Do not quote without permission.
A new donor in Latin America: Chinese banks and the end of the
Washington Consensus
VADELL, Javier
NEVES, Pedro
FLACSO/ISA
Buenos Aires
2014
1
Introduction
Less than a decade nearly 50 billion dollars were directed from China to the
Venezuelan government to ensure access to oil. Such capital guaranteed the Venezuelan
government conditions balance a welfare policy driven by oil capital, and infrastructure
projects. These steps guide the a new sentence, which puts the Chinese Bank o Development
(CBD) as the largest bank in the International Financial System, making the center of Chinese
going out policy and its internal growth in the last 10 years.
This bank is part of the system of centralized banks in China. CBD manage projects
and acquisitions that would enable greater profitability and credit expansion from the Bank
itself. According to Sanderson and Forysthe (2013), China's financial structure remains
centralized, while the western financial sector, involved in the 2008 crisis, prevails as a
private structure. In these terms, the Chinese financial scenario exposes featured on its own
merits, which deals directly with the historical process of political and economic
transformations within China. In this sense, those economic transformations has become a
constitution of a specific element that requires attention that nourish research and sui generis
understandings about the condition of China as an emerging middle power.
The question is whether this process of strengthening the new network financial power
could be an overcoming of neoliberalism ideological paradigm or, instead, a new global
manifestation of a passive revolution after 2008 crises, anchored in a reformatted aggiornato
neoliberalism hegemonic governance. This paper will discuss the intervention of Chinese
Development Bank (CDB) in Latin American as a new financial option for developing
countries in a post WC context (VADELL, RAMOS, NEVES, 2014 no prelo). In this new
scenario, CDB is becoming the more important investor in the region surpassing traditional
western investment banks (BRESLIN, 2013). The Chinese Bank does not impose political or
institutional conditions on borrower governments (string attached POLITICAL conditions),
but carries stringent economic terms related to equipment purchases and oil-mineral sale
agreement. This financial network has crucial political implications for Latin American
domestic development models, which we intend to discuss.
1 - Chinese development
Concerning the long process of development in China, Arrighi (2008) suggests that
multiple points, in addition to attracting investment, are significant. Thus, the high quality of
this labor reserve, added to the culture and the Chinese revolution which is combined with the
2
expansion of resources and high demand for the productive mobilization in China. In addition
to formation of a demand for its own direct consumption of durable goods. Thus, capital is
not the main point, but the conditions found by this developed into a given space.
Nevertheless, the economic reforms in pursuit of development have earned a first step
from the controlled opening in the period of Deng Xiaoping. Despite the opening process,
control or maintenance of autonomy, as in the pricing policy was a key to the ongoing process
of growth of GDP, as production capacity and also the attraction of foreign direct
investments. The open market process in China occurred concomitant with the emergence of
neoliberalism in the Western Countries (HARVEY, 2005)1. China has not adhered blindly to
all neoliberal postulates and, so, maintained its policy coordination to strengthen the state in
the process of attraction of foreign direct investment, privatization and 'liberalization'.
Besides, this process was accompanied by a selective state-induced competition
2
.
(NAUGHTON, 2010) In those terms, while Thatcher stated that there would be no alternative,
but a neoliberal model of development in order to modernize, the Chinese Communist Party
(CCP) was oriented by a strong presence of the sate guided
by the idea of
Asian
development model.
The first Deng’s reform gained control of the agricultural surplus. Since the 1978s
land reform, land were no longer 'state property' and passed to state control through the
Household Responsibility System. In this process, the workers left the control of land, but not
abandoned their villages, but without the direct dispossession as the British enclosures. As
noted by Medeiros (1997), control over the supply of labor in special areas was essential for
the subsequent productive and consumptive transition, since originally form the expansion of
the primary sector. From 1983 onwards, China sought the production of durable consumer
goods, and from the mid-1990s, extends to greater production of capital goods. Arrighi (2008)
warns that only in 1983 the political control of the labor force in specific areas slowed, doing
justice to a Ricardian liberal concern, in which productive assets should be free to move
between sectors, because potentiate the process of specialization that before, Adam Smith had
defined as a central point for the production of wealth. In those terms, these workers were to
nearby cities, such as Townships and Villages Enterprise (TVES).
1
Neoliberalism is simultaneously an ideological paradigm, a process of global transformation that expand new
‘geographies’ aiming at the capitalist accumulation (Harvey 2005) and a specific form of globalisation (Scholte
2005).
2
Despite induce competition, the consideration of the State stood at strengthening its production hall. As the
author puts: "More than elsewhere, here the government intervenes directly to foster the collaboration of
universities, enterprises, and state banks in the development of information technology" (Arrighi 2008, p.357).
3
This process of mobility of labor force and upgrading of consumption strengthen the
urban society (Cities) changed the structure of Chinese Society and conditioned the
development process and the power of the Communist Party. As a result, there was a greater
fiscal decentralization in favor of local governments, which contributed to the development in
proximity to the central intent, but with greater freedom to merge the reallocation of
agricultural surplus aligned to the surplus of the labor force for investment in the production
of durable goods.
