China–Latin America trade and investment relations have expanded rapidly in the past decade. China’s demand for Latin American natural resources is commonly understood to be the basis for this expanded economic relationship. There is no similar consensus, however, about the consequences of this burgeoning relationship. Many are optimistic about the possibility of continuing the rapid expansion of economic and political relations, but others worry about the health and sustainability of commodity-based trade and investment.
In his article ‘China-Latin America Relations: Long-Term Boon or Short-Term Boom?’, Dr. Matt Ferchen pinpoints the resultant dual narratives, some describing the China–Latin America relationship as complementary and others emphasizing dependency. The author demonstrates, however, that no assessment of the health and stability of the China–Latin America relationship can be complete without better understanding of Chinese commodity demand. Chinese demand for key Latin American commodities, including mineral resources such as iron ore, is based on a boom in domestic Chinese heavy industrial production, which in turn has fueled a global commodity boom of inputs to feed it. Chinese industrial (over)production has increased only as a result of stimulus and credit policies in the wake of the global financial crisis, causing concern inside and outside of China about capacity and asset bubbles.
The basis of China–Latin America trade and investment relations, therefore, the author emphasizes, is both narrower and more fragile than commonly understood. To align overly optimistic expectations about the health and sustainability of China–Latin America relations, both sides need to assess more realistically the many challenges to maintaining the boom in economic relations of the last decade.