Must read article about Sino-Latin American relations

A must read article for anyone interested in Sino-Latin American relations was published today on SeekingAlpha’s website.  It is written by Erik Bethel, one of the four founders and CEO of Sino-Latin Capital.  I highly recommend it to anyone even mildly interested in the growth of Sino-Latin American relations.

Click here to access the full article direct from SeekingAlpha.

Travel to any country in Latin America and you will see the visible hand of China at work: a computer manufacturing plant in Mexico, a copper mine in Peru, a football stadium in Costa Rica. In the year 2007, the thought of China in Latin America would have appeared, at best, improbable. But in a three-year stretch, China signed free trade agreements with Chile, Peru and Costa Rica, inked billions of dollars worth of deals in oil and mining projects throughout the region, and supplanted the US as Brazil’s biggest trading partner. Once almost unseen in Latin America, China’s bilateral trade has risen from $12bn in 2000 to well over $150bn today.

Given the importance of its new Asian friend, Latin Americans are rolling out the red carpets to Chinese business delegations and jumping on planes not only to Beijing but also to Shanghai, Shenzhen, and Tianjin.

Rationale Behind Chinese Investments in Latin America [...]

Please visit SeekingAlpha to read the full article

China to create $5 billion fund to invest in Latin America

In line with China’s outbound investment strategies in Africa and Asia, China is now planning to create a $5 billion usd investment fund for Latin American investments.

The funds target investments will include, infrastructure (probably to help the Chinese get commodities out), agriculture, mining and energy.

Read more in Spanish from Argentinean DERF Agencia de Noticias.

Asia in Focus

APEC nations call for free trade

Nov 14 (REUTERS) – APEC leaders tackle climate change negotiations and economic integration, as Japanese Prime Minister Yukio Hatoyama stresses the need for free trade zone.
Penny Tweedie, Reuters

Obama seeks stronger links in Asia

Nov 14 (REUTERS) – United States President Barack Obama pushes for greater U.S. involvement in Asia, welcoming a “strong, prosperous” China.
Penny Tweedie, Reuters.

China to lead Somalia piracy fight

Nov 13 (REUTERS) – China will assume a leadership role in an international coalition fighting maritime piracy off Somalia, signaling its navy’s growing ambitions beyond Chinese waters.
Stefanie McIntyre reports.

China’s seemingly unending quest for resources continues

Sinopec Corp. announced today that it expects to incorporate parts of its overseas assets from its parent company Sinopec Group into its listed listed company in China.

Wang Xinhua, chief financial officer (CFO) of the oil firm  said “the good overseas assets of the Sinopec Group, the parent company of Sinopec Corp., would be injected into the listed company before the end of the year.”

CSA smell’s a bid to strengthen the traded shares, especially once Chinese investors jump on the bandwagon.

The assets in question are found in countries ranging from Russia, Australia and Canada.   Company data indicates that by the end of 2008, Sinopec’s overseas recoverable reserves reached 160 million tons.

According to this ChinaMining.org article Sinopec Groups oil equity production in 2008 was 9.01 million tons, accounting for up about one-third of Sinopec’s total output.  This year overseas oil equity output will rise to roughly, 17.40 million tons, almost double the previous year.

Qiu Xiaofeng, an analyst with Merchants Securities, reckon that the Sinopec Group’s overseas assets are able to generate about 11.2 billion yuan of profit or 0.13 yuan EPS, if the oil price stays at 75 US dollars/barrel.  On the news, Founder Securities maintains its rating of “overweight” on Sinopec Corp.  A-stock.

Here’s a look at the two year performance of this growing Chinese energy giant’s shares on the NYSE.

SHI - NYSE

The quest for energy resources — CNN Video

CNN Video — Militants agree to stop attacks. Nigeria’s oil minister tells CNN China and U.S. are vying for their oil.

Newswire: China

China sovereign wealth fund speeding up investment – mining a target – Mineweb

China’s sovereign wealth fund CIC has been speeding up its investment programme spending as much each month this year as in the whole of 2008 – and mining and energy are important targets.

China takes tough ore stance – The Shanghai Daily

China won’t necessarily follow iron ore contract price agreements set by steel mills in other nations, a senior industry official said, as it fired the first salvo in the upcoming annual negotiations for the 2010-2011 fiscal year.

“We will not insist on other countries taking China’s iron ore price as a reference, and we will also not blindly accept prices agreed to by other countries,” Shan said. His remarks are not new because China has not formally settled a contract price with iron ore majors for 2009-2010, but “China’s intentions are important” as it’s the biggest buyer of the steel making ingredient, investment bank UBS noted.

China’s economy expands by 8.9 pct in third quarter – chinamining.org

China’s economic growth accelerated to 8.9 percent year on year in the third quarter, and 7.7 percent year on year in the first nine months, the National Bureau of Statistics (NBS) said Thursday.

China May Pare Economic Stimulus to Control Inflation – Bloomberg

Chinese officials may be preparing to reduce monetary stimulus that propelled growth to 8.9 percent in the third quarter and led the world out of recession.

