Paraguay urged to follow one-China principle, pre-condition for more economic and trade ties
Published: Sep 18, 2023 09:09 PM
A view of Asuncion, Paraguay Photo: VCG

A view of Asuncion, Paraguay Photo: VCG

The Paraguayan authorities cannot expect to maintain their "diplomatic ties" with the Taiwan island while asking for more direct benefits from China's rapid economic development, a move that is like "having feet on two separate boats, which is doomed to fail," Chinese experts warned.

The remarks came as a high-level official of Paraguay, the last South American country that retains "diplomatic relations" with the Taiwan island, recently expressed his hope for Chinese investment in the country's green hydrogen industry, as Bloomberg reported on Monday.

"I'm open to talking to any entrepreneur from China who wants to invest and create jobs in Paraguay," Paraguay's Finance Minister Carlos Fernandez said in an interview with Bloomberg TV.

Experts said that this statement reflects the country's urgent desire to cooperate with the Chinese mainland, but it is up to Paraguay to make the initial move by severing "diplomatic relations" with the Taiwan island.

Santiago Pena, the newly elected president of Paraguay, under US pressure, continues to maintain such "diplomatic ties" with the Taiwan island, which means that "China's cooperation with Paraguay is destined to be limited and will not achieve maximum efficiency at all," Wang Youming, director of the Institute of Developing Countries at the China Institute of International Studies in Beijing, told the Global Times on Monday.

Only when there is a breakthrough in the political cooperation framework can economic cooperation and people-to-people exchanges receive the highest level of credibility and be truly maximized, Wang added.

This is not the first time that officials of the South American country have come up with such claims. Previously, Pena said in July that the country would love to do more trade with China, according to media reports.

Former president of Paraguay Mario Abdo Benitez also made similar remarks about seeking trade cooperation with China.

While Paraguay always wants to draw Chinese companies to invest, in reality, few businesses would actually invest because companies need to assess investment risks, and they are unlikely to invest in countries with which China does not have diplomatic relations, Tang Jie, a researcher with the Institute of American & Oceanian Studies at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Monday.

"This is especially true in sensitive areas like the hydrogen energy industry, where we have core advantages," Tang said, adding that unless there is a close relationship between the two governments, there is limited hope for relatively effective guarantees for corporate investments, given the risks and the substantial amounts of investment that may also be involved.

The statements by the Paraguayan official are driven by the country's economic development needs, as it has recognized the importance of China as a large consumer market and significant economic entity, while seeking to tap into this market through trade and investment in return for a continuous source of momentum for its own economic growth.

In recent years, bilateral trade between the Chinese mainland and Paraguay has increased rapidly, reaching $1.979 billion last year, compared with its approximately $1.3 billion trade with the Taiwan region.

Paraguay's economy mainly relies on the export of beef and soybeans, and the Chinese mainland is its largest importer of meat products.

Paraguay is also part of the Southern Common Market, where member countries such as Argentina and Brazil maintain very close political, economic and trade relations with China. However, because Paraguay has not severed "diplomatic ties" with Taiwan, it has led to the suspension of some activities within this regional economic organization, including the possible signing of free trade agreements, Tang said.

Over the years, Chinese investment and technology, especially under the Belt and Road Initiative, has helped increase the value of the mineral products and improve employment in the region.

While the US and the authorities of the Taiwan island might offer some short-term benefits, their funding often comes from private capital, which is profit-driven, unlike China's diplomatic approach, which seeks a balance between interests and principles, Wang said, urging Paraguay to recognize the general trend and restore normal relations with China as soon as possible, so as to provide a stable political environment for companies from both sides to invest or operate locally.

In recent years, China has established or resumed diplomatic relations with countries such as Panama, the Dominican Republic, El Salvador and Nicaragua in Latin America, actively promoting bilateral practical cooperation, and bringing tangible benefits to the peoples of the relevant countries.