Latin America is China’s economic new frontier. They call their strategy “win-win”, or also “South-South”: developing countries establish relations independent of countries of the Global North, and the foremost of these developing nations then acts as a leader for the rest. The political implications of this strategy are evident, according to Marco Wong, director of the editorial magazine “It’s China,” and former CEO of several Chinese and Italian companies operating in Latin America.
“China is applying in Latin America the same strategy that is used in Africa. Given the price and quality of the majority of Chinese goods, its much easier to enter deregulated and unprotected Latin American markets than the markets of developed countries.” China has a strategic interest, as a state-capitalist power, in the natural resources available in Latin American countries. “China is neither capitalist nor communist, but state participation in the private sector is very prominent. State support is most influential in terms of access to credit, where banks are almost obligated to help clients expand overseas. In addition to this, it is necessary to consider that China’s banking system is not yet fully evolved,” continues Wong, "se they actually have only Chinese clients".
“Countries with an advanced industrial system usually tend towards protectionism. Take Italy, for example. Trenitalia is a quasi-monopoly with its own know-how and mission and when it buys, it prefers to buy Italian industries.” So entering the Latin American markets will take China some time.
China’s momentous progress is fruit of a winning strategy: foreign investment and the creation of localized progress that accompanies foreign partners. Now, the system has been reversed, and, thanks to massive government aid in terms of infrastructure (Beijing implemented massive stimulus packages in the wake of the financial crisis), the scales are starting to tip in favor of the Chinese.
“China is creating alternatives, it is offering more choice.”
On the other hand, global competition on China’s scale doesn’t really exist.
Regarding the political implications: Chinese companies are not very savvy and usually make some political mistakes – China’s economic power is young, and so are its diplomatic skills. “Perhaps a country with a colonial past would have known how to handle tricky situations [such as a Chinese blunder in Costa Rica that made news] in emerging countries. The problem remains that in China, managers are bred to be exported, often being sent to foreign countries solely on the basis of their knowledge of the language. This development occurs at such a rapid rate that there is no time to create an adequate managerial class.”
And so the Chinese revert to their time-tested method of “guanxi,” or networking relations. It’s no secret that almost all business in China is done over dinner. “When I worked in Italy for a Chinese company, my boss constantly asked me whether or not I had brought a certain client out to dinner yet. It seemed inconceivable to him that a business relation could be established without having taken the client out to dinner at least twelve times.”
The strong relationship between politics and economy is also due to another Chinese peculiarity. “In China, there has always been a strong sense of cultural hierarchy. The economy has always been at the helm of large volumes, which implies a certain centralization of control. Since this has always worked for them, they have decided to export this strategy.” For example, ready-made railway lines for an entire Latin American country.
translated by Giovanni Zenati