In such a case, according to Arrighi, despite the mobility of labor (production factor)
relocating the interest on land, there is no accumulation by dispossession. But there was a
relative increase of the space through which the worker has migrated. This even leaves the
countryside, but the local market is reestablished aiming to strengthen some social areas to
promote a positive circle of purchasing and internal growth, where are the distributional
reforms. Those reforms can be conceived as the counterpart of the State in specific economic
sectors. In those terms, there was an increase in the deficit of the state, however there was also
an increase in exports at a rate of 17% per year in the mid-1980s, which sets up a picture of
the relative openness of the economy in direct relation between exp / imp on GDP, indicating
an increase of 10% in 1978; to 17% in 1984; and 44% in 1995. Alongside a increasing
openness in the commercial stage, the attraction of FDI has drive the process of opening,
indicating, by the mid-1990s, the incursion of 111Bi dollars for joint ventures focused mostly
to the domestic consumption which gradually was structured (Medeiros, 1997).
Despite reforms materials, the characteristics of Chinese culture also has its weight.
The implemented actions did not occur in a blank area without a specific social background
(Morais, 2011). According to Arrighi, two sites echo this scenario: First, these reforms do not
suggest the end of socialism, because that still operates through the actions of the Party; and,
according to the cultural reform, the Chinese from the countryside has more autonomy,
including in dialogue with the government on particular issues, such as corruption. As well,
the Chinese Revolution was the driving force of the whole procedure later in their own
development, since the collectivization of land to the green revolution with implements of
techniques of production to induce stable growth. As well, from the 1970s China maintains an
upcoming economic growth of 9.5% per year (BI, 2010), as illustrated in the figures that
follow, also indicating the variation above the economic growth of all nations line.
4
Figure I
Fonte: Bi (2010)
The images displayed reinforce the join condition of Chinese development. Its
uniqueness transcends the analytical application of developmental models already worked
on3. On the new contours of the same historical development, some institutional changes were
fundamental to China continue to grow and expand the commercial and investments networks
abroad. According to Vadell (2010, p.), three key points show to understand going out China:
"relations between the PRC and Latin America consist of obvious efforts from China to push
forward three specific foreign policy goals. 1) raw materials acquisition, 2) a consumer
market for its products; 3) diplomatic support for its position toward Taiwan".
2 - Understanding the emergence
The process of developing Chinese bolstered a distinct condition for the current China.
China is an actor who problematizes the emergence creating challenges to various analysis
and theoretical models. In those terms, it is stated that the condition of China's emerging
middle power is sui generis, not on the basis of the explanatory limits of the efforts already
made, but due to the political and economic framework that only China has performed. Better
clarifying this argument, Narlikar (2010) strives to understand the condition of emergency in
3
The models can then be shown, from the years 1960/70, the contrast between the models: "the introvert, the
primary exporter or even national development, typical of Latin American economies and marked by state
activism and the promotion of industrialization through protection of domestic markets; and extraverted or
promotion of exports, adopted by Asian economies, characterized by increased "neutrality" of trade policies and,
therefore, presumably less interventionist "(Cunha, 2008, p.2)
5
the broad sense. In his effort, is constructed as an analysis of the emergence standards of
behavior of those states considered new powers. In those terms, such powers would use a mix
of challenging behavior and combining the existing order according to the dichotomy between
domestic and external policies of each state. The actions of such actors are allocated in
integrative and distributive strategies. The first agrees with the systemic order founding
common solutions from the perspective of global commons; The actions of such actors are
allocated in integrative and distributive strategies. the second presents revisionist character
against the order, at one stage with a threat and penalties. Another concern raised relates to
political negotiation process from the emergency, including this condition in a composite
scale for 'fragile' states and the great powers.
However, Narlikar (2010) certainly identifies systemic updates that mark the new
arrangement in which the 'emerging middle' are inserted. Becomes clear also that the
traditional stages of international cooperation remains, such as the World Bank, International
Monetary Fund, the Security Council of the United Nations, G8 / 7, World Trade
Organization, the Organization for Growth and Development, among others. When new
structures that link new strategies, follows at least the G20 (finance, agriculture), which
exposes the collusion of specific groups with mobility within the area of interest for
cooperation.
Huelz (2010) and Jordaan (2003) are also efforts to better understand international
relations from the behavior and integration of emerging middle powers in international
politics. Such works meet a core function: to distinguish between the traditional middle
States, and current middle States through its international political relations. Accordingly, an
initial question may be raised (though answered only on the development of the work) where
China fits into this historical, behavioral or theoretical-methodological division alerted in
Narlikar? Huelz (2010) and Jordaan (2003) are also efforts to better understand international
relations from the behavior and integration of emerging middle powers in international
politics. Such works meet a core function: to distinguish between the traditional middle
States, and current middle States through its international political relations. Accordingly, an
initial question may be raised (though answered only on the development of the work) where
China fits into this historical division theoretical-methodological, or behavioral alerted by
Narlikar?
