China: Don’t tweet for me, Argentina
Argentina’s President Cristina Fernandez has once again made headlines, and this time it was her insensitive remarks on twitter about Chinese people’s alleged difficulties with pronouncing certain letters.
Anyone with a rudimentary familiarity with Asian cultures would be well aware of the importance of “face” and “honour”, and the necessity for guests to pay the utmost respect to their hosts, especially if the country in question is China.
A few months earlier, her long diatribe at a special session of the United Nations Security Council came at the expense of annoying world leaders, principally US President Barack Obama, who, as the chair of session, had to remind his colleagues that they have to “make sure [they're] respectful of the time constraints”. The Argentinean leader has also come under criticism for her often unpredictable bombastat home, stirring one controversy after the other.
World’s economic engine
With charismatic leaders such as “Lula” da Silva of Brazil and Hugo Chavez of Venezuela out of the political picture, the Argentinean leader has largely assumed the mantle of populist-leftist politics in Latin America. But her diplomatic gaffe, which attracted spirited responses across China’s vibrant and increasingly nationalistic virtual public sphere, tends to hide a more fundamental transformation in global politics; the emergence of China as an indispensable economic partner to countries across the world.
For more than a decade, China’s voracious appetite for raw materials has turbocharged long-sputtering economies across Latin America, Africa, and Asia. China became a pivot of economic prosperity for much of the developing world.
However, as China’s appetite subsided, and the global demand for oil and basic commodities tanked, many emerging economies have confronted a credit crunch, which has, in turn, made the latter even more dependent on Chinese largesse. Beijing’s modern day tributary system has far exceeded China’s ancient sphere of influence in East Asia.
Fernandez, similar to many world leaders who have visited China in recent months, was on an urgent mission to invite greater Chinese investments in Argentina, which has not been in a great economic shape recently. Since the early-2000s, Argentina has jumped from one debt crisis into another, with the latest credit default episode taking place in mid-2014.
China to the Rescue
During her three-day visit to Beijing, Fernandez vigorously sought Chinese hand in the realm of energy security, manufacturing, and resource extraction.
The Argentinean leader also asked for expanded Chinese investments in the domestic car and telecommunications industry, while offering access to mineral resources…
The Argentinean leader asked for Chinese assistance in nuclear energy supply as well as the construction of the Nestor Kirchner and Jorge Cepernic hydroelectric dams in Argentina. Amid a looming energy crisis in the Latin American country, the aim of the visit was to solicit maximum Chinese financial and technological assistance for the diversification of Argentina’s energy resources.
The Argentinean leader also asked for expanded Chinese investments in the domestic car and telecommunications industry, while offering access to mineral resources such as potassium and lithium.
The previous month, Venezuela’s embattled President Nicolas Maduro had to make a similar journey to Beijing, seeking an economic lifeline from China. With the collapse of oil prices in recent months, Venezuela’s heavily oil-dependent economy has hit rock-bottom, with the Maduro administration desperately needing as much as $20bn to cover expenses for the current fiscal year.
Since 2007, Venezuela has borrowed up to $51bn from China, making China the single most important creditor to the Latin American country. After years of mismanagement and runaway state expenditures, Venezuela has faced a precipitous depreciation in its currency, which has sparked a collapse in imports and a massive shortfall in essential commodities.
Smaller Latin American countries such as Ecuador, another bastion of populist-leftist politics, have become even more dependent on China, which, in 2013, covered up to 60 percent of Ecuador’s finances — in exchange for nearly 90 percent of the latter’s oil. In 2010, China’s financial assistance to Latin America dwarfed that of the World Bank, Inter-American Development Bank, and US Export-Import Bank combined.
Perils of wealth
Since 2001, China has pledged more than $600bn in aid and development assistance to developing countries. Reeling from western sanctions over the Ukrainian crisis, even Russian oil companies have had to rely on $30bn in Chinese financing. In recent months, China has pledged another $140bn to a whole host of global and regional development and financing institutions, which are set to compete with the western-dominated World Bank and the International Monetary Fund.
Since 2008, China’s financial reserves have more than doubled, hitting the $4 trillion mark. Multibillion loans allow China to deepen its grip on resource-rich countries, as well as diversify its assets by exploring long-term investments across the globe. With Chinese yuan becoming the world’s fifth most traded currency, Beijing is setting its eye on challenging global currencies such as the euro and yen in the coming decades.
But China’s supposedly no-strings-attached lending practises have created a moral hazard, discouraging reform and perpetuating a cycle of economic mismanagement and semi-autocratic governance in the global peripheries. Caracas is yet to pay back $23bn in debt to China.
Decreased oil prices will make this even more difficult. No wonder Maduro struggled to secure any huge loan from China during his latest visit. Over the coming years, China will be increasingly under pressure to attach more conditions to its lending practises lest it ends up with a bunch of bad debtors and billions of sunk cost.
Yet, this also means that China will increasingly act like traditional creditors such as the World Bank.
Richard Javad Heydarian is a specialist on Asian geopolitical/economic affairs and author of “How Capitalism Failed the Arab World: The Economic Roots and Precarious Future of the Middle East Uprisings”.
The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial policy.