On Eve Of Obama Trip, China Sees “Enormous” Potential In Brazil


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On Eve Of Obama Trip, China Sees “Enormous” Potential In Brazil

Mar. 18 2011 – 12:19 pm | 418 views | 1 recommendation | 0 comments

President Obama arrives Brazil this weekend for a high-profile visit at a time when  American officials increasingly see China as competitor for influence in the region. To gain some Chinese perspective into the U.S. presidential trip, I exchanged with Bridge Kang, deputy managing editor for Forbes China, the licensed Chinese-language edition of Forbes. Kang this month traveled with a Chinese business delegation to Brazil.

Q. Trade between China and Brazil has been growing rapidly in recent years. What’s behind the trend?

A. China’s GDP growth has been quick, and Brazil offers many resources that China needs.  About 86% of China’s imports from Brazil are oil, minerals and agricultural products and commodities. China’s demand for much of what we currently purchase isn’t about to decline.  From 2008 to 2010, Brazil’s average export growth to China was 40%, and China has become the country’s largest export market.  China expects that it will become Brazil’s largest source of imports this year.

Q. How can China’s exports and investment in Brazil be further strengthened?

A. There is enormous room for China to do more business in Brazil. The country will be staging the World Cup and Olympics in the coming years, and that will require infrastructure that China has expertise with.  Like China, Brazil is building more and more low-income housing, and China has a lot of expertise in that, also.  Brazil needs much more investment in education and healthcare, and Chinese companies can be competitive in those areas.  Consumer goods are more expensive in Brazil than China, and so clearly there is room for Chinese suppliers.

On the investment side, Brazil has agricultural and forestry resources that many Chinese would be happy to invest in.   To that end, the Chinese government should ease restrictions on capital inflows by Chinese investment funds into Brazil.  Rather than only trying to export from China, Chinese companies should build more factories in Brazil itself and hire more Brazilians there. To reduce transaction costs, Brazil and China should liberalize currency trading between the real and renminbi, as China has done with the ruble.

Q. How can Brazilians do more business in China?

A. Brazil can certainly sell more farm produce to China, including commodities and meat.  That competitiveness in food could be extended vertically, and I can imagine that Brazil would also be successful in other parts of food service and distribution.   China can also be a bigger market for Brazilian airplanes.

Q. To what extent are the U.S. and China rivals for business and influence in Brazil?  What business advantages does China have? The U.S.?

A. U.S. companies have operated in Brazil much longer than China’s, and the business they are doing differs from China. In a nutshell, they occupy the high end of the market, and China the low-end. The U.S. is more competitive in autos, services, and some high-tech areas, such as software.  Chinese companies are strong in apparel, machinery and lower-end electronics.  Overall, U.S. trade with Brazil is relatively complementary. By contrast, China and Brazil are both emerging market countries and have more overlap. Brazilian companies worry about competition with China, and the Brazilian government is sensitive to this. About one third of Brazilian anti-dumping cases involve China, and tariffs have been raised as a result. That’s a problem for China.

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