Huelz (2010) reveals three interpretive waves that help in the identification of state
power into distinct variables. Initially was an attempt to track the structural and / or statistical
allocate on the emerging middle power condition; others, such as a critical relationship
6
constituted the relation / behavioral abstraction; Following in the behavioral framework,
another sum of works bring a qualitative reading on the ability of Foreign Policy elements in
face to an international political economic framework.
Huelz (2010), after exposure of traditional schools, asserts that these nurtured a rigid
framework of variables to understand the traditional middle powers. However, there would be
a renewal of concepts and training practices across of the new emerging powers in the
international system. The big win with these adaptations is the understanding of movement
(updates) that the emerging term combines. In this sense, there is a separation between
traditional middle powers, which were designed and created in another time and means; and
the new middle powers (emerging). This separation helps to clarify the variations, and enables
a safer theorizing on the subject, but does not include all the variables of a single actor.
Resuming the hypothesis launched by Huelz, first the emerging powers has a strong
international identity, based on a clear vision of world order beyond the current and future
understandings; Still, the emerging powers are located in different structural contexts of
industrialized economies, but with development capabilities that allow some degree of
influence in the global economy; The author also refers that the conduct of rising powers tend
to be influenced by a distinct global agenda of traditional middle powers, which indicates that
the emerging powers do not necessarily emphasize engaging in thematic areas that require a
sense of morality involving responsibility within a international community; emerging middle
powers also have presented a behavior and attempts at reforming character, but not
revisionist. Finally, the emerging middle powers are also regional powers.
Some warnings are still required to read the initial effort on Huelz. Along this line,
Buzam (2011) points out a critical anchored in the Chinese empirical example. Therefore, the
basis materials / social and domestic-international, politically and as a potential hegemonic
model, China would present initially, the limitations of the emerging. According to the author,
despite the well-established equipment capacity, China is also deeply dependent on the
growth of the states that compose their political alliance, besides presenting a historical trend
of immersion in the region, besides not to seek a construction of soft power, or consensual
political broadening its modus vivendi4.
In anticipation of an interpretation about China's rise through the process of going out
(which can be understood from the internationalization of its financial institutions and their
4
Those ideas are close to historical accounts of Forysthe and Sanderson (2013) about the Chinese political
securitization of energy resources, which, for Kotschwar, Moran and Muir (2012), as well as favoring such
securitization consumption of such resources also implies in a balanced growth between / shared with the
cooperative states.
7
companies), there is, in a sense, a concomitant path that must be clarified which is nourished
by both theoretical abstractions, but mainly consists of the specificities of each mode of social
production. In the Chinese case, the collusion between Party / State and Market best
reinforces the argument set out here. To this end, the following pages try to warn the pillars of
Chinese internationalization, illustrating the investment in the South and, later, building a
brief economic and political vision in this new historical fact.
3 - China Investments
The Chinese emergency, associated with its process of going out or go global, guide to
numerous questions about their impacts on the economy as well as in international politics.
China, since 2005, has been released with more fervor on the international scene with
diversified investments according to their area of incursion (see table). In this sense, some
doubts began to gain ground. So, what are the Chinese interests? How to understand the
expansion of the Chinese capital? Is there any reliable interpretation about the data that
illustrate the great amount of Chinese capital? What is the impact for each region within this
new spiral development besides the lines of IFIs traditional? Faced with such questions, some
issues are beginning to confirm.
In this context, it is perceived that the actions of the China Development Bank (CDB)
and the China Ex-Im Bank has surpassed the Traditional Financial Institutions (IFI's); within
Latin America Countries these same banks have offered loans in distinct features from other
regions, due to the search for raw materials and energy. Yet, There is not, at first, an overlap
or competition between Chinese banks and Western banks, such as the IDB and World Bank;
About the conditionalities, China innovates across traditional sources for not linking political
assumptions and fixed ideational values and does not require a development model
(VADELL, 2012, 2013; MELLOR, 2013). Regarding the materiality of their actions,
approximately 500 billions of U.S. dollars were invested directly by multiple Chinese actors,
in a sum of bureaucratic state with Party Banks and State Owned Enterprises.
8
CHART 1
Chinese Outward investment since
2005: two views($ billions)
China Global
Year
Investment Tracker
2005
10.1
2006
19.8
2007
30.4
2008
58.4
2009
55.9
2010
68.1
2011
74.2
2012
76.3
2013
84.5
Total
478.7
Fonte: adaptado de Scissors (2014)
A starting point for such questions requires an interpretation of Chinese five-year
plans (Planos Quinquenais), in accordance with Myers and Yang (2012). These plans indicate
the intentions of the state and, therefore, the potential politics that may be linked to Chinese
demands. The penultimate plan, in 2006, and the last plan, in 2011, indicate, at first, a
Chinese concern over, first, energy resources and commodities, and later, the quest for social
planning with purpose of boosting domestic consumption on seeking an equilibrium of
national income. Therefore, it can be said that China seeks a growth associated directly with a
balance of investment and consumption which leads the state to transnationalization of capital
associated with the rise of social welfare. All this process illustrates the ongoing economic
and Chinese political engineering, which, by Arrighi (2008), does envision a controlled
liberalism, or induced to enhance the economic growth of and by the State.
