Sino-Venezuelan lawsuit shows bilateral relationship based on commercial principles

By Wang Jiamei Source:Global Times Published: 2017/12/7 22:38:39

Some media outlets are interpreting a lawsuit filed by Sinopec in the US against Venezuelan state oil company PDVSA as a sign of China's growing impatience over the ailing economy in Venezuela, but the case just reflects a normal bilateral trade relationship.

A US subsidiary of Sinopec, China's top oil refiner, has sued PDVSA for a May 2012 contract to supply $43.5 million worth of steel rebar, half of which it said remained unpaid, according to a report from the Financial Times on Thursday.

There has long been speculation about the true nature of Sino-Venezuelan relations, as China is widely believed to have offered large amounts of financial aid to the South American nation. But such claims reflect an erroneous and biased understanding of the relationship.

The suit, while involving a relatively small sum, still demonstrates that the bilateral economic and trade relationship is based on normal commercial ties.

It is true that China is Venezuela's biggest foreign source of funding, with loans and investments of more than $62 billion between 2007 and 2016, the Financial Times reported, citing figures from the China-Latin America Finance Database.

But the loans China has provided are not grants or foreign aid; they are for commercial purposes. While oil-for-loans granted by China may have helped Venezuela's cash-strapped government, the deals have also addressed China's demand for energy. Venezuela has one of the world's largest oil reserves, and its oil revenues account for about 95 percent of total export earnings. According to PDVSA's financial statements, the oil company shipped an average of 505,000 barrels per day of oil to China in 2016, which served as the repayment for Chinese loans.

While there have been reports about the increasingly poor quality of crude oil from PDVSA this year, the fact that Venezuela is a key source of heavy crude supplies should not be overlooked.

The same is true of infrastructure construction under the Belt and Road (B&R) initiative. Chinese companies are not pursuing infrastructure projects along the B&R route for charitable purposes or as a form of aid. The B&R initiative is aimed at win-win results, bringing economic benefits for all parties involved.

Business is business. Chinese companies should make legal preparations for potential risks when pursuing overseas projects, while companies in the host countries should also be aware of their legal obligations. The exchange of practical benefits is what makes cooperation sustainable.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn



Posted in: EYE ON THE ECONOMY

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