Deepening economic woes in China are something the communist regime can no longer dismiss and dependent countries can't afford to ignore.
Since China's decision to end its "zero-COVID" policy was announced last December, the subsequent economic downturn has hit multiple sectors. Import and export markets have slumped this year, coupled with the country's soaring debt, underperforming industrial output, and a tanking real estate market.
China's National Bureau of Statistics originally released the data, but the state-run agency has since blocked additional unemployment statistics after widespread media reports.
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A spokesperson for the bureau, Fu Linghui, told reporters during an August news conference that the "age-specific urban unemployment rate for young people" would be suspended for that month. Given the increased pressure that the Chinese Communist Party (CCP) faces over the faltering economy, state-level attempts to control the narrative aren't surprising.
Some say China's economic slowdown was "inevitable."
But the ripples of Beijing's economic downturn will reach far beyond its borders. Many experts are predicting that China's partners in the developing world, particularly Latin America, will bear the brunt of its domestic troubles.
The past 20 years of Latin America's engagement with China have been based on "perceptions and hopes" rather than practicalities, said Evan Ellis, a regional analyst and professor at the U.S. Army War College Strategic Studies Institute.
That's evident in Latin America's dubious infrastructure projects and grandiose loans given to local governments with a history of defaulting on their debts.
China's infrastructure projects in Latin America are famously riddled with problems, some of which significantly affect local populations. They include the $2.7 billion Coca Codo Sinclair hydroelectric dam in Ecuador, which opened in 2016 and has local engineers voicing concerns over cracks and structural issues.
Commodities Impact
One of the near-term effects the region faces is cooling commodity prices due to falling demand from China, the region's biggest trade partner, aside from Mexico.This is especially problematic for countries with strong mineral and agricultural sectors, which rely heavily on Chinese demand.
Mr. Ellis predicts a “protracted period of lower commodity prices" that will hit Latin American countries hard since China will likely be buying less and trying to sell more. He said the CCP likely won't have “quite as much money to throw into the region as it once did.”
Consequently, that could dim some of the reputational luster that China has spent years building.
“Across the board, China is not going to look quite as glamorous to Latin America as it used to," Mr. Ellis said.
"Commodity exporters, such as Chile, Peru, South Africa, and Australia, could see less demand from China," said Robert Gilhooly, senior emerging markets economist at Abrdn. He said that would lead to a cooling trend in global prices and create "knock-on effects impacting investment, tax revenues, and broader business sentiment.”
Other analysts say cooling commodity prices are just the beginning.
"One of the main reasons these [Latin American] regimes gravitated toward China is because of the immediate practical benefits of that relationship ... appealing loans, investments, military and security opportunities, and assorted forms of support," Irina Tsukerman, regional security analyst and president of Scarab Rising, told The Epoch Times.
"Should [Latin American governments] come to see China as an unreliable ally ... without delivering on its promises, they will immediately turn away in search of another suitor."
Ms. Tsukerman believes that image factors heavily into China's approach to engagement with Latin America, and isn't convinced that the CCP will scale back its regional investments, even at the cost of its own economic crisis. She believes that the regime cares more about "projecting power" than having what she called a "prudent and sober balance of expenditures."
"In reality, there's a perception in the ruling class that, so long as Beijing's long arm reaches far and wide around the world, rumors of its economic collapse will not be fully believed by Western countries," she said.
However, Beijing's continued investment in Latin America will likely come with what Mr. Ellis called a "hardening of China's diplomatic line." He expects this to materialize with China's loan terms, noting that the CCP is "very adept" at getting paid.
"Like in Africa, the Chinese are not letting anyone walk away from their debts," he said.
He said that the CCP will probably sharpen its approach as a trade and investment partner while setting stricter terms and deepening its "politicization" in Latin America.
Opportunity Knocks
If more stringent trade and investment deals between China and Latin America come to pass, it may also hamper CCP efforts to expand the RMB yuan as a reserve currency in the region. Earlier this year, the governments of Brazil and Argentina announced that they would begin using the yuan as a trade currency. On June 29, Argentina's government took it a step further when its central bank announced that residents and businesses would be able to open accounts in yuan.China hasn't been coy in its desire to push the yuan as an alternative to the U.S. dollar for reserves and trade, which many have called a "de-dollarization" campaign.
Yet with Beijing's economic retraction and more complicated or less access to funding, it may be an opportune time for the United States to step into the limelight in its own backyard. Ms. Tsukerman says that the reality of China's changing economic status could ignite a change in attitude.
"Despite leftist ideologies of Latin American regimes such as Argentina and Brazil, their leaders are pragmatic and self-interested. They may use populist rhetoric and extreme ideologies to get to power and control, but when it comes to guarding foreign policy and their own pockets, their eyes are wide open," she said.
Mr. Ellis says it's up to Washington to differentiate itself as a trade partner in Latin America and capitalize on any economic fumbling on China's part. If not, he remarked, it wouldn't be the first time that U.S. officials missed a golden opportunity.
"I’ve never been disappointed in our government's ability to shoot itself in the foot."
