Energy supply plays a major role for china
China’s vice president xi jinping toured five latin american countries last week. On thursday, he arrived in brazil, the last stop on the continent. Previously he had held talks in venezuela, among other places. In a speech to businessmen from both countries, xi had suggested the further improvement of cooperation between the two countries and made it clear that energy policy was a high priority for his country. Venezuela is china’s fourth largest oil supplier. Overall, trade between the two countries had been worth $9.85 billion in 2008. This was an increase of almost 70 percent over the previous year, which may have been partly a result of the temporary sharp rise in the price of oil.
In brazil, too, energy supply played a major role in the talks. Both sides signed a contract that will provide china with deliveries of 100.000 to 160.000 barrels of crude oil a day at the prevailing market price . In addition, a memorandum of understanding was signed under which the state-owned brazilian oil company petrobras will receive a loan of ten billion u.S. Dollars from the chinese development bank, also a state-owned company, which it needs to develop new fields. Among other things, brazil is believed to have larger oil deposits off its coasts. By may, when brazil’s president inacio lula da silva visits beijing, the credit agreement will be negotiated.
Obviously, the people’s republic is determined to use its enormous foreign currency to secure its energy supply. Just last week, after years of negotiations, china and russia finally signed a contract for oil supplies and the construction of a pipeline from siberia to northeast china. Russia will receive a $25 billion loan, which will be repaid in oil and other currencies. Russia will receive 300 tons of oil per day for the next 20 years.000 barrels of oil.
Meanwhile, china has become brazil’s second most important trading partner. In 2009, 20 percent of china’s iron ore imports are expected to come from the latin american country. Beijing also buys large quantities of soy there, but raw materials are not the only commodities on the shopping list: for the brazilian manufacturer of regional aircraft embraer, the people’s republic is an important sales market. Therefore, the chinese link to /8/133286 and, in particular, the expansion of the infrastructure there could also help to mitigate the effects of the global economic crisis in brazil to a certain extent.
Relations between the two countries are symptomatic of the shifts in international trade brought about by china’s rise. Until a few years ago, the bulk of the international exchange of goods took place between the industrialized countries, or at best between them and the major suppliers of raw materials among the developing countries. Sud-sud trade, on the other hand, was of little consequence.
There has been a fundamental change. China’s trade with latin america has increased tenfold since 2000 and now stands at $143 billion annually. Xi used his trip to promote further deepening of cooperation. He encouraged increased cultural exchanges, cooperation in stabilizing the global economy and consultations on international affairs, among other things. Both sides should work together on a new international financial system, technology transfer and a fair international world economic system.