posted by lodurr at 1:38 PM on June 27, 2007

You said that China is attempting to leverage it's power through diplomacy and other soft tactics. This is not true when it comes to Taiwan

Okay, you're right that they're not doing that so much with Taiwan. But the point I was making was that China is more liked in the world now then the U.S.

As far as the Unification stat, I was just refering to KMT supporters, since the KMT favors unification. It seems that the situation is a bit more complex there, and obviously I don't think many people want to Unify right now, under China's terms.
posted by delmoi at 1:44 PM on June 27, 2007

China's situation today is similar to Japan in the 80s

Nah. Japan had less than half the population of the US. China has 4.4 times the population of the US (1.3/0.4 billion), so for China to exceed the US GDP, the average Chinese GDP per capita only has to become about that of Mexico ($8500). In fact Chinese PPP is already equal to the US.

Hell, let's talk about the thermodynamics of being a superpower. In 2004 the US consumed 98 exajoules (10^18 joules). China consumed 58 exajoules (compared to Japan's 21) and has accounted for most of the growth in the last 5 years. These figures are highly significant since national economic and military competitiveness is ultimately constrained by energy resources. There is no sign of China's growth, or the concomitant accumulation of political power, slowing down.
posted by Bletch at 1:52 PM on June 27, 2007

You said that China is attempting to leverage it's power through diplomacy and other soft tactics. This is not true when it comes to Taiwan

Really? So it's "shock and awe" over there, is it?
posted by telstar at 1:59 PM on June 27, 2007

Really? So it's "shock and awe" over there, is it?

Soon, maybe... Between the 2004 anti-secession law and the increase in production of amphibious military units, I'd say we're heading for a showdown.

Can you give me a good reason why the Chinese are increasing their production of T-63 amphib tanks, which have a maximum water range of 120km, if not for an invasion of Taiwan?
posted by SweetJesus at 2:07 PM on June 27, 2007

Well, I've been hearing about China's imminent invasion of Taiwan since Reagan made it one of his favorite chestnuts back in the early 80's.

Another favorite of Ronnie's: fundamentalist Muslim "freedom fighters".
posted by telstar at 2:10 PM on June 27, 2007

But the point I was making was that China is more liked in the world now then the U.S.

This isn't a hard thing to do. I also think that much of the animosity directed towards the United States is directed at Bush, rather than America itself. Once Bush is out of office and our foreign policy begins to shift, I think that much of this anger will dissipate - especially with the Asians, who have a much longer view of history than we do here in the West.

Well, I've been hearing about China's imminent invasion of Taiwan since Reagan made it one of his favorite chestnuts back in the early 80's.

Well, from China's perspective, they've never given up control of Taiwan, and thus have never needed a reason to invade it. If the Taiwanese were to declare their independence, you better believe China would invade.
posted by SweetJesus at 2:12 PM on June 27, 2007

Err, that's T-63A Amphib Tanks.
posted by SweetJesus at 2:15 PM on June 27, 2007

I also think that much of the animosity directed towards the United States is directed at Bush, rather than America itself.

I don't know why you think people might have the urge to fly airplanes through your buildings, but I can assure you that the reasons have been around long before Bush.
posted by Artw at 2:15 PM on June 27, 2007 [1 favorite]

I don't know why you think people might have the urge to fly airplanes through your buildings, but I can assure you that the reasons have been around long before Bush.

I though, you know, we were talking about the world at large, rather than admittedly small group of extreme radicals. I guess you're the type that points out the exception, rather than the rule.
posted by SweetJesus at 2:17 PM on June 27, 2007

Bletch,
Er, those figures are nice and all, but did you even read the articles linked? Nobody's talking about population or energy use. China's red-hot growth masks significant weaknesses in areas like banking, which is what I and the article meant when it said that its current growth was like Japan in the 80s. These weaknesses can't be ignored forever, which is what happened to Japan in 91. The growth is happening in a manner similar to what the US saw in the 30s, which is what was meant about the Depression comparison. How about being less dismissive and responding to what's being debated?

Discussions about China bring out a strange polarity in people, like yours or that shown in lodurr's comment, Ah, China. We love to deny the importance of China... People seem to fall into either the "China is an invincible juggernaut!!!!" or "China's meaningless!" camp, but there are positions between these. You can recognize China's power, importance, and political skill while also noting that it has real problems to deal with.
posted by Sangermaine at 2:22 PM on June 27, 2007 [1 favorite]

For what it's worth, when I was teaching in Beijing, one of my English students was an economist working as an analyst/reporter for Xinhua, the state news agency. She had a much less optimistic view of China's economic future than I did at the time. She was seriously concerned that the party leaders are not nearly as concerned as they should be about the effects China's state owned banks are having on the economy. The comparison between China now and Japan in the 80s is quite apt. Many educated people, her included explicity say that they don't want China to repeat Japan's mistakes.
posted by [expletive deleted] at 2:45 PM on June 27, 2007

... but did you even read the articles linked? Nobody's talking about population or energy use.

