China Sets Up Shop Right Next Door to the US

the US is in. This time, it's not the money China is spending inside its own nation, but the enormous amounts it's lending to other countries across Asia, in Africa, and our focus today in Latin America, right next door to the United States. China is building deep trading partnerships and economic ties with several of America's neighbors in the region. And that could also pay off politically for China in

the ongoing rivalry between Washington and Beijing. To unpack all this, I'm happy to welcome Rebecca Chewing Wilkins back to the podcast. She's a government reporter for Bloomberg based in Hong Kong. Rebecca China has spent that sums helping nations a cross Asia and in Africa, Latin America build huge, expensive infrastructure projects that would have been out of reach for a

lot of them otherwise. This is part of the huge Belt and Road Initiative or b r I that President Jumping had made a centerpiece of his agenda for the country's future. Can you explain what's the big goal? What is China aiming to achieve with these foreign investments. Well,

China has ultimately sought to reshape the global order. It's ultimately about trying to create this counterweight to US dominance as it perceives it, and that's primarily been exercised through season pings sort of landmark foreign policy agenda which you

alluded to. So it's the Belton Road Initiative. It was really focused around investment, building out infrastructure projects, so railway projects, stadiums, and doing that brings other benefits, right, yes, so in some sense this this was also of course about creating diplomatic ties with many of these countries, and over the last twenty years we have seen China sort of using some of these financial incentives that it's rolled out through b r I as it's known, in order to for example,

build votes in the United nations and further its objectives overseas. China extended many of the big loans for these projects back when its own economy was rapidly growing. Now j Ping has solidified his power at home. He was just recently installed for an unprecedented third term, but China's economic growth has dramatically slowed, along with a lot of the rest of the world, and he's facing challenges at home. So has this ambition outside its borders paid off in

the way that China anticipated. The consideration here is about when we look at the past decade of season Ping and power, whether or not b r I has been successful, whether it has successfully created a network that China is able to leverage and extent um and increasingly, one question is becoming whether or not the sort of spending the

extent of it. By some estimates, they spent about one trillion dollars on b r I and the majority of that I think about six of Chinese loans to overseas nations now are now with countries that are in financial distress.

So one big question for China is whether or not it's now willing to ultimately become the world's distress Debt creditor, and so China increasingly is having to face the reality of having extended all of this credit across the globe and what that means for its role and the financing itself to China. I think isn't sort of substantive enough to really threaten China economically, but it is sort of

putting China into a corner. The critics have often viewed China's attempts to extend influence through this lending as debt traped diplomacy, and so it's also concerned with that narrative trapped diplomacy. Can you say a bit more about that, is that the idea that China has leverage over these countries. Yes, so the debt trapped diplomacy, as you say, is this idea that you know, debt is extended to somehow deliberately exert influence in a way that really compromises that borrowers

ability to operate. Although in some ways, of course, having conditions of lending is quite normal, and it is important to remember that in many cases, for example, when we think about Latin America, China lent quite substantive large amounts of money because actually Latin American countries weren't able to seek that type of lending from say the I m F.

They weren't able to meet those conditions. And increasingly the investment that we've seen has gone from just sort of infrastructure projects like building a railway, say, to actually investing in, for example, key raw materials, so investing in lithium or copper I m F. That's the international monetary fan helps

developing countries with financing. Given the economic climate in China and in the countries that lends to, is China still making these big investments abroad now when it comes to be R I. I think there has been somewhat of a reconsideration of how effective that's been. We have seen a pull back, for example, in the spending of the b R I that it could fell in the first half.

There has been no new projects issue to countries like Russia, Egypt, Pakistan, So there does seem to be some re calibration here. And we also have these reports that they may now finally be considering writing off some of these loans and potentially even perhaps offering depth forgiveness, and that really is a shift for China. We haven't seen them offering that

in the past. They've sort of tended to prefer this so called extend and pretend action plan for years, g and other senior of Chinese officials, they talked about Belton Road all the time, but more recently now a lot

of talk about that instead. Now we're hearing all that from Beijing about the Global Development Initiative for all you acronym fans as g d A instead of b r I. So is the g d I the Global Development Initiative rebranding of Belton Road to make us sound more like it's about helping other countries instead of being about China, or is it something new? The key difference that we

really see is the difference in focus. So b r I very much focused on infrastructure and investment via infrastructure, whereas the g d I is much more focused on this idea of development. And the other really key distinguishing factor here, I think is this alignment between the g d I goals and aims and the u n's own sustainability goals. So we see China somehow looking to operate or move within a framework that is aligned more with

