The spillover effect of Chinese growth on South America: an analysis from international trade

Abstract

China's rising share of South American trade since 2001 has made that country's growth a matter of huge importance for the continent's economies. This study sets out to analyse the spillover effect of China's growth on that of the leading South American economies (Argentina, Brazil, Chile and Colombia) between 1981 and 2014. It analyses whether the increase in China's share of these countries' trade since 2001 has altered that effect. The findings suggest that, while positive, it has remained substantially unchanged. The main conclusion from these results is that expanding exports from traditional sectors of the South American economies (commodities) is not enough for earnings to increase with China's growth. The article emphasizes the importance of public policies designed to diversify South America's portfolio of exports to China, such as incentives for exporting by non-traditional sectors.

Latin America-Caribbean-China Knowledge Networks: State of the Field

“…According to most studies, these differences have been reflected in the geographical concentration of the bilateral trade, since the South American countries accounted for nearly 90 percent of LAC's exports to China by 2008, with nearly no substantial changes since then (IADB 2010;Silva, Gomes, and Teixeira 2018). Concentration in the origin of sub-regions and countries that export to China has not been the only issue addressed by scholars, but also concentration in a handful of commodities being exported to the Asian country: 70 percent of the export basket is made of soybeans and other oilseeds, crude petroleum oil, iron ore and concentrates, copper ore and concentrates, fish meal, and wool Stallings 2020;.…”

“…Thus, academics have claimed that trade between China and LAC is mainly characterized by medium and high-technology products imported from China, in exchange for raw materials or natural resources with a low level of transformation. These patterns exhibit an inter-industry trade relationship, with scarce diversification on the export side (Cuhna 2011;Santiso and Avendano 2011;Roldán et al 2016;Agramont and Bonifaz Moreno 2018;Hiratuka 2018a;Silva, Gomes, and Teixeira 2018).…”

“…These facts have raised the concerns of some scholars that claim that countries in LAC have to get the right policies in place to respond to these challenges Fornés and Mendez 2018;Kaplan 2021). In this regard, Silva, Gomes, and Teixeira (2018) claim that there is not only a lack of public policies to diversify the portfolio of products that countries in the region export to China, but also an inability of LAC's producers to participate differently in Chinese markets, such as by offering products with certain quantity of value-added.…”

“…Moreover, Mattos and Carcanholo (2012) point out that China is placing South American industries under great pressure due to its presence in markets that are relevant to industrial development (Mattos and Carcanholo, 2012). As a result, growth in the Chinese economy has had negative effects on growth in South American countries (Silva, Gomes, and Teixeira 2018).…”