For my part, if all someone does is talk about the article that's been linked, it's just a so-so post. If he introduces a new aspect, as Bletch did, then I start to get more value from it. I read Bletch's point as being that all this aside, there's still this energy cost issue which seems to indicate that the problems may not mean as much as they seem to.
posted by lodurr at 2:50 PM on June 27, 2007

lodurr,
Oh, I understand, and looking over my post I'm ashamed at how hostile it sounds because I really didn't mean it to be. Bletch did bring in some interesting new information, but I think it would be good to try to relate that new info to, as [expletive deleted]'s friend brought up, the effect of the banks on things. Focusing on some aspects of China's growth to the exclusion of others will result in a distorted view, which is what I was so poorly getting at in the last paragraph of my post.
posted by Sangermaine at 4:18 PM on June 27, 2007

Seems to me that China understands longterm relations to other countries and history much better then the US.

I think the comparison to Japan in the 80's is somewhat flawed. Japan wasn't catching up to modern standards like China did the last 20 years. Japan did this in the early 1900's - awakening after the long isolation.

It would also be good to put India into the picture - since it has similar infrastructure, cultural and poverty issues.

India has been 'on the market' much longer then China, but has hardly managed to become a world player, secures resources and investment like China did. But China was never hindered by this thing called 'democracy'.

China is much more rutheless on it's way to progress and reinventing itself. The country has made already several very bloody experiments: the great leap forward was catastrophic.

It is also hardly China's fault, that the US wastes it's good image and influence with all these wars and interventions. Latin America has often been treated badly by the US.

And with Cuba the US has shown an even more stupid approach then China has with Taiwan. I wonder if the US ever registers that the cold war is over - even with Cuba.

My money is on a stronger China, unless the US get's smarter about longterm relationships, drops all it' stupid wars and military intervention - and takes more care of it's industrial base, education and get's rid of it's wasteful lifestyle (addiction to oil anyone?).
posted by homodigitalis at 4:37 PM on June 27, 2007

China is doing a really good job of expanding their diplomatic ties, not only in Africa and in Latin America but globally. They have come a long way in the last 10-15 years, gaining a lot of sophistication in the way they interact with other countries. At the same time, they have succeeded in taking away some of Taiwan's diplomatic options, most recently about two weeks ago when Costa Rica switched diplomatic recognition from Taipei to Beijing.

Nevertheless, China is facing a lot of challenges internally as well. Maintaining energy supplies to keep GDP growth going, keeping the populace soothed, dealing with a large migrant population, a financial system that is probably untenable in the long run, what is possibly an irrational exuberance in the stock market, huge pressure for a successful Olympics, etc. and there is certainly some concern there.

I agree that the current U.S. administration is not paying enough attention to China's growing influence, despite a solid enough Asia policy team in place - they are too focused on the Middle East in general and in Asia on North Korea. It is unfortunate, but perhaps has not yet reached the level of "dangerous disregard" for China's rise, like some claim. There are, for example, two congressional commissions actively monitoring what China is up to.


I also feel that I need to add a few things in answer to the issue of Taiwan and to the popular image of China in the world.

First off, the Taiwan populace still overwhelmingly (80%) favors maintaining the status quo. Moreover, the number of people leaning towards independence (~24%) is larger than the number of people leaning towards unification (~15%). This is a recent trend, but more and more people in Taiwan consider themselves Taiwanese, not Chinese. Even within the KMT there is debate regarding the issue of unification, despite the official stance.

Secondly, there is some evidence that although China is generally seen in a more favorable light than the U.S., the global image of China is becoming tarnished as well. The Pew Global Attitudes Project actually released a study on this very issue today, and China has slipped significantly since 2005. In addition, many of China's neighbors, not just Taiwan, are very suspicious of and wary about China's expanding military might.

The China/Taiwan/US relationship is certainly important, for a myriad of reasons. What happens with the Taiwan/China question is more important to the U.S. than most people realize. Nevertheless, the complexities surrounding what the U.S. needs to do to maintain its leadership position in Asia, and how to deal with China's rise, are pretty mind boggling.
posted by gemmy at 4:41 PM on June 27, 2007

Since the world economy now uses China as it's manufacturing base any financial collapse there would most likely have huge and far reaching effects.

You know, I've wondered about that for a while, because it gets said a lot, but I don't think that makes it true.

A few months back, the Chinese stock market corrected itself by 9%. It was the biggest single day drop in the Chinese market in ten years (and not really surprising considering how fast it's been growing). The Australian and US stock markets were also affected, but it was much more watered down (2-3% drop), and they bounced back pretty quickly.

I've read that foreign investors are largely restricted from the Chinese markets, which implies that should the Chinese market crash severely, the Western world (at least the financial sectors) *should* be fairly insulated.

*should =| would
posted by kisch mokusch at 5:09 PM on June 27, 2007

Excellent, informative post Bletch. Thanks.

