How Latin America will feel the effects of projected economic, social, and industrial changes in China was the topic of discussion at the monthly Pardee House Seminar at the Frederick S. Pardee Center for the Study of the Longer-Range Future on February 29.
Titled “China’s New Five Year Plan: Implications for Latin America,” the seminar featured remarks by Margret Myers, (Director of China and Latin American program, Inter-American Dialogue), Prof. Edward Cunningham, (Department of Geography and Environment, BU), and Pardee Faculty Fellow, Prof. Kevin Gallagher, (International Relations, BU), who moderated the session.
Margaret Myers discussed three aspects of the newest Five Year Plan – the 12th such plan issued by the Chinese government – that outlines directions and goals for the country through 2015. She spoke first of the economic transformation that the plan calls for, shifting the country’s export-based economy of the past few decades to a consumption-based one. This effort to stimulate increased purchasing by domestic consumers is tied to related efforts to introduce or expand social welfare programs, such as unemployment benefits and an increased minimum wage, she said.
Myers also spoke of the important role that natural resource constraints are having on the country and its move to impose measures to protect the environment and reduce air and water pollution. The third component of the plan she highlighted is the focus on industrial reforms, which promote the service sector and other strategic emerging industries in place of the emphasis of manufacturing inexpensive consumer goods for export.
Myers called the plan “very complex” and said whether and how local governments, businesses, and rural areas will comply with the larger vision set forth for the country remains to be seen. Despite the new 5-year plan, “nobody has any idea, really, what will happen in China,” in the coming years, she said.
Edward Cunningham noted that natural resource constraints are highlighted as an area of concern in the plan and this marks a major shift from China’s former clearly stated desire to be energy self-sufficient at all costs. He said that China is depleting its coal resources so rapidly that it went from being the largest exporter of coal to the largest importer within the past two years. He cited China’s need to import energy resources and mineral commodities from Latin American countries as one major impact from China in that region. Another impact is China’s increasing presence in the region as Chinese companies acquire Latin American firms or expand operations of existing companies.
Both Cunningham and Kevin Gallagher discussed the danger of Latin American countries being subject to the “resource curse,” where natural resource commodities, such as minerals or energy sources, attract such high prices – in this case because of increasing demand from China — that the country’s currency becomes inflated, negatively affecting other aspects of its economy.
Gallagher noted that some countries in the region are working to diversify their economies to avoid such consequences. “Commodity growth is something some Latin American countries are trying to move away from.”