the United Nations. That's very very different from the b r I, which is really a kind of China constructed notion, how's all this sending abroad playing at home in China. Part of that China dream that sees in Pink set out right at the beginning of his leadership was this promise for national rejuvenation, essentially to restore China's place in

the world economically but also politically. And so I think for the average Chinese citizen there's definitely an increased sense of nationalism, of Chinese pride, and this idea that China is an operator on the global stage that can rival the US. Is there any feeling among Chinese citizens that their leaders are spending a lot of money overseas when

workers at home are struggling. Is has been interesting because the discussion about Chinese debt forgiveness, for example, has actually stoked some resentment that we've seen, So, for example, this resentment about China going abroad and offering aid when actually people at home domestically are having a really tough time under these very stringent COVID lockdowns, under the economic slowdown,

and of course the property crisis. So Rebecca, for this episode, we're looking at how all this is playing out in one region where China has invested heavily Latin America, and it used to be that the US was the major investor in the region, but China has moved in in a big way. Well in Latin America, for example, China in some ways has gone there to create markets, but it's also used all of these commodities to help fuel

its industrial boom. So lots of commodities, and of course it has invested in things like copper, in things like lithium, and so countries like Bolivia, Ecuador, Venezuela rely on being able to export to China that piece off in raw materials China needs. But there's power things at work here too, right absolutely, I mean China has rapidly increased its influence in Latin America over the past twenty years. There is that asymmetric tension here. For many of the Latin American countries,

China is this key strategic partner. China, on the other hand, while it does to some extent rely on exports from those countries, as we say, there's these these crucial commodities, has really sought to use the diplomatic ties that that allows. So if we think about Taiwan, for example, which we know is really important flashpoint for China. The number of countries in Latin America that officially recognized Taiwan over the years has dramatically dwindled, and that's been linked to other

financial incentives. So we can see how China is quite explicitly using these ties to advance its own diplomatic goals. Rebecca Jiman Wilkins, thanks so much for talking to me. After the break, we take a look at what it's like when China comes calling with a load of cash for your country. One South American country China has invested a lot in is Argentina. Jonathan Gilbert covers commodities for Bloomberg and he's been writing about this growing relationship. He

joins me from Buenos Aires. Jonathan, can you describe the partnership between China and Argentina. Argentina had credit ward was

for a long time. It obviously had a big default in two thousand and one two thousand and two, and even with a market friendly government in the two thousand and fifteen to nineteen period, it's never really recovered it's credit respectability, but it's obviously needed to be able to build things, and China has emerged in that time frame as a lender of last resort and has been able to spend billions and billions of dollars on all sorts

of things. It probably started with infrastructure with railroads and power plants, and more recently has evolved into different things like lithium projects and nuclear power plants. And Argentina's first COVID vaccines were from China. Then investment from China is now around twenty four billion dollars. What's that money being used for. What we've seen in Argentina is a couple

of interesting deals. One going back to Patagonia at this time in a slightly more northern region called nail Ken, and there's a space mission center there which has drawn a lot of eyes. And that deal was with the

nail Ken provincial government. And then where I was doing my reporting in the north of Argentina in Quahoi, we're seeing the Chinese government goes straight to the governor who has present vential ambitions himself and strike deals for the solar project, which is perhaps going to be a thousand megawats, which is huge. And also as a sort of a quid pro quo, China will provide security cameras for a

lot of Hahoi's government buildings. So what you're seeing is a relationship that started at the federal level is now trickling down to the provincial or state levels, which really shows sort of the efficiency and the strength of Chinese international relations in the region. You said earlier that this started in part with Argentina's credit problems. Have these Chinese investments helped Argentina with that? Like any of these infrastructure deals, they take on debt that they have to end up

paying back. I think the benefit for Hahoi was it it got a lower rate from China than it would have done from Western companies. There's no doubt that when you take on these Chinese projects and you take on debt for them, then you're then saddled with, you know,

a contract that you have to fulfill. In the case of It's interesting because that solar farm is now hooked up to the grid, and the energy that they can sell to the grid, they're now making tens of millions of dollars a quarter of so you know there's an immediate return there and immediate revenue stream to be able to start paying back the debt. Johnathan, you spent time in Hawaiian northern Argentina and you asked people and government

officials about Chinese investments, what did they say? I think the excitement was definitely amongst the government officials. So I visited several government officials. One was the Energy secretary, one was the Production secretary. And I mean, just to give you a flavor of the Energy Secretary's office, the first thing I noticed when I was in there waiting for him was that he had a small photo behind his desk.

