General

Under the influence of the Federal Reserve's radical interest rate increase, the appreciation of the U.S. dollar, the conflict between Russia and Ukraine and other factors, Latin America's economy has suffered a serious impact and its growth prospects are bleak. According to the report recently released by the United Nations Economic Commission for Latin America and the Caribbean, this year's economic growth in Latin America and the Caribbean is expected to be only 2.7%, far below the 6.5% growth rate last year. Latin American countries should avoid going through the "lost decade" again. In addition to solving the political factors that affect economic and social stability at home and accelerating industrial upgrading, they should consider strengthening cooperation in multiple fields with other emerging markets, such as China, to find a way out in multiple difficulties.

At present, Latin American countries face two major challenges to strengthen cooperation with China:

On the one hand, the "New Monroe Doctrine" of the United States. The United States accused China's "the Belt and Road" initiative of plunging Latin American countries into a "debt trap", accused Russia of supporting the Venezuelan government, and tried to build a "supply chain alliance to China" in Latin American countries through "offshore outsourcing".

On the other hand, the industrial structure of China is highly similar to that of some Latin American countries, and the product homogenization competition is serious. Because some Latin American countries have implemented import substitution strategies, and constantly improved their industrialization level and manufacturing capacity of industrial products, the competition with similar products in China in the offshore market has become increasingly fierce. In addition, many Latin American countries have a low level of market opening and tend to implement trade protection policies. Some countries, such as Mexico, even frequently initiate anti-dumping investigations against China.

However, both near shore and offshore are difficult to "dock". In recent years, Latin American countries' international relations have gradually become diversified rather than "Americanized". This is because Latin American countries have reached a consensus that the region will not and cannot become a competitive place for world powers.

From this perspective, Latin American countries and China have a foundation of mutual benefit and mutual benefit, which has also made China Latin America relations steadily advance in recent years. At present, not only 21 Latin American countries have signed the "the Belt and Road" cooperation agreement with China, but China will continue to maintain its position as the second largest trade partner of Latin American countries in 2021. According to the data released by the General Administration of Customs of China, the total import and export volume of China Latin America international trade in 2021 will be about 451.591 billion dollars, an increase of 41.1% over 2020. Except Mexico, the largest international trade partner of Latin American countries is China; Moreover, since 2005, China has provided more than 140 billion US dollars in loans to Latin American countries, more than the World Bank and the Inter American Development Bank combined.

For the United States to blame China's investment and financing will make Latin American countries fall into a "debt trap", which is inconsistent with the actual situation. According to the data released by the World Bank, 60% of Latin American countries' public debt belongs to private creditors, 18% to international financial institutions, 16% to commercial banks and 6% to official bilateral debt (China is one of the largest bilateral debt countries in this category). It can be seen that the largest creditors of Latin American countries are not China, but private creditors and international financial institutions, accounting for 78%.

Most importantly, China's investment and financing in Latin American countries not only comply with business rules and local laws and regulations of Latin American countries, but also the loan interest rate of China's policy banks to Latin American countries is usually lower than that of the Export Import Bank of the United States, which to a greater extent makes up for the Latin American development fund gap. This shows that China's investment and financing not only did not let Latin American countries fall into the "debt trap", but also promoted the economic development of Latin American countries.

In order to avoid the recurrence of the tragedy of the "lost decade" in the future, Latin American countries will undoubtedly continue to further promote cooperation with emerging market countries such as China in various fields and explore new opportunities for development.

First, cooperation in new infrastructure. In recent years, especially the spread of the COVID-19, many Latin American countries have recognized the importance of new infrastructure, including the construction of 5G base stations, ultra-high voltage, intercity high-speed railway and urban rail transit, new energy vehicle charging piles, big data centers, industrial Internet, etc. They believe that if they can firmly grasp the development trend of new infrastructure and accelerate the construction of new intelligent consumption systems on this basis, Let "new infrastructure" and "new consumption" become the driving force of each other, which will certainly promote economic development.

Second, cooperation in the digital economy. The traditional industries in Latin America are gradually digitalizing, and the most obvious is the transformation from traditional retail to e-commerce. The penetration rate of e-commerce in Latin America in 2021 will be about 10%, ranking first in the world for three consecutive years. Its trading volume has reached 20 billion US dollars. It is estimated that by 2023, e-commerce sales will reach 42 billion US dollars. The cross-border e-commerce service platform and the digital economy industry represented by "Internet plus" will not only become a new growth point of Latin American countries in the future, but also a new growth point of China Latin America cooperation in the future.

Third, cooperation in the financial field. In addition to the direct financing provided by development financial institutions, the cooperation space between commercial banks in China and Latin America will also be wider, the cooperation form will be more flexible, and the cooperation content will be more cutting-edge. In particular, Latin American countries have taken the lead in the field of digital currency development in the world. For example, the Bahamas has become the first country in the world to officially use the digital currency of the central bank, the Eastern Caribbean Monetary Union has become the first monetary union in the world to use the digital currency of the central bank, and regional powers such as Brazil, Peru, Chile and Mexico are stepping up their efforts to introduce their own digital currencies. As an international financial center, Hong Kong, on the one hand, can actively tap and invest in financial technology related enterprises with development potential in Latin American countries; On the other hand, Latin American countries have also emerged various innovative and high-tech enterprises in recent years, so we can consider actively attracting these enterprises to list on the Hong Kong Stock Exchange.

Just as Chinese State Councilor and Foreign Minister Wang Yi once described China's relations with Latin American countries as "a bosom friend in the sea and a distant place like a neighbor", Chinese enterprises are actively exploring new opportunities for development in Latin American countries and promoting the development of international trade.