1

Do not quote without permission.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

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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

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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).

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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.

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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)

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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

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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.

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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.

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CHART 1

Chinese Outward investment since

2005: two views($ billions)

Year China Global

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

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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 value-

added 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.

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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.

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CHART II

China Global Investment Tracker - South America

Country Year Investor Quantity in

Millions Sector

Argentina 2007 CDB $30 Other/Export

Argentina 2010 CNOOC $3.100 Energy

Argentina 2010 Shaanxi Chemical $1.010 Chemicals

Argentina 2010 Sinopec $2.470 Energy

Argentina 2010 CITIC and

China Construction Bank $85

Infrastructure/

Transport

Argentina 2010 CDB $30 Renewal of

2007 loan

Argentina 2010 CDB and others $10 Infrastructure

Argentina 2010 CDB and CITIC $273 Infrastructure

Argentina 2011 CNOOC $330 Energy

Argentina 2011 Heilongjiang

Beidahuang Nongken $1.510 Agriculture

Argentina 2011 ICBC $680 Finance

Argentina 2011 Chery $170 Transport

Argentina 2011 ICBC $100 Finance

Argentina 2012 CDB $200 Energy

Argentina 2013 CNOOC $120 Energy

Argentina 2013 CDB $2.1 Infrastructure

Argentina 2013 China Energy Engineerin $2.820 Electroingenieria

Bolivia 2013 Sinomach and China Railway $190 Transport

Bolivia 2013 China Aerospace Science and Technology $300 Technology

Bolivia 2014 Power Construction Corp $110 Transport

Bolivia 2014 Power Construction Corp $240 Energy

Brazil 2005 ICBC $201 Mining

Brazil 2005 CITIC $430 Energy

Brazil 2006 Sinopec $1.290 Energy

Brazil 2006 CITIC $340 Metals

Brazil 2007 CDB $750 Energy

Brazil 2009 Wuhan Iron and Steel $400 Metals

Brazil 2009 CIC $500 Metals

Brazil 2009 CDB $300 Infrastructure

Technology

Brazil 2009 CDB $10.0

Energy

Pre-salt oil field

evelopment

Brazil 2009 China Communications Construction $100 Transport

Brazil 2010 Sany Heavy $200 Real estate

Brazil 2010

East China Mineral

Exploration and Development

Bureau (Jiangsu)

$1.200 Metals

Brazil 2010 Sinochem $3.070 Energy

Brazil 2010 State Grid $990 Energy

Brazil 2010 Chery $400 Transport

Brazil 2010 Sinopec $7.100 Energy

Brazil 2010 CIC $200 Finance

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Brazil 2010 Bank of China and China Ex-Im $1.2 Mining