Under this strategy, the transnationalization of Chinese investments bind other states,
and expose, at least two types of consequences that can be discussed. First, the local impact
with regard to the income increase of the countries that receive the investments. These
countries are faced with new features available separately, with milder conditions when
compared to traditional investments IFI `s.
Although Latin America is a term that unites different people by a common
denominator of colonization, this region is sprayed by geographical, economic, political and
cultural multiplicity. Nevertheless, the region has a tradition on development economic and
social thinking. From the 1950s with the creation of ECLAC, some joint agendas were built,
which sought to eliminate the content of structural economic dependence from first world
countries. The efforts of Dependency Theory have sought, safely, to elucidate the importance
9
of developing even within a policy framework that, in its midst bipolar, divide interests and
resources within the international system and, therefore, tying up all the justifications for
economic growth under the umbrella of international security.
Nevertheless, Dependency Theory and the governments of Latin American countries
spent much of the twentieth century enslaved to broader policy guidelines that stifled the
pursuit of growth and economic development per se. The specific conditionalities of IFIs `s
come to guide the development and economic growth, and since the 1980s with the debt crisis
of Latin America. With China, a new context and a new form has been practiced and, unlike
IFI `s, the Chinese capital, despite high interest rates and long-term agreements, have been
reported with lower intensity by contrast policy. Those contracts leads to the positive
discourses positive approached between borrowers and Chinese, both in Latin America and in
Africa (GALLAGHER and others, 2012; VADELL, 2013). The WC constituted a specific
historical North-South network power (Grewal 2008), articulated in the 1980’s after the debt
crises under the neoliberal paradigm. Therefore, we claim the that China-Global South
relationship based on trade and investments is characterized as a new center-periphery global
network power based on trade and investment. We brand it as the ‘Asian Consensus’.
Returning to the outlook of the new guidelines of the last five-year plan, despite not
being a rigid prescription, the industrial reform indicates the search for production of valueadded and high technology, for example (Myers, Yang, 2012). The Chinese investments in
Latin America is leading by Argentina, Brazil, Ecuador and Venezuela to larger sums driven
by securitization of energy resources. According to Hilton (2013), "Latin America has the
world's largest reserves of silver, at 49% of the total global copper, at 44%, and tin, at 33%. It
Also has at least 16% of the global oil reserves and the largest quantity of arable land in the
world". Since 2005, ECLAC data indicate greater strength of reprimarization of Latin
American economies, with a significant increase on the commercial transit of goods between
China and Latin America indicating about 75 Billions of dollars were directed to Latin
American countries Americans between 2005 and 2010 (HILTON, 2013; Gallagher and
others, 2012). As stated by Mello (2012), the exchanges among the actors featured since
1999, passed the figure of US$8 billion to US$ 180 billion. This figure illustrates a greater
Chinese presence in the region, which has been performed by specific direct loans as well as
the proliferation of free trade agreements with Chile, Peru and Costa Rica. However, 90% of
investments has been focused on resorce-seeking and energy.
10
As figure 02 shows, the demand produced by the Chinese macroeconomy, since the
Chinese five-year plan, is unfolds in eight developmental areas: electric power, road
construction, railway, petroleum and petrochemical, coal, postal and telecommunications,
agriculture and related industries, and public infrastructure (CBD), and an Estimated 73.7
percent of the total new CDB's loans went to these sectors (CDB "Strategic Focus")
(Gallagher and others, 2012).
But, , what is the impact for each region within this new development besides the
traditional lines of the IFIs?. China, unlike the World Bank and the IDB's, work in extractive
and energy areas, beyond the search for raw materials. Already these early institutions have
directed major contributions to the fields of social welfare, such as health and education
(EIICHI 2010, Breslin, 2013). The following table and the image of the global distribution of
resources illustrate the areas of Chinese investment5.
5
Following the caution of the Inter-American Dialogue and Heritage Foundations, the data presented were
compiled and show as an estimate of the investment, since the investments are not, mostly, provided by Chinese
investors, as stated by these same institutions.
