The Impact of China on Latin America: Trade and Foreign Direct Investment Channels

11 Pages Posted: 10 Jun 2019

See all articles by Jacopo Timini

Jacopo Timini

Universidad Carlos III de Madrid; Banco de España; Centre for European Policy Studies (CEPS)

Ayman El-Dahrawy Sánchez-Albornoz

Banco de España

Date Written: May 17, 2019

Abstract

The economic, political and institutional ties between Latin America and China have become closer as the Chinese economy has grown. Indeed, as a result of its rapid economic growth, China now plays a systemic role in the world economy. However, since the global financial crisis, the Chinese economic model has shown signs of exhaustion and controlling the rate of growth may prove to be a particularly difficult challenge, taking into account the profound structural transformation to be addressed and the high level of debt of the Chinese economy. Against this backdrop, the article provides an empirical analysis of the effects on the Latin American countries’ growth of their trade and investment relations with China. It also analyses the channels through which the Chinese economic slowdown is transmitted to the region. The study shows that, through the trade channel at least, an unexpected slowdown in China could have a negative impact on economic growth in Latin America.

Keywords: China, Latin America, economic growth, international trade, foreign direct investment

JEL Classification: O11, O47, O54

Suggested Citation

Timini, Jacopo and El-Dahrawy Sánchez-Albornoz, Ayman, The Impact of China on Latin America: Trade and Foreign Direct Investment Channels (May 17, 2019). Banco de Espana Article 7/19 (2019). Available at SSRN: https://ssrn.com/abstract=3401709

Jacopo Timini (Contact Author)

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, 28903
Spain

Banco de España

Alcala 50
Madrid 28014
Spain

Centre for European Policy Studies (CEPS) ( email )

1 Place du Congres, 1000
Brussels, 1000
Belgium

Ayman El-Dahrawy Sánchez-Albornoz

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

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