The economic expansion the government reported yesterday exceeded the 7.9 percent gain in the previous three months and pushed stocks lower in Asia and Europe on concern the central bank may tighten monetary policy. On the eve of the release, the cabinet signaled that inflation concern will play a greater role in setting policy.

China launches Nasdaq-style market to spur small businesses – Xinhua

China held a launching ceremony Friday for its Nasdaq-style market, ChiNext, in Shenzhen, Guangdong Province. The first batch of 28 selected firms will make their debut on Oct. 30 on the Shenzhen-based exchange.

World Bank discusses investing in Africa with China Investment Fund

BEIJING — World Bank President Robert Zoellick said he is talking to Chinese government officials about cooperating on investments in Africa, which he said could help boost the continent’s economic growth.

Mr. Zoellick told reporters Wednesday during a visit to the Chinese capital that China Investment Corp., the nation’s sovereign-wealth fund, has expressed interest in investing in the World Bank’s recently launched asset management company, which invests private-sector funds into places like sub-Saharan Africa and Latin America.

World Bank President Robert Zoellick
On Wed, stated he will press Group of 20
for more aid to developing countries [WSJ]

“CIC expressed interest in this as a commercial investment vehicle, but obviously there is no decision yet on their part,” Mr. Zoellick said. Other sovereign-wealth funds and pension funds are also interested in the new investment vehicle, he said, which manages some $4 billion in funds.

Click here to read J.R. Wu and Andrew Batson’s complete article at the WSJ

China's Policy Paper on Latin America and the Caribbean – MercoPress Analysis

[Source] — MercroPress

On November 5, 2008, the Chinese government released a policy paper on Latin America and the Caribbean, as it had previously done so for Europe in 2003 and for Africa in 2006.

Although it may not come as a huge surprise that Latin America is the most recent region for which China has formally spelled out its foreign policy position, the region has been historically perceived as being under the United States’ sphere of influence. Perhaps the importance of the Chinese policy paper lies in the timing of its release. The release of the paper deliberately coincided with the unfolding of the current financial crisis; this congruence of events has allowed China to expand its influence in this somewhat neglected region without attracting any lasting venom from the U.S. China’s policy paper formally evidences the importance of Latin America and the Caribbean as part of China’s growth plan for its long-term strategic interests. Most of all, this includes access to raw materials as well as a plethora of natural resources, the infiltration of new foreign markets, the reduction of diplomatic support for the Republic of Taiwan, and the strengthening of Beijing political standing on the global stage through strong alliances cemented with the developing world.
The policy paper’s general context

The policy paper explicitly states its main objective is to “clarify the goals of China’s policy in this region, outline the guiding principles for future cooperation […] and sustain the sound, steady and all-around growth of China’s relations with Latin America and the Caribbean.” In the economic realm, China expresses an interest in investing in energy, mineral resources, forestry, fishing and agriculture, areas important to expanding China’s productivity. Additionally, the Chinese government seems to show interest in infrastructure projects not directly related to its economy, albeit essential in the transportation of natural resources, and proposes to fund these projects in order to be perceived as a partner in development. Furthermore, China expresses its desire to increase military diplomacy and sale of equipment to the region. Although many of the report’s statements are merely rhetoric and general in scope, the paper helps formalize China’s economic, diplomatic and military ties with Latin America, which were first proposed by then President of China Jiang Zemin in 2001.

The policy paper was released against the backdrop of the current financial crisis and the corresponding economic hardships that have severely hit the U.S. and Europe. Its publication deliberately coincided with the emergency G-20 meeting to discuss the economic crisis that was about to take place in Washington. More importantly, it preceded Chinese President Hu Jintao’s visit to Peru for the November 2008 Asia-Pacific Economic Cooperation (APEC) summit, at which he presented China’s foreign policy towards Latin America. This timing of the paper’s release was especially important for the countries seeking to diversify their export markets and decrease their dependence on declining Foreign Direct Investment (FDI) from the US and Europe. With the vast foreign reserves accumulated by China –which totalled US $1.95 trillion in December 2008– the region had valid reasons to closely follow the summit’s developments.

To access this article in full you must register for MecroPress’s website.

Once you register, click here for a direct link to this article

Abundant mineral wealth in china

Two articles grabbed my attention from Chinamining.org this morning. They both relate to the fact China’s ethnic regions also happen to be home to a great proportion of the countries commodity and energy wealth.

You can click on the titles of each respective article to access the stories in full from Chinamining.org.

–> Tibet has copper ore reserves of 30 mln t, half of China’s total

Southwest China’s Tibet Autonomous Region has geological copper ore reserves of more than 30 million tons, accounting for over a half of the country’s total, according to the region’s geological prospecting bureau.

The bureau director said that Tibet is the largest region in China by its copper resources reserves. By 2008, 329 copper ore deposits had been found in the region, including 11 large deposits and six mid-size ones. Its Qulong copper ore mine, the largest one in Asia, is estimated to possess copper reserves of more than 10 million tons.

–> 1st Kunming Mining & Cooperation Forum (Sept 2-4, 2009)

Entering the 21st century, the global mining industry is writing a new chapter. It is an era of resource economy. Mining market becomes more open and capitalized. Mineral exploring as well as financing becomes more diversified.

Yunnan is rich in natural resources, known as “the Kingdom of non-ferrous metals”. More than 150 kinds of minerals have been proved there, accounting for 92.6% of Chinese total. Among the proved 92 minerals, 9 of them have the largest reserves in China and 21 of them are listed within top three. Mining as one of the five pillar industries in Yunnan plays an important role in the development of the local economy.

Earlier this summer another ethnic region grabbed world headlines. Does the region of Xinjiang ring any bells? Xinjiang is home to a large number of China’s ethnic Muslims, is culturally quite similar to other republics in central Asia and is often referred to as East Turkestan. Xinjiang is also on track to become China’s most important oil and gas producing region.

This article, “Xinjiang’s oil and gas equivalent ranks first in China” is from little over a year ago (July 2008), asserts that Xinjiang has already passed Daqing (China’s other oil producing region) as the number region in oil and gas output.

As one hand seizes development, the other taps into the potential to allow Xinjiang’s oil output to soar. The latest statistics show that Xinjiang’s annual oil and gas equivalent output has already exceeded that in Daqing and ranks the first in the country.

The third national resources evaluation shows that: Xinjiang’s total oil and natural gas resource reserves exceeded 30 billion tons. Although it is rich in resources, Xinjiang still requires development and a reduction in consumption. Recently, Xinjiang has been producing 75,000 tons of crude oil daily, occupying 14.4 percent of the country’s daily crude oil output. In 2007, Xinjiang’s oil and gas equivalent reached 44.94 million tons, and ranked at the top.

In all likelihood, the development of commodity sectors in these regions will be controlled by Beijing…not locals. What industries can these regions develop as to diversify their economic development from commodity sector led growth?

Yunnan and Tibet have great potential for becoming tourist meccas in China. Yunnan, the less politically sensitive of the two, has already emerged as one of China’s most popular tourist destinations.

Furthermore, Yunnan’s strategic location in SE Asia put it in a good place to be at the center of the future growth of trade and exchange between China and the countries of Vietnam, Myanmar and Laos.

[Map courtesy of leafgovso.co.uk]

Tibetan tourism is growing as well, but remains inhibited by the sporadic changing of restrictions and the need to acquire a special internal visa or permission to visit.

When analyzing this situation from a the perspective of the people in the Chinese government determining domestic policy, China can not and will not simply let three of its most resource rich regions control the development their natural resource industries.

Sad as it may be for some members of the minority groups in these regions, one thing is sure–Xinjiang, Tibet and Yunnan are all going to remain integral pieces of China for a long time and be subject to increased inflows of ethnic Han Chinese seeking economic opportunities.

Let me clearly state, the opinions expressed in this analysis not reflect how I the author, (Bennett A. Reiss) feel on a personal level. Allow me to try to put things into perspective with two analogies which I feel help explain the Chinese point of view.

Canada is full of resources from top to bottom. I am by no means an expert, but I highly doubt the Eskimo and Native American populations have much say about development of Canadian mining and energy companies in their ancestral territories.

Likewise, a more mainstream analogy might be the US in Iraq. To the “logic” driven Chinese bureaucrat, China is far more justified in their domestic policy towards these resource rich regions than the United States is in Iraq. On the surface the US is subjugating a foreign population in a country half way across the globe from its own territory. China in its own official opinion is not subjecting anyone, and to further add to the Chinese argument, these regions have been a part of China for centuries if not thousands of years.

Even if your feelings on the war in Iraq produce other rationalizations for the US invasion (outside of oil), try to justify this to a country with over 1.4 billion people to feed and improve the lives of.

I welcome debate in this area to any readers who would like to discuss this topic further.

Newswire: China and Commodities in focus

China stops expansion projects in steel industry for three years – Xinhua

China’s Ministry of Industry and Information Technology (MIIT) Thursday announced a three-year moratorium on approvals of new expansion-related proposals in the iron and steel industry, as the government pledges to eliminate outdated capacity.

CISA stance hurts small steel mills – China Daily

China’s top negotiators in the bitter and protracted row over the price of iron ore seem destined never to agree – risking a loss of face that will raise questions about whether they are up to the job and who it is they are actually representing.

Their apparent refusal to compromise is damaging the competitiveness of smaller domestic steel mills, forcing them to buy from their larger counterparts, say analysts. The bigger firms have been content to pay whatever the spot price is for ore and pass on the premiums.

CNPC to speed up oil assets buy plan - Xiao Wan of eChinaCities

China National Petroleum Corp (CNPC), the country’s largest oil and gas producer, will speed up overseas acquisitions in regions such as Africa and South America this year, in a bid to boost China’s quest for energy security.

Coal mines to merge in new plan – China Daily

A large-scale restructuring of the coal industry in China’s major coal-producing province of Shanxi, starting at the end of this month, will reduce accidents and improve efficiency by shutting down small coal mines, officials said.

“The restructuring this time is the largest after years of adjusting the coal industry’s structure,” Miao Huanli, planning section director of Shanxi provincial coal bureau, said yesterday.