Development Centre

A strengthened China-Latin America partnership would help foster development and overcome the middle-income trap : 2016 China Development Forum

 

Paris, 21 March 2016 : More than three decades of high economic growth have allowed China to reach the upper-middle income country category but the recent slowdown makes the so called middle-income trap – the long-lasting slowdown in productivity and Gross Domestic Product per capita growth endured by countries when they approach upper-middle income levels - a potential challenging scenario for the country. In the case of Latin America, the middle-income trap has been affecting most of the countries in the region for several decades.

The example of Latin America raises the question of whether China could be affected in the same manner and opens opportunities for mutual learning and deeper engagement between the two regions. A strengthened China-Latin America partnership can pave the way to foster linkages, expand opportunities and identifying policy solutions to boost productivity growth, make growth more inclusive and achieve the sustainable development goals.

The session “Overcoming the Middle-Income Trap in the New Normal: Comparative Perspectives from China and Latin America” held during the 2016 edition of the China Development Forum in Beijing explored policies to tackle the middle-income trap and promote inclusive growth in both regions, particularly in the current economic context. The event gathered a wide range of perspectives, notably the OECD Secretary General Angel Gurría, the Economics Nobel Laureate Joseph Stiglitz, the Inter-American Investment Corporation’s General Manager, James Scriven and prominent experts from Chinese institutions such as the Development Research Centre of the State Council and the Centre for China and Globalisation countries (access the full list of speakers).

The middle-income trap has been prominently analysed inter alia by the China’s Development Research Centre of the State Council and the World Bank in their China 2030 report. Building on existing discussions, the high level panel featured the results of the Latin American Economic Outlook 2016 (a joint publication by UNECLAC, the Development Bank of Latin America and the OECD Development Centre), which explores the evolving partnership between China and Latin America and the Caribbean face to the middle-income trap and a challenging global economic landscape.

Over the past two decades, China and Latin America’s relations have evolved considerably. Latin America and the Caribbean is a traditional commodity exporter and an importer of manufacturing and technological goods from China. This relationship is now changing. China continues to be a major actor for foreign trade in the region, being the largest trading partner for Brazil, Chile and Peru.

China’s New Normal, the transition from an export-oriented to a more consumption-oriented model, and the implementation of several structural reforms, will be likely to impact Latin American and Caribbean economies in different areas.

On the one hand, this process will have important implications for traditional commodity exports, with growth rates that could decrease from an average 16% (in the early 2000s) to 3% until 2030 in the case of metals, 16% to 4% for energy and 12% to 2% for food. On the other hand, opportunities for exporting other goods to meet China’s changing consumption patterns will emerge.

And China’s relationship with the region is not only commercial anymore. Financial loans from Chinese public institutions in the region attained more than 94 USD billion in 2014, and only in 2015 reached 29 USD billion. This makes of China the largest bilateral lender in the region, not far from all the multilateral organisations (World Bank, IDB, CAF) together. The increasing presence of Chinese financial institutions, including commercial banks, in the future, opens financing opportunities in areas such as infrastructure.

Finally, China’s approach to reach bilateral agreements in the form of FTA (Free Trade Agreements) or BITs (Bilateral Investment Treaties) call for the region to define a coherent platform to negotiate and dialogue with China.

Representatives from major financial institutions, the private sector, international organisations and policy makers gathered at the OECD Development Centre session of the China Development Forum. They discussed what is at stake and what can be done to support countries in accelerating productivity growth while making growth more inclusive and societies more resilient in China and Latin America and the Caribbean. Debated issues included the policies and reforms that China needs to make in order to tackle the middle-income challenge, the implications of the New Normal for the development prospects of developing economies, and how countries can expand innovation capabilities and foster upgrading in support of inclusive growth against the background of a rapidly changing global economy. The panel also stressed the importance of leveraging institutions such as the OECD Development Centre - which brings together China and several countries from Asia, Africa, Europe, Latin America and the Caribbean - to foster policy dialogue and strengthen partnerships for inclusive development.



Read the OECD Secretary General's speech, given at the Forum

For more information on the Latin American Economic Outlook 2016: Towards a new partnership with China 

For more information, journalists are invited to contact the OECD Development Centre : Bochra.Kriout@oecd.org; Tel: +33 1 45 24 82 96

 

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