11
CHART II
China Global Investment Tracker - South America
Country
Year Investor
Argentina
Argentina
Argentina
Argentina
2007
2010
2010
2010
Sector
Argentina
2010 CDB
$30
Argentina
Argentina
Argentina
2010 CDB and others
2010 CDB and CITIC
2011 CNOOC
$10
$273
$330
Other/Export
Energy
Chemicals
Energy
Infrastructure/
Transport
Renewal of
2007 loan
Infrastructure
Infrastructure
Energy
Argentina
2011
$1.510
Agriculture
Argentina
2011 ICBC
$680
Finance
Argentina
2011 Chery
$170
Transport
Argentina
Argentina
Argentina
Argentina
Argentina
Bolivia
Bolivia
Bolivia
Bolivia
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
2011
2012
2013
2013
2013
2013
2013
2014
2014
2005
2005
2006
2006
2007
2009
2009
$100
$200
$120
$2.1
$2.820
$190
$300
$110
$240
$201
$430
$1.290
$340
$750
$400
$500
Brazil
2009 CDB
$300
Finance
Energy
Energy
Infrastructure
Electroingenieria
Transport
Technology
Transport
Energy
Mining
Energy
Energy
Metals
Energy
Metals
Metals
Infrastructure
Technology
Brazil
2009 CDB
$10.0
Brazil
Brazil
2009 China Communications Construction
2010 Sany Heavy
East China Mineral
2010 Exploration and Development
Bureau (Jiangsu)
2010 Sinochem
2010 State Grid
2010 Chery
2010 Sinopec
2010 CIC
$100
$200
Energy
Pre-salt oil field
evelopment
Transport
Real estate
$1.200
Metals
$3.070
$990
$400
$7.100
$200
Energy
Energy
Transport
Energy
Finance
Argentina
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
CDB
CNOOC
Shaanxi Chemical
Sinopec
CITIC and
2010
China Construction Bank
Quantity in
Millions
$30
$3.100
$1.010
$2.470
Heilongjiang
Beidahuang Nongken
ICBC
CDB
CNOOC
CDB
China Energy Engineerin
Sinomach and China Railway
China Aerospace Science and Technology
Power Construction Corp
Power Construction Corp
ICBC
CITIC
Sinopec
CITIC
CDB
Wuhan Iron and Steel
CIC
$85
12
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
2010
2011
2011
2011
2011
2011
2011
2012
2012
2012
2012
2012
2012
Bank of China and China Ex-Im
Chongqing Grain
ICBC
ZTE
JAC Motors
Taiyuan Iron, CITIC, Baosteel
Sinopec
China Construction Bank
State Grid
Beiqi Foton
Lenovo
JAC Motors
CIC
Brazil
2012 CDB
$500
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Chile
Chile
2013
2013
2013
2013
2013
2013
2014
2014
2005
2009
$200
$320
$720
$1.280
$130
$250
$390
$100
$550
$1.910
Mining
Agriculture
Finance
Technology
Transport
Metals
Energy
Finance
Energy
Transport
Technology
Transport
Real estate
Infrastructure
3G network
Real estate
Agriculture
Finance
Energy
Energy
Energy
Energy
Energy
Metals
Metals
Chile
2011 CDB and HSBC
$150
Infrastructure
Chile
Chile
Colombia
Colombia
Colombia
Colombia
Ecuador
2012
2013
2006
2009
2011
2012
2005
$190
$1.360
$430
$75
$240
$980
$1.420
Energy
Energy
Energy
Infrastructure
Energy
Energy
Energy
Ecuador
2009
$650
Metals
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
Ecuador
2009
2010
2010
2010
2010
2010
2010
2010
2011
2011
2011
2011
2012
$1.0
$610
$1.7
$1.0
$571
$2.300
$670
$270
$1.0
$2.0
$210
$470
$80
Ecuador
2012 CDB
Energy - LoanstoOil
Energy
Energy
Energy
Energy
Energy
Energy
Energy
Energy
Energy
Energy
Energy
Infrastructure
Other
Finance 2013 budget
deficit
Xugong Machinery
COFCO
China Construction Bank
CNOOC and CNPC
Three Gorges
Three Gorges
Three Gorges
State Grid
Minmetals
Shunde Rixin and Minmetals
Xinjiang Goldwind
SkySolar
Sinopec
CDB (with CAF)
Sinomach
Sinochem
CNPC and Sinopec
China Railway Construction
and China Nonferrous
PetroChina
CNPC and Sinopec
China Ex-Im Bank
CDB
China Ex-Im Bank
Sinohydro
Gezhouba
Three Gorges
PetroChina
CDB
Power Construction Corp
Harbin Electric
China Ex-Im Bank
$1.2
$1.410
$100
$200
$100
$1.950
$4.800
$200
$940
$300
$150
$450
$460
$2.0
13
China Railway Construction
and China Nonferrous
China Ex-Im Bank
Banck of China
Power Construction Corp
Harbin Electric
China Communications Construction
China Railway Engineering
Bosai
China Ex-Im Bank
Zijin, China Nonferrous,
and Xiamen C&D
Chinalco
Minmetals and Jiangxi Copper
Chinalco
Shougang
Najinzhao
Minmetals
Ecuador
2013
Ecuador
Ecuador
Ecuador
Ecuador
Guyana
Guyana
Guyana
Guyana
2013
2013
2013
2013
2011
2012
2012
2012
Peru
2007
Peru
Peru
Peru
Peru
Peru
Peru
2007
2007
2008
2009
2009
2010
Peru
2011 CDB
$150
Peru
Peru
Peru
Peru
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
2012
2013
2013
2014
2005
2007
2008
2008
2009
2009
2010
2010
2010
$50
$820
$2.600
$5.850
$940
$4.0
$140
$4.0
$7.500
$1.0
$900
$960
$290
CDB
China Fishery
CNPC
Minmetals
CITIC
CDB
Sinomach
CDB
China Railway Engineering
CDB
CNPC
Sinomach
Gezhouba
$2.040
Metals
$312
$299
$240
$600
$140
$510
$100
$130
Energy
Energy
Energy
Energy
Transport
Energy
Metals
Infrastructure
$190
Metals
$790
$450
$2.160
$990
$100
$2.500
Metals
Metals
