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China, Venezuela Expand Economic Ties

On September 17th, President Nicolas Maduro returned to Venezuela after a brief diplomatic trip to China, where he met with President Xi Jinping and other top Chinese officials. Maduro subsequently announced that Venezuela will receive US$5 Billion in Chinese investment over the next year, partially aimed at enabling the troubled South American nation to double oil exports to China. State-owned China National Petroleum Corporation (CNPC) also purchased 9.9% of shares in the oil joint venture Sinovensa, bringing overall Chinese ownership to 49%. China has long been a top financer for Venezuela, having recently committed an additional US$250 Million to boost oil production in July.

Venezuela’s extreme dependence on oil revenues (accounting for 98% of export earnings in 2017) has created a well-publicized economic nightmare. The country is struggling to combat extreme hyperinflation, food shortages, and mass emigration. China has provided Venezuela with economic support in the face of domestic political unrest and economic sanctions from abroad. Despite reports that the Venezuela may have overstated the size of the deal, it is still a significant Chinese commitment.

China’s relationship with Venezuela demonstrates a broader trend in the region. China has rapidly expanded its trade, foreign direct investment and lending practices with Latin America. China has invested over US$110 Billion in Latin America since 2003, according to joint report from the OECD Development Centre and Atlantic Council. China’s investment has primarily included oil & gas, mining, and recent trend toward the service sector. Similarly, Chinese banks have lent the region roughly US$140 Billion since 2005 – of which nearly 15%  have a “commodity-backed clause, such as loans-for-oil and purchase requirements.” 

Policy experts from the Center for Strategic & International Studies (CSIS), in an April 2018 commentary report, state that the United States (and, by virtue of proximity, other regional countries) should be concerned about China’s role in Maduro’s Venezuela. China, they allege, has propped up the “repressive Maduro regime and damaged Venezuela’s long-term economic success” through corrupt practices and forced dependence. President Xi Jinping’s aggressive foreign policy is a key mandate in his vision for China’s future, and Chinese influence within the region is unlikely to subside.

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