It's an important topic for the future of the planet.

China is sagely sowing diplomatic seeds on two natural resource saturated continents, Africa and Latin America.

telstar, enjoyed your anecdote about Peruvians being excited by The Last Emperor. There are certain situations in life like that, which can be portentous and I think you read the signs correctly.

Never having heard about the Chinese population in Cuba, I was amused when I first went to Chinese-Cuban restaurants in NYC 21 years ago. The Chinese waiters spoke Spanish and the dishes were East-West mixes. "In 1847 Chinese workers were brought in from Hong Kong, Macau, and Taiwan during the following decades to replace and / or work alongside African slaves."

"Estimates widely vary on the number of Chinese Descendants in Latin America but it is at least 1.4 million and likely much greater than this."
posted by nickyskye at 6:19 PM on June 27, 2007

Sangermaine,
At the macro level, it does seem like China is showing a lot of the same financial indicators that led to Japan's crash in the 90s. But I think if you examine the structure and reason's for China's growth, you'll find it's vastly different from Japan.

To start off, China's growth has largely been fueled by equity investment by small- and medium-sized companies as opposed to Japan's growth through debt funding of large companies. The debt funding was necessary because with Japan's small population and limited land, it had to build huge industries around technology- and capital-intensive operations: construction, high-end electronics, vehicles, machines, and precision tools. A huge amount of corporate value was tied up in the real estate, buildings, machines, and warehouses - expensive assets that Japanese banks had claim to.

In contrast, all of China's economy is built around the idea that everything can be done fast and cheap. A foreign entrepreneur can fly in with some blueprints, shop around the manufacturing plants, and get his first unit off the conveyor belt within a week for pennies. Or for a bit more money, he can rent a warehouse and staff it with his own workers. Either way, there is little involvement from banking institutions simply because they're not necessary. China's economic value isn't tied up in expensive machinery sitting on expensive land churning out expensive items, it's in the endless supply of workers making $0.10 an hour snapping together the 3 parts that make up your plastic toilet brush.

So why is China making investments everywhere and why are they be worried about inflation? Again, realize that everything comes down to China's leverage to make things fast and cheap. To sustain its growth, China needs energy and resources. If it can't meet the energy demands, energy costs go up, manufacturing costs go up, everyone takes their business to Southeast Asia, and overnight China is left with empty factories and 1.3 billion unemployed people. Unlike Japan, it can't just shift manufacturing elsewhere, that's all it has! And of course, if it can't keep foreign currency relatively high compared to its own, it also can't sell cost-competitive products. It needs to invest in other countries to develop their markets for China's goods. What good is churning out a million toilet brushes a year if there aren't markets to consume it?

And the arms sales to South America are just business. China has the technical expertise and manufacturing ability to produce arms so they feel it's in their right to sell them. Russia doesn't have either capabilities anymore and the US certainly won't sell them arms.

Right now, China is a lot more similar to post-war Japan than 80-90s Japan, albeit moving at a faster pace. If any country needs to worry about heading into a crash, it's South Korea, the country that has displaced Japan as the heavy industries giant.
posted by junesix at 6:20 PM on June 27, 2007

ps, Bletch, enjoyed your use of LOLCAT for the language of the post title.
posted by nickyskye at 7:46 PM on June 27, 2007

junesix,
Either way, there is little involvement from banking institutions simply because they're not necessary.
This is simply not true.

You say: To start off, China's growth has largely been fueled by equity investment by small- and medium-sized companies as opposed to Japan's growth through debt funding of large companies.

How do you think those small and medium-sized companies came about from the previous system of total state ownership? Loans from state banks, which continue to invest in and work with said companies.

And
A foreign entrepreneur can fly in with some blueprints, shop around the manufacturing plants, and get his first unit off the conveyor belt within a week for pennies. Or for a bit more money, he can rent a warehouse and staff it with his own workers.
Where did those factories and warehouses come from? Who is building them, building the infrastructure to support the businesses, financing the massive building booms along the east coast? Again, state-owned banks. I'm not sure why you think banks aren't involved in this situation, when they most certainly are.

You bring up some good points, but this is the heart of the matter, as [expletive deleted]'s friend and the article Pastabagel linked to note. Many bad loans have been given to businesses that shouldn't be getting them, creating an underlying weakness, which is how the situation is analogous to Japan's in the 80s. Yes, it's not exactly the same, but there are lessons to be learned. The bad investments can be ignored now because things are super-hot so it covers up the flaws, but if a bad break comes and debts are called, there's a problem. These bad loan practices, coupled with, fueled by, and fueling, irrational exuberance in the stock market and investing all create weaknesses that need to be addressed sooner or later.
posted by Sangermaine at 8:38 PM on June 27, 2007

"Last time we looked"

Last time we all looked, I blinked. Can I get a do-over?
posted by Eideteker at 7:49 AM on June 30, 2007