Metals
Metals
Metals
Metals
Other
Trade financing
Infrastructure
Agriculture
Energy
Metals
Real estate
Infrastructure
Agriculture
Infrastructure
Transport
Mining
Energy
Energy
Agriculture
Other
Trade-related credit
facility
Infrastructure
Transport
Transport
Transport
Chemicals
Venezuela 2010 CDB and Portugal's BES
$1.5
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
$20.0
$200
$320
$260
$460
2010
2011
2011
2011
2011
CDB
Chery
China Communications Construction
China Communications Construction
China Communications Construction
Venezuela 2011 CDB
$4.0
Other
Joint Financing Fund
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
Venezuela
$4.0
$1.5
$410
$1.470
$1.310
$500
$1.400
$4.0
$5.0
OtherHousing
Energy
Metals
Energy
Energy
Energy
Energy
Energy
Energy
2011
2011
2012
2012
2012
2012
2013
2013
2013
ICBC
CDB
China Railway Construction
Wison
State Grid
CDB
Sinopec
CDB
CDB
14
Venezuela 2013 CDB
$700
Mining
Venezuela 2013 China Ex-Im Bank
$391
Infrastructure
Venezuela 2014 Power Construction Corp
$480
Transport
Venezuela 2014 Chinalco
$500
Metals
source: adapted from Heritage Foundation
http://www.heritage.org/research/projects/china-global-investment-tracker-interactive-map
and Inter-American Dialogue https://www.thedialogue.org/china_latin_america_finance_database
Figure II
4 - Why china investments are overcoming neoliberalism ideological paradigm?
Distinct from the theme associated to the trade openness, which is linked to the
decades of 1980/1990, the Chinese internationalization traces back to the first decade of the
twenty-first century and is allocated in addition to exp / imp relationship, the direct and
indirect participation of Chinese capital to overseas. Erica Downs (2010/2011) asserts that
such case concerns to the need to ensure China's access to raw materials market, which would
sustain, in the long term, a continued Chinese production growth. However, the Chinese
going out not only promotes the search for new partnerships for oil and / or natural gas, but
could be read as a step in which supports the Chinese finance, secured with partnerships
15
which the resources are provided, and the continuous turning leverage capital on China that
remains. Still, replace the neoliberal practices6 by development in Latin America, restoring
some provisions, such as free market but supporting new approaches with space for policy
autonomy of governments. China does not build and does not imposes a new development
model for Latin America, but indicates a new consensus through transnational economic and
political networks, which can restore the economic-political practices.
In this way, to study and understand the particular institutional Chinese finance system
and its global interconnection it is crucial.
As already pointed out, the accumulation without dispossession initiated during the
period Deng led to greatest economic decentralization inside China. At this sense, local
governments began holding greater freedom on the loans for development of specific process
areas. The productive outcome was visible, constituting a first step to a new consumer society,
but also led to the largest crisis since the Chinese Communist order established in 1949.
Chinese default in 1994 was indirectly associated to the Asian crisis. As already pointed out,
the accumulation without dispossession initiated during the period Deng led to greatest
economic decentralization inside China. At this sense, local governments began holding
greater freedom on the loans for development of specific process areas. The productive
outcome was visible, constituting a first step to a new consumer society, but also led to the
greatest crisis since the Chinese Communist order established in 1949. Chinese Default in
1994 was indirectly associated with later Asian crisis, but remained their specificities about
the issue of inflation. Within this context, the CDB is created as a way to leverage capital
through bonds unopened, gathered in long-term funds through bonus bought from Chinese
commercial banks. According to Sanderson and Forsythe (2013), this strategy supported the
construction and implementation of infrastructural projects inside China. In those terms, the
creation of a development bank was induced by low revenues of local governments, led to
insolvency, to guide a leverage capital not tied to direct deposits, but bought the bonds of
commercial banks in the long term. In this logic the capital remains within the state and its
relocation in infrastructure projects fueled the Chinese boom, which occurred concomitant a
productive and a creation, joint, of a new social mass of customers of durable goods.
