Barbara Stallings
Abstract: Two important middle-income regions – Southeast Asia and Latin America – have very different geographical and historical relations with China. In this paper, we ask how those differences are reflected in their current relations with China and the economic and political impact of those relations. We begin with a brief characterization of the main differences and then conduct an econometric analysis of the economic relations and their impacts. This is followed by case studies of three pairs of countries to examine in more detail the characteristics of the countries’ relations with China as well as the heterogeneity within the two regions. The principal findings can be summarized in five points. First, the main similarity between Southeast Asia and Latin America is that trade is the dominant form of economic relationship with China. Quantitative methods show a strong, positive relationship between trade with China and development outcomes. Qualitative data indicate that trade can be positive or negative, depending on the type of product involved. Second, a significant difference between the two regions involves finance. Quantitative evidence shows that FDI and loans from China have a strongly positive impact on development in Southeast Asia, but there is no statistically significant relationship for Latin America. Third, a possible link between the first two findings is the nature of supply chain relationships in the two regions. Southeast Asia is tightly integrated into Chinese supply chains for many industries, while Latin American countries are generally located at the lowest end of the chains as exporters of raw materials for Chinese production. Fourth, the constraints faced by individual countries vary within the two regions. In both cases, constraints faced by commodity exporters are mainly economic - the inability to upgrade their economies. For industrial exporters involved in supply chains, political constraints may be more important as economic relations tend to be complementary. Fifth, US-China conflicts affect both regions in negative ways and cloud future trajectories.
Key words: China, Southeast Asia, Latin America, trade, finance, supply chains, deindustrialization, debt, US-China conflict