China-Venezuelan Economic Relations: Hedging Venezuelan Bets with Chinese Characteristics
Wilson Center Executive Report: Economics and Globalization (2019)
40 Pages Posted: 4 Oct 2019
Date Written: February 20, 2019
China is Venezuela’s largest bilateral lender as well as a source of diplomatic support. Yet for half a decade Beijing has been steadily unwinding its financial ties with the struggling South American nation. In this article, we demonstrate how China has been ensnarled in a creditor trap in Venezuela. For years, China lent to Venezuela with few policy conditions, securing their lending with loan-for-oil deals and wagering that Venezuela’s oil production capacity was a sufficient guarantee for debt repayment. However, under the shaky leadership of Nicolás Maduro, Venezuela’s economic and political dysfunction has grown at the same time that Chinese confidence in the Bolivarian nation appears to have plummeted. China’s recent lending has been defensive, providing some temporary debt relief to Venezuela to protect Beijing’s considerable financial commitments in the country. At the same time, the Asian giant has signaled its willingness to work with opposition leaders. What does the future hold for China-Venezuela relations, in both economic and political terms?
Keywords: economic development, China, Venezuela, global banking and finance, inflation, oil, debt trap
JEL Classification: E65, F34, F35, F55, F65, F68
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