New era for Asia-Latin America cooperation

Beijing, April 4- How will China's economic slowdown impact the Latin American economy? Recently while attending the annual meeting by the Inter-American Development Bank (IDB) in Costa do Sauípe of Brazil, I frequently heard debates over this issue among participants.

On the day the meeting kicked off, a front page article on the journal of the meeting, published by Emerging Markets, warned, "Latin America commodities at risk from China shadow banking”.

On the third day, the top article on the front page carried the headline, "Panic over US tapering, China growth overdone." And another article in the journal had the headline, "Latin hopes grow for new China fiscal stimulus”.

Traditionally, Latin America has relied on exporting oil and minerals to make a profit. Around 74 percent of Latin American exports are bulk commodities, with China being the major purchaser.

Since last year, more than a few research institutions have predicted that China's future economic transformation and economic growth slowdown would lead to reduced demand for bulk commodities. This, according to the predictions, would exert negative impacts on countries like Brazil, Chile and Peru, and bring shocks to more Latin American countries as international market prices are forced down.

IDB'S President Luis Alberto Moreno said at a press meeting that although China's economic slowdown and US tight monetary policy will influence some countries' exports, this will also stimulate Latin America to accelerate transformation and boost regional trade.

It is in such circumstances that new potential looms large in China-Latin America operations.

The Chinese influence on the Latin American economy, previously mainly focused on purchasing bulk commodities, is now realized more through investment.

Latin America has become China's second largest investment destination.

By the end of 2013, China's non-financial direct investment stock in Latin America had reached $83.4 billion. This stood at just over $1 billion in 2003.

Increased Chinese investment in infrastructure and manufacturing will vigorously promote Latin America's economic upgrades.

For instance, Chinese investment in automobile and motorcycle plants in Brazil fuels Brazil's exports of these two products to other Latin American countries.

Such "Asian drive" does not solely come from China. In this meeting, the energetic role of Japan and South Korea in promoting Latin American economic growth could also be felt.

During the meeting, South Korea signed a letter of intent with the IDB to set up a trust fund to support various infrastructure development projects in Latin America. China established a cooperation fund with the IDB last year, and Japan launched a similar fund with the IDB long ago.

In recent years, the cooperation between Asia and Latin America has become a new highlight of the global economy. Both regions have maintained steady growth while the Western economy has been plagued by troubles.

Both regions have large populations, abundant resources and great development potentials. In recent years, as China, Japan and South Korea constantly expand investment in Latin America, their competition in this region has intensified, which actually facilitates local industrial upgrades.

Meanwhile, the ever-increasing infrastructure investment from China, Japan and South Korea has paved a solid foundation for Latin America's sustainable development.

At the moment, the 34 countries that participate in the Forum for East Asia-Latin America Cooperation account for 30 percent of global economic volume and 40 percent of global trade volume. The cooperation between these two regions benefits the world's economic balance.

At the meeting, I met a drum band from South Korea giving performance on the spot. It was a pleasant surprise to hear familiar Korean drum music in remote Latin America.

South Korea sent this band because the 2015 meeting will be held in Busan, which will also be the IDB's first time in 10 years to hold the annual meeting outside Latin America. The drum music conveyed the strong signal of consolidated bonds between Asia and Latin America.