China eyes South America for new trade routes

The inauguration of the Chancay Port in Peru, located near the capital Lima, in mid-November is of significant strategic importance in reshaping global trade.

Construction of the port began in 2019 when China's COSCO Shipping Ports Ltd acquired a 60 percent stake in the Chancay Terminal from Volcan Compania Minera. The investment allowed COSCO Shipping to develop the adjacent ocean area with exclusive rights as the terminal operator. Following the resolution of legal disputes regarding the surrounding port area, this infrastructure promises to cut travel time from China by more than 10 days, reducing it to 23 days. Departures from Shanghai, the world's largest port, will particularly benefit a lot. Products including mineral resources, fruits, soybeans, timber, and frozen fish from Peru will be exported to China through weekly connections.

Peru has long-standing ties with China, dating back to the 19th century when migration brought over 100,000 Chinese to the South American nation. Today, about 8 percent of Peru's population descended from those early immigrants. The cultural exchange is evident, with Chinese words integrated into Peruvian vocabulary, and in recent years, February 1 has been declared as Peru-China Fraternity Day.

These historical ties have paved the way for flourishing trade relations, especially since the signing of the comprehensive strategic partnership in 2013. Trade volume further surged from 2016 to 2023, growing at an average annual rate of 14.6 percent. In the first 10 months of this year, trade peaked at $35 billion, marking a 16.8 percent year-on-year increase. Notably, Peru boasts a GDP of about $270 billion and a per capita income of under $8,000 for around 33 million citizens. China's primary exports to Peru consist of consumer goods and machinery, while Peru exports agricultural products and raw materials such as copper.The Chancay Port, expected to become a major hub in South America, features a depth of around 18 meters, enabling it to accommodate advanced container ships with capacities of 18,000 TEUs. It is the only port of its kind along South America's southwestern coast. Mario de Las Casas, COSCO Shipping's external relations manager in Peru, said that the port is an opportunity not only for Peru but for all of South America.

The port will also benefit Brazil, as the two nations are connected by the Intraoceanic Highway, traversing key agricultural regions like Acre and Rondonia. This connectivity is particularly relevant as China's demand for soