Chile, China scale new heights in relations

By Jorge Heine Source:Global Times Published: 2017/10/23 21:05:47

Illustration: Liu Rui/GT

For those with their eye on trade, 2016 was especially significant for Chile-China relations. Amazing as it may sound, Chile became the No.1 exporter of fruit to China, with $1.2 billion, meaning that one out of every four pieces of fruit imported by China by value ($5 billion) came from Chile, the farthest country from China. It was also the year in which China became the No.1 market for Chilean wine, with some $197 million. The year 2017 is not doing too badly as the negotiations to deepen the Free Trade Agreement (FTA) between both countries have been successfully concluded and the new upgraded version of the FTA is expected to be signed during the APEC summit in Hanoi in November.

But trade is only part and parcel of a much broader picture of enhanced Chile-China links. Since 2014, official visits at the highest level - either heads of state or heads of government - have taken place every year. Both Chile and China have been great beneficiaries of globalization and free trade and are firm supporters of multilateralism, which brings them closer together on a variety of issues, including the need to combat climate change.

Ever since Chile was the first country in South America to establish diplomatic relations with China in 1970, bilateral links have flourished. Chile was also the first country in the region to support China's bid to join the World Trade Organization and to support China's condition as a market economy. The 2005 FTA - the first signed by China with any individual country - was another milestone, and bilateral trade has increased fourfold since then, reaching $31 billion in 2016.

Chile is the biggest producer and exporter of copper, and China the biggest importer and consumer. Copper thus makes up a significant part of Chile's exports to China. China, in turn, exports many manufactured products to Chile, from mobile phones to cars and electronic products.

But over the last few years, the trend toward a greater diversification of Chilean exports has become apparent, especially in food - not just fruits and wine, but also meat and seafood. As the Chinese middle class expands, the demand for these products will continue to increase, and Chile's agricultural sector, already one of the fastest growing in its economy, is gearing up for that.

The challenge now is to move from trade to investment. Chile's infrastructure and energy sectors are especially attractive in this regard. In the past few years, Chile has made a quantum jump in the development of renewable energy sources, which already comprise 20 percent of its installed energy generating capacity.

This has been largely due to the explosive growth of solar energy in the Atacama desert, which has the world's highest solar radiation intensity, leading to The Washington Post referring to Chile as the "Saudi Arabia of solar energy." With China in the worldwide lead in both solar and wind energy, there are plenty of opportunities for Chinese companies in Chile.

Chile has also one of the world's largest lithium reserves. With electric cars as the wave of the future, demand for lithium batteries is bound to explode. Electric cars also require four times more copper wiring than conventional. At least one Chinese company has already expressed interest in building a factory for electric cars in Chile.

Infrastructure is another area of great potential. The Southern Cone - Argentina, Brazil, Chile - exports between 20 and 25 percent of all food imported by China, in volumes that all projections indicate will continue to expand in years to come. To strengthen Chile's logistics and transport systems is thus imperative in order to expedite and facilitate the flow of products to Asia in general and China in particular. Bi-oceanic corridors need to be built crossing the Andes to bring commodities and other products from South America's Atlantic rim to the Pacific coast. Chinese construction companies are in a good position to do so: having the technology, the expertise and the capital. Chile is South America's bridge toward the Asia-Pacific.

But in today's world it is not just physical connectivity that is important. Digital infrastructure is also significant. That is why Chile has proposed installing a fiber optic, submarine, trans-Pacific Internet cable from China to Chile that would provide the first such direct connection from Asia to South America across the South Pacific. A pre-feasibility study on the project was delivered in June last year to both governments and the project is very much on track.

The II China-Latin America Ministerial Forum will take place January 19-22 in Santiago. It should provide a renewed impetus not just to the excellent relations between Chile and China, but also to those between China and the region as a whole. These relations have come into their own in the new century. Many say it will be the Asian century.

The author is the Chilean ambassador to China.

Posted in: VIEWPOINT

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