Publication: China Brief Volume: 4 Issue: 23

Call it “Operation American Backyard.” Hu Jintao’s first trip to Latin America as president is emblematic of the fact that China’s power projection has reached the furthest corners of the world – including Latin America, the United States’ largely neglected backyard.

Hu’s fortnight-long journey involves much more than the Chinese supremo’s participation in the annual Asia-Pacific Economic Cooperation forum in Santiago, Chile – more than even the much-awaited summit last Friday between Hu and President George W. Bush on the sidelines of the APEC Head of States conclave. Firstly, Hu’s historic Latin American tour, which included Brazil, Argentina and Cuba, underscores the fact that “energy diplomacy” has become top priority for Chinese foreign and security policy in the wake of the spike in oil prices and continued instability in the Middle East.

Secondly, the remarkable trip made by Hu not long after he became China’s commander-in-chief last September has confirmed that Chinese foreign policy has entered a new era of activism, including a more assertive role in far-flung areas such as Africa and Latin America. Some diplomatic analysts have even seen in the leaps-and-bounds developments in Sino-Latin American ties the beginnings of the “Sinicization of Latin America.” It is true, of course, that no Chinese cadre would say openly that China is taking on the U.S. in its backyard. Yet the diplomatic analysts view the some 400 agreements and business deals notched up by Hu and his entourage of businessmen as pretty much amounting to a challenge to the 1823 Monroe Doctrine, which implies that Central and Latin America lie within Washington’s “sphere of influence.”

A Beijing source close to the Chinese diplomatic establishment said owing to the huge gap between the military might of China and the U.S., the Hu leadership would continue to steer clear of direct confrontation with Washington. However, he said advisers to the Hu leadership were convinced that in terms of the scramble for oil and other resources, competition between major powers such as China, the U.S., Japan and India has already reached fever pitch. “Before the September 11, 2001 terrorist attacks, Bush had characterized the U.S. and China as strategic competitors,” the source added. “While Sino-U.S. rivalry has been sidetracked thanks to their cooperation in fighting terrorism, experts in both Beijing and Washington realize that the two countries are bound to intensify their jockeying for position in the field of securing scarce resources.”

On the front of energy and resources, Latin America presents a bonanza for China in the areas of oil and gas, iron ore, agriculture produce such as beef and soya bean, and other items. The “all-weather strategic partnership” that Hu was able to cement with Brazil last week was especially noteworthy. The Brazil state oil firm, Petrobras, expected that China would this year become the third-leading destination of Brazilian crude exports, with shipments of about 50,000 barrels per day. At the same time, the Chinese state oil company Sinopec invested $1 billion in a joint venture with Petrobas for the construction of a gas pipeline linking south to northeast Brazil. Other deals the Chinese have recently signed included iron ore shipments from Companhia Vale do Rio Doce (CVRD), one of the world’s largest mining concerns, for Shanghai’s famous Baoshan Steel Mill.

China’s influence in the entire region has expanded owing to a dizzying array of new investments in not only mines and oilfields, but infrastructure and transport. Cumulative capital outlay has exceeded $4 billion. Last year alone, Chinese state-owned enterprises (SOEs) pumped $1.04 billion into the region, accounting for 36.5% of Latin America’s foreign direct investment (FDI). Yet this figure has been dwarfed by what Hu and his delegation of state entrepreneurs pledged last week. The Chinese vowed to plough in $100 billion in the coming ten years. For instance, in Argentina alone, the SOEs are due to invest $19.7 billion in the coming decade in mines, railroads, and other infrastructure projects.

In his tightly packed tour, Hu also flashed the “solidarity with the developing world” card. In addresses to the parliaments of Brazil and Argentina, the Chinese President stressed that his country would “forever stay on the side of developing countries.” Hu noted that China would spare no effort to help build a multi-polar world order – “a democratic international order as well as a multiple [approach] to development models.” This seemed a not-so-subtle dig at the unilateralism, if not “neo-imperialism,” supposedly pursued by the Bush administration.

More significantly, China’s global clout is such that the Hu leadership is in a position to back up its rhetoric about helping Latin America with concrete economic and diplomatic gestures. Apart from FDI, Beijing has pledged to do what it can to promote the international status of large countries such as Brazil. Thus, China has lent support to Brazil’s bid for a place in an expanded UN Security Council. Brazil’s competitors include Japan – whose candidacy is supported by the U.S. – and India. Again, the subtext of the special relationship that Beijing has been trying to forge with Brasilia is that if Brazil feels that its economic and political aspirations have been adversely affected by the giant shadow cast by the U.S., China is ready to extend a helping hand.

In return for its largesse, Beijing will have assured supplies of oil and gas, minerals ranging from gold to nickel, as well as agricultural produce. This is despite the much longer distance involved in shipping over the goods to China. Moreover, Latin American countries including Brazil, Argentina, Chile and Peru last week agreed to recognize China’s “full market economy status” (FMES). So far, some two dozen countries have accepted the Middle Kingdom’s FMES, and Beijing is poised to put more pressure on the European Union to do the same. Recognition of this status would enable China to better defend itself against charges of dumping that may be raised by its trading partners.

Beijing’s much higher profile in this far-off region is also set to yield a Taiwan-related bonus. The Hu leadership is convinced that as China’s influence grows, it will be well-positioned to persuade practically all Central and Latin American countries to dump Taiwan. Already, the 13 Central and Latin American countries that still recognize Taipei are facing intense pressure from their businessmen, who are barred from the lucrative China market because of the Taiwan factor. The next country in this region that may switch recognition from Taiwan to China may be El Salvador. Recently, the El Salvador Foreign Minister Francisco Lainez admitted that his country was considering establishing diplomatic links with China owing to lobbying by the local business community that was anxious to profit from the China market.

Over the long term, China’s Latin-American offensive could have a negative impact on Sino-U.S. relations. This is despite the fact that the Bush-Hu tête-à-tête last week was generally successful. Hu said after the brief meeting that he appreciated Washington’s one-China stance – and vowed to work closer with the Bush White House in the coming four years to promote a “constructive, cooperative relationship” with the U.S. And Bush praised Chinese cooperation in the global war against terrorism, particularly Beijing’s contribution to a possible resolution of the North Korean nuclear crisis.

Hu’s whirlwind tour of Brazil, Argentina, Chile and Cuba the past week or so, however, has illustrated the extent to which Beijing can exploit the less-than-cozy relations between the U.S. and Latin America to establish major economic and energy footholds in Washington’s backyard. The Bush White House certainly does not want to see Beijing boosting its influence in countries such as Venezuela and Cuba, whose leaderships have thumbed their nose at Washington. Beijing’s apparent success in securing oil supplies from Venezuela could undercut that country’s crude exports to the U.S. And ever more intimate economic cooperation between China and Cuba will hurt the ability of the Bush administration to put pressure on the Fidel Castro regime through the imposition of sanctions. Indeed, in his meeting with a wheelchair-bound Castro earlier this week, Hu rhapsodized over the fact that China and Cuba were “not only friends, but brothers.” The Chinese president then vowed to boost economic and technological aid to the pariah state.