Brazil 2011 Chongqing Grain $1.410 Agriculture

Brazil 2011 ICBC $100 Finance

Brazil 2011 ZTE $200 Technology

Brazil 2011 JAC Motors $100 Transport

Brazil 2011 Taiyuan Iron, CITIC, Baosteel $1.950 Metals

Brazil 2011 Sinopec $4.800 Energy

Brazil 2012 China Construction Bank $200 Finance

Brazil 2012 State Grid $940 Energy

Brazil 2012 Beiqi Foton $300 Transport

Brazil 2012 Lenovo $150 Technology

Brazil 2012 JAC Motors $450 Transport

Brazil 2012 CIC $460 Real estate

Brazil 2012 CDB $500 Infrastructure

3G network

Brazil 2013 Xugong Machinery $200 Real estate

Brazil 2013 COFCO $320 Agriculture

Brazil 2013 China Construction Bank $720 Finance

Brazil 2013 CNOOC and CNPC $1.280 Energy

Brazil 2013 Three Gorges $130 Energy

Brazil 2013 Three Gorges $250 Energy

Brazil 2014 Three Gorges $390 Energy

Brazil 2014 State Grid $100 Energy

Chile 2005 Minmetals $550 Metals

Chile 2009 Shunde Rixin and Minmetals $1.910 Metals

Chile 2011 CDB and HSBC $150 Infrastructure

Chile 2012 Xinjiang Goldwind $190 Energy

Chile 2013 SkySolar $1.360 Energy

Colombia 2006 Sinopec $430 Energy

Colombia 2009 CDB (with CAF) $75 Infrastructure

Colombia 2011 Sinomach $240 Energy

Colombia 2012 Sinochem $980 Energy

Ecuador 2005 CNPC and Sinopec $1.420 Energy

Ecuador 2009 China Railway Construction

and China Nonferrous $650 Metals

Ecuador 2009 PetroChina $1.0 Energy - LoanstoOil

Ecuador 2010 CNPC and Sinopec $610 Energy

Ecuador 2010 China Ex-Im Bank $1.7 Energy

Ecuador 2010 CDB $1.0 Energy

Ecuador 2010 China Ex-Im Bank $571 Energy

Ecuador 2010 Sinohydro $2.300 Energy

Ecuador 2010 Gezhouba $670 Energy

Ecuador 2010 Three Gorges $270 Energy

Ecuador 2011 PetroChina $1.0 Energy

Ecuador 2011 CDB $2.0 Energy

Ecuador 2011 Power Construction Corp $210 Energy

Ecuador 2011 Harbin Electric $470 Energy

Ecuador 2012 China Ex-Im Bank $80 Infrastructure

Ecuador 2012 CDB $2.0

Other

Finance 2013 budget

deficit

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Ecuador 2013 China Railway Construction

and China Nonferrous $2.040 Metals

Ecuador 2013 China Ex-Im Bank $312 Energy

Ecuador 2013 Banck of China $299 Energy

Ecuador 2013 Power Construction Corp $240 Energy

Ecuador 2013 Harbin Electric $600 Energy

Guyana 2011 China Communications Construction $140 Transport

Guyana 2012 China Railway Engineering $510 Energy

Guyana 2012 Bosai $100 Metals

Guyana 2012 China Ex-Im Bank $130 Infrastructure

Peru 2007 Zijin, China Nonferrous,

and Xiamen C&D $190 Metals

Peru 2007 Chinalco $790 Metals

Peru 2007 Minmetals and Jiangxi Copper $450 Metals

Peru 2008 Chinalco $2.160 Metals

Peru 2009 Shougang $990 Metals

Peru 2009 Najinzhao $100 Metals

Peru 2010 Minmetals $2.500 Metals

Peru 2011 CDB $150 Other

Trade financing

Peru 2012 CDB $50 Infrastructure

Peru 2013 China Fishery $820 Agriculture

Peru 2013 CNPC $2.600 Energy

Peru 2014 Minmetals $5.850 Metals

Venezuela 2005 CITIC $940 Real estate

Venezuela 2007 CDB $4.0 Infrastructure

Venezuela 2008 Sinomach $140 Agriculture

Venezuela 2008 CDB $4.0 Infrastructure

Venezuela 2009 China Railway Engineering $7.500 Transport

Venezuela 2009 CDB $1.0 Mining

Venezuela 2010 CNPC $900 Energy

Venezuela 2010 Sinomach $960 Energy

Venezuela 2010 Gezhouba $290 Agriculture

Venezuela 2010 CDB and Portugal's BES $1.5

Other

Trade-related credit

facility

Venezuela 2010 CDB $20.0 Infrastructure

Venezuela 2011 Chery $200 Transport

Venezuela 2011 China Communications Construction $320 Transport

Venezuela 2011 China Communications Construction $260 Transport

Venezuela 2011 China Communications Construction $460 Chemicals

Venezuela 2011 CDB $4.0 Other

Joint Financing Fund

Venezuela 2011 ICBC $4.0 OtherHousing

Venezuela 2011 CDB $1.5 Energy

Venezuela 2012 China Railway Construction $410 Metals

Venezuela 2012 Wison $1.470 Energy

Venezuela 2012 State Grid $1.310 Energy

Venezuela 2012 CDB $500 Energy

Venezuela 2013 Sinopec $1.400 Energy

Venezuela 2013 CDB $4.0 Energy

Venezuela 2013 CDB $5.0 Energy

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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

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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.

17

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

18

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 low-

interest 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.

19

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.

20

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

21

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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