6
We could elucidate the neoliberal practices as the Imperatives of Washington Consensus,
which was known for the Strings-attached policies, as one aspect of the neoliberal hegemonic
bloc.
16
There is a clear intersection between BNDES and the CBD on the strengthening of
banks' assets by leveraging through infrastructural projects. However, despite the prominent
intersection, the Chinese capital constantly rotates within the state, since the financing feed
their own state enterprises. As Forysthe and Sanderson (2013), if this logic is correct, the
China's going out has two columns in order: 1 - a productive matrix bases with access to
materials or commodities; 2 - the financial matrix, through the expansion of long-term credit
to the CBD.Another major innovation with the indicated leverage was the centralization of
Chinese financial market since the creation of the CBD in 1994. In this sense, all Chinese
commercial banks have fueled this great power of capital that is the Development Bank of
China. Such banks, considered the Big Four (Industrial & Commercial Bank of China, China
Construction Bank, Bank of China, Agricultural Bank of China), not only started to share the
extension of credits, but solved the disposal of bad assets that were beginning to clog up
finances in China according to the high indebtedness of local governments in the early 1990s.
CDB was formed in the city of Wuhu in 1994, after default of several Chinese provinces in
the seeding of the Asian crisis. Since then the bank begins to run such a wuhu model to create
credit through shared bonuses with Chinese commercial banks creating a round of capital,
which is leveraged, keep under control by what can be thought of a Extended State Chinese,
since their own Chinese corporations have received capital induced state. In the early 1990s
did not exist conditions for loans by local governments and the state. Inflation was
skyrocketing, public deficits and increased commercial banks lost liquidity.
Fearing the general bankruptcy of state / local and state government, CDB centralized
finance aiming to eliminate projects and investment without any solvency, exposing the future
costs, rolling the debt and controlling interest rates. In this sense the CBD has become more
involved with local governments, controlling spending, and implement jointly the LGFV
Model - Local Government Financing Vehicles that sought to eliminate the Non-performing
loans (NPLs) composing 40% of loans bank, according to Downs (2011). In Following to
strengthen the Chinese financial market, the CBD became the strongest institutional agent
within the state. As noted by Downs (2011) and Sanderson and Forysthe, (2013), Chen Yuan,
president of the Bank since its founding in 1994, has, within the Chinese political framework,
the same political status of the current president, Xi Jiping. This process of institutional
strengthening, in view of both authors, permeates ,directly, by the historical figure of Yuan
17
within the bureaucratic framework of finance and the Chinese Communist Party7. Chen Yuan
is not just a bureaucrat in front of a bank. Yuan is the son ofone revoluionary. Born in 1945, is
the son of Chen Yu, one of the immortals of the revolution, integrating the image symbol of
Chinese heroes hall next to Mao Tse Tung.
Chen Yuan, in addition to coined in its history the legacy of political constitution of
the Party, brings in its curriculum the knowledge of the largest banks in the world, in addition
to closely monitor the meetings and proceedings under the major International Financial
Institutions. Example of the close relationship and interest at the time in which the Asian
crisis led to insolvency Chinese banks, china bank revised its structure under the leadership of
Yuan on a time when Asia followed the steps outlined by the World Bank and the
International Monetary Fund: the opening of the banking system. However, only China
continued with its alternative. According to Sanderson and Forysthe (2013, p. 41) "its the
state-controlled banking system funneled people's deposits into CDB bonds allowed it to grow
from a bank with one branch and three into offices a bank in 2011 had assets over 6 trillion
yuan and a loan book bigger than JP MORGAN CHASE & CO ". "It was in this scenario that
the CBD has become a "real bank"(zhenzheng of Yinhang) and not the "government loan
distribution machine" (Zhengfu of fangkuan Jiqi)" (Downs 2011, p.11). Whereas, "the Asian
financial crisis gave Chinese leaders a chance to centralize their banking system and
strengthen the control of the Communist Party to promote its always longed political stability,
exactly opposite to what the IMF and the World Bank recommended to the rest of Asia
"(Sanderson and Forysthe, 2013, p.57).
The pursuit of Chen Yuan was to build a system of internal cooperation, in which
CDB will transfer part of these loans for other Chinese banks, such as Bank of China.
However, the main innovation proposed by Yuan was the creation of the Risk Control
Mechanism. In this scenario, it reduces the political loans and maximizes profit through
profitable projects in partnership with the 'lenders' local to limit bad loans and extend lowinterest loans to keep balanced on leveraging the capital market. In those terms, has stabilized
a financial market for the CBD enhance their funds, considering that before a same institution,
on a Soviet model, it sold bonds only to state enterprises, then went on to play in the financial
market of commercial banks as a process of expanding the form in which capitalize and
extend more credit. In those terms, one can understand that the effort on Chen Yuan was
7
All those reformulations have the first institutional step towards strengthening of China's domestic financial
sector. This transformation was fundamental to the second stage with the transnationalization of Chinese finance,
which is the major concern of this paper.
18
become the CBD a more commercial bank, in other words, a financier of projects to leverage
more capital. According to in Downs (2011, p.17), "CDB Also contributed to the reform of
China's financial sector with its pioneering role in the development of China's bond and
securitization markets." As well, it creates a competitive institution, about a levels of the
global market, but not a commercial institution in its fullness. The Party still matter, though,
'interestingly' CDB became a commercial bank in late 2008, at the height of the subprime
crisis, becoming a join-stock company. An expansion of the bank from an economic /
financial crisis of paramount importance. It is important to emphasize that, in Downs (2010),
the bank would become a commercial institution in its essence from that last expansion.
However, for Sanderson and Forysthe (2013), the bank does not lose the influence of the
Party. Within this continuing influence, the trace composed of leaders of the Party and Chen
Yuan was realized following first reform on the credit to eliminate the bad loans; from the
1998 construction of internal risk control mechanism for new loans; 1999 resolution of the
crisis in debt of state and local governments; and since 2000, giving his face the
internationalization of Chinese the going out process.
Unlike Narlikar and Huelz (ano), the emergence of China can be better seen in
Amsden’s arguments (2009). The author claims the hypothesis of autonomous conduction of
knowledge-based assets as an inducer of the production development of the states. According
to the author, such a development would be "a process in which we move from one set of
assets based on primary products, exploited by unskilled labor, for a set of knowledge-based
assets operated by skilled labor" (Amsden, 2009, p.29), as "a set of skills that allow the holder
to produce and distribute a product above the prevailing market price (or below market
costs)," (ibid.), in terms of administrative and technological skills, as refers to the production
and transformation through technological innovations. The induction of knowledge assets
would favor the development of a state, while the decentralization of this process indicate less
ability to enhance this same movement. Changing the companies / corporations for the
financial system, China illustrates another example of control in addition to the inductions of
business competition, centralizing financial practices in the search for a 'clean' mechanism
leverage capital able to maintain high growth of its GDP itself. This picture can be read in the
Chinese case, since the CBD meets all steps for further internationalization on a collusion of
interests between Bank, State and Party. Unlike the Chinese example, Asian countries, like
South Korea, Philippines, Thailand and others, decentralized its banking after the crisis of the
1990s and the results diverge from Chinese executions. This great transformation, reported
here, can be read as the first Chinese onset over the neoliberal theory and practice.
19
5 - Loans/Oil agreements as an emergency strategy to restore the capital
Forysthe and Sanderson (2013) warn that the Bank had created a way to leverage
capital through loans, which require only one condition for their support: continued growth of
the economy. This continuous growth of China requires aggressive behavior on the
international scene as the securitization of primary resources policy providing loans to partner
governments in return for mineral and energy resources. However, in this process, not only
ensures high sequence GDP growth based on production and domestic consumption.
At this loan process to ensure access to commodities, Downs (2011) and other scholars
claim that the loans underpins the sum game Win-Win for China itself. At this game it creates
a kind of productive integration between banks and Chinese companies, which, in most loan
agreements signed, running infrastructural development service overseas, each actor would
seek its own interests, but coordinated a policy of induction. The available data indicate a
significant sum of Chinese companies in various sectors, to stand out the shares of China
Railway Construction on Venezuela, with about 8 billion dollars invested; CNPC and Sinopec
in Ecuador, with investments of over $ 1 billion; Sinopec in Brazil, with investment of 1.7
billions of U.S. dollars; and China Energy Engineering, with U.S. $ 2,820 invested in
Argentina. Some activities of the bank in its internationalization process are highlighted. Two
lines of action can be illustrated. First, the actions aimed at securitization resource. The
second, framing the financial acquisitions made by the Bank from the 2008 crisis point would
balance better able to process credit expansion in balanced exchange. The first scenario, the
securitization is illustrated through key partnerships such as Venezuela, Russia Brazil and
others. Secondly, buying sound with some surprise given its large sum of capital. In the center
of the crisis CDB has invested in the acquisition of 3.1% in shares of British Barclays
Bankford (U.S. $ 1.45 billion) for example. In addition to the acquisitions that followed for
ABN Amro.
These acquisitions reflect the ambition to make the CBD an increasingly global bank
in dialogue with the interests of the CCP on the strengthening of the state, due to the
continuous injection of capital by the Central Bank of China in order last shield on the
possibilities of the bank become strictly a commercial bank.
The innovations in the development of Chinese finance comply with, in a sense, the
resolution of an initial economic problem posed by Rosa Luxemburg on the expanded capital
accumulation and its tendency to decrease the rate of profit. This engineering that seeks to
circumvent an immanent rule of the capitalist system can be read as forming an additional
20
variable of the emerging condition of the Chinese state. Nevertheless, China has became the
most important extra-regional actor for these states. In this context, it is possible to note the
goals pursued by PRCRPC in the process of strengthening relations with Latin American that
has changed the historical process of development.
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