China’s Rising Influence in Global Energy Markets

In the last 25 years, China has gone from providing less than 2 percent of Latin America’s exports to being the second largest trade partner for the region and the single biggest trade partner of South America. This skyrocketing trade relation comes on the back of China’s ambitious Belt and Road global infrastructure initiative, and gives Beijing enormous influence in critical emerging markets. 

In addition to trading goods, China is also a key lender in Latin America, particularly in the context of providing funding for energy and infrastructure projects. Frequently these loans are paid back in kind with oil, with Venezuela being the biggest recipient. Venezuela has received nearly $60 billion in Chinese state loans, almost double the amount of the next largest recipient, Brazil. 

China has also made major inroads in terms of shoring up clean energy supply chains, such as through major investing in the “lithium triangle” region of Argentina, Chile and Bolivia. The United States, meanwhile, has struggled to accomplish similar agreements in South America. Complicated political and geopolitical history within the Americas has seemed to lead many Latin American leaders to favor China over the United States as a trading partner. 

This is augmenting a long-standing concern in the United States that China is gaining too much influence over some of the West’s most pronounced political adversaries. According to a report by the Council on Foreign Relations, “some observers say growing China-Latin America ties are bolstering authoritarian governments, including those in Cuba, Nicaragua, and Venezuela.” One such observer is Evan Ellis, a research professor of Latin American Studies at the U.S. Army War College Strategic Studies Institute, who calls the dynamic “an incubator of populism.” He went on to clarify, ??“It’s not that China’s trying to produce antidemocratic regimes, but that antidemocratic regimes find a willing partner in the Chinese.”

In addition to expanding economic ties across the Global South, China is expanding its soft power across emerging economies and potential political allies. Moreover, the Council on Foreign relations reports that this campaign is highly interrelated with China’s goal of annexing Taiwan as a part of its One China policy. And it appears to be working. The Council reports that “Because Beijing refuses diplomatic relations with countries that recognize Taiwan’s sovereignty, Latin America’s support for the island has dwindled in recent years.” Today, just a handful of countries in the region recognize Taiwan’s statehood. 

While China has been extremely effective in its soft-power takeover of Latin America, this strategy is certainly not limited to that region. For years, China has been working its way toward becoming the “center of gravity for global energy markets” from Southeast Asia to Africa and beyond. And current political and economic aggression on the part of the Trump administration are playing right into these goals. Not only do his tariff policies assure greater global cooperation with China, they also open up huge markets for Beijing.

In gutting climate financing, for example, the United States has opened up a major corridor of opportunity for China to continue to do what it does best, inking deals with emerging economies around the world and becoming entrenched in their energy sectors and economies writ large. “In Trump’s war on clean energy, China (and everyone else) wins,” blared a recent Politico headline. By all appearances, the Trump administration is ceding the clean energy race to China entirely, preferring to focus on other markets instead.

But abandoning clean energy policy could be a major political and economic error for the United States, according to experts. A recent Johns Hopkins study found that if the United States were to repeal the Biden-era Inflation Reduction Act, it would likely “harm US manufacturing and trade and create up to $80 billion in investment opportunities for other countries, including major US competitors like China. US harm would come in the form of lost factories, lost jobs, lost tax revenue, and up to $50 billion in lost exports.” And for China, it would mean all-out domination of global clean energy sectors and a massive expansion in its already prodigious spread of soft power. 

By Haley Zaremba for Oilprice.com