It was a Chinese peasant with a what looked like a field, and it had the Energy Secretary's face superimposed onto the as Chinese peasants. So, yeah, they're in his office, Yeah, in his office. In his office and other bits of paraphernalia from China a winter bine, even though they are a soul of producing province. But it said create our

future together, I think was the inscription. And when you spoke to Mario Passaro, which is the name of the secretary, he was just, you know, very excited to be dealing with the Chinese and just because of what we've been talking about that they've been able to spur these opportunities faster than you know, Cocoy could ever have hoped for. But then I think if you go to the sort of the street level, I got a more nuanced view. Let's let's say, I think people knew that China were investing,

that they looked at it very suspiciously. I remember talking to one woman who said that her brother worked up in the minds. I remember her telling me about her brother being scared that, you know, to put it in quotation marks, the Chinese were taking over, and that everything that he could see there was was Chinese. Latin America has a history of colonial powers coming in and taking things away and taking away the riches and Latin America

staying poor. And I definitely feel in amongst the people in sans Avodor that that was the fear that China was going to come in, sell its expertise, take away the lithium, and perhaps KAHOI wouldn't read the benefit. China is now looking to invest eight or nine billion dollars in a nuclear reactor in Argentina. If it happens, that could help Argentina, of course, but also paid dividends for China.

Once again, that's an example of China expanding its influence and also exporting its knowledge and expertise across the world. But the interesting caveat here is that Argentina wants to be able to have the license to develop the nuclear fuel itself. If you look at other parts of nuclear history and you see that countries that have acquired nuclear reactors from say Russia, have been a prisoner to Russian fuel,

which obviously today is a big problem. So this might allow China if it agrees to export its nuclear reactors to countries across the world who are looking for diverse fuel supplies, so they're not only reliant on China. So it would allow Argentina to develop its nuclear fuel industry. So when you look down the road, where do you see the relationship between Argentina and China going And where does that leave the US. I mean, if I look at Argentina and I look at all the different areas

of cooperation, it's not just trade. Argentina cells, its soil be insto China. Yes, it imports hundreds of different things from China. Yes that's true, but then you've also got the COVID vaccines, the potential to develop these pig farms, the nuclear power plant, the train lines, the hydro electric power plant, the lithium, deposits, the solar farms, deposits of want into the Acentine Central Bank to help his currency position. I think China's influence has been so overwhelming that the

US has really fallen behind. Jonathan Gilbert, thanks so much for taking the time talk to me. No problem, it's a pressure to do it. You heard Jonathan say just now that the US has fallen behind, why would Washington let that happen? We answer that question after the break. Why has the US let China start getting an economic and maybe a political leg up Right next door, Dan Tan Kate is here to help us understand. He's based

in Hong Kong and overseas Bloomberg's government coverage across Asia. Dan, can you talk a little bit about this idea that g is trying to present an alternative to the Western lad world order. We've seen this for a couple of years, and it's really been more prevalent after the trade war with Donald Trump. You know, the last Party Congress, which is basically China's version of election, was in two thousand seventeen, and at that event she basically said China's standing tall

in the East. And after that, the US sort of took that as China coming out in the world and saying, wow, you know, they're really catching up to us quickly here. And you saw Trump with the trade war trying to

keep China down a little bit. All that's done is kind of reaffirm China's notion that, okay, the US and the global institutions that existed for the past forty years and basically since World War Two that have helped, you know, fuel the world economy don't work for China anymore in the same ways that they do, and that the US is kind of actively using them now to keep China down.

So we saw that last month when she shimping the latest Party Congress and essentially set himself up to rule China for at least the next ten years, if not for life. And in that speech he basically made the point that China, first of all, I wasn't backing down on any of its core interests, and secondly, that Chinese modernization offers a new choice for humanity. That was a phrase he used. So what does she jumping mean by

Chinese modernization. It's the Chinese system. It's the legitimacy of a system that doesn't depend on elections, and you know a lot of what she jumping and Chinese officials have done, even when they contrast with America, as they say, look, America has its own version of democracy and that's great. China has its own version of democracy and that's also great.

And china version is, of course, um not democracy at all in any sense of how one would define it in terms of elections and transparency and openness and reinformation that sort of thing. So essentially, it provides authoritarian regimes cover to go along their merry way in a in a way that's you know, they don't have anyone judging them or seeking to overthrow them, or you know, in

any way sort of sanctioning them or punishing them. She's m paying really now on a conservative diplomatic mission to win over kind of the third countries or the swing states you might call them. And Laddam is a huge part of that, um just winning over these countries that really don't want to pick sides between the U S and China. Has the US been kind slow to recognize and to respond to China's advances throughout that region. Definitely,

there's really no doubt about it. And what it comes down to is basically just um the US is sort of handcuffed on what it could do economically. We've seen that not just in Latin America but in Asia as well. The cp T p P as it's now known, the trade deal that Donald Trump pulled out of when he took office, that actually had three Latin American countries in it, and it was seen as something that you know, would

include kind of the Apec economies. So Chile, Mexico, and Peru were all in that deal and still aren't in that deal. It's still exists, just without the US, and that was open to other deals. But that was supposed to be kind of the vehicle that America would use to kind of reduce the economic dependence on China and

balancings out a little bit more in the region. Now that's gone, d US replaced it with something called the Indo Pacific Economic Framework, and this doesn't include any Latin American countries for instance, It just as Asian Pacific countries and it doesn't even do that much. It doesn't reduce tariffs. People are very unclear what the economic impact of this is at all. So it's this kind of this window dressing type of thing to say, hey, we're doing stuff,

but substanttly it's not that much. So why has the US been so slow to try to reinforce these relationships, these longstanding trading partnerships and allow China to kind of move in with loans that are favorable with certain kind of political strings attached when it comes to Taiwan and other sorts of things that work against the US position.

I think in some ways it's a matter of bandwidth for the administration's um you know, lad him often just takes the back seat to whatever is happening in the Middle East, or with China, or with the war in Ukraine. That's traditionally where the eyes of the administration are and they haven't been able to walk and chew up so while they've been focused on those sorts of things. Afghanistan

another one. You know, China's quietly just gone about its business, putting out cash, putting in investments, giving loans, starting projects, having their companies go into Latin America in a way that the US really isn't built to do because they don't have this kind of state directed economic model that China does. So China can just kind of go along, secure these resources and that is primarily China's main objective

when it comes to foreign policy. They're not out there fighting wars, are getting into those sorts of entanglements there. Foreign policies mainly geared at securing resources for the domestic economy,

so it's a priority thing to some degree. Now it's definitely on the radar again, but so much has happened in the past two decades that the US is suddenly waking up and finding itself way behind the curve here, and they're trying to play catch up a little bit now, but still if you look at what they're doing, it's not that much. Biden and the G seven announced this thing called the Partnership for Global Infrastructure and Investment p g I I UM, a new acronym for everyone, very catchy, yes,

a very catchy new acronym. So this was rebranded from the old back Better World UM. It was the first iteration of this that they now, I've changed and this is meant to counter the Belton Road and Biden, when he was at the G twenty all all throughout his Asia trip, has talked about this is as being, you know, the next big thing they're using all the great buzzwords transparent, sustainable,

good government's, climate friendly private sector. You know, this is meant to showcase what an alternative to the Chinese system would look like. Yeah, if you look at what they're actually doing, the most substantive thing that they've put under this umbrella now is twenty billion dollar financing deal to help Indonesia transfer from coal into a green economy. If you look at all the projects they list, they really

list only two for Latin America. One is just a thirty million dollar investment in Brazil and another one is is fifth D two million loan guarantee for a project that could buy US solar equipment. So, you know, it's a lot of talk right now, it's not a lot of action. And I think that's where the REBBE will hit the road in the next couple of years. Can they mobilize billion dollars which is what they've talked about. China is actually opening up the checkbook and giving these

governments money. So even if they don't necessarily want to take Chinese money, and there is a backlash to some Chinese money in the region, and there will be everywhere in the world that this happens for these governments it's often a choice of Okay, I'm gonna take several billion dollars or I'm going to have nothing. And you know, what are you going to do? If you're trying to show your population that you're delivering for them, You're going to take the money and you're gonna use it to

win political support at home. D'antan Kate, thanks so much for coming on the show. Great to be here. You can read more by Danton Kate, Rebecca Chewing Wilkins, and Jonathan Gilbert on Bloomberg dot com. Thanks for listening to us here at The Big Take, the daily podcast from Bloomberg and I Heart Radio. For more shows from my Heart Radio, visit the I Heart Radio app, a podcast, or wherever you listen. Read today's story and subscribe to our daily newsletter at Bloomberg dot com slash Big Take,

and we'd love to hear from you. Email us with questions or comments to Big Take at Bloomberg dot net. The supervising producer of The Big Take is Vicky Burgalina. Our senior producer is Katherine Fink. Our producer is Rebecca Chasson. Our associate producer is sam Goa Bauer Hill the Garcia is our engineer. Original music by Leo Sidrin. I'm West Kasova. We'll be back tomorrow with another big take.