Monday, May 14, 2012

China's growth a double-edged sword for Latin America

China will be able to grow its economy at around 8% per year for the next 20 years, the World Bank's chief economist Justin Lin said at a seminar in the Chilean capital Santiago, organized by the UN's Economic Commission for Latin America and the Caribbean (Eclac).

This growth will represent both opportunities and challenges for Latin America and the Caribbean (LAC), said Lin, who is also a senior VP at the World Bank.

Since 1979, the Chinese economy has expanded at an average annual rate of 9.9%, while its trade has increased at an average annual rate of 16.3% in the same period, Lin said, a trend never before seen in the world economy.

LAC has benefitted considerably from China's economic rise as the country has had - and continues to have - a huge appetite for natural resources, he said.

Although China will likely continue with strong demand for natural resources in the years to come, demand may not be as strong as in the past because the country's economy will become increasingly more sophisticated and less resource-intensive, the economist said.

Lin also said that China's emergence as the "world's factory" has negatively impacted some countries in LAC, especially those with light manufacturing industries, like Mexico.

But rising wages in China could represent an opportunity for some Latin American countries to re-industrialize in the coming years, if such efforts are supported by governments through pro-active and targeted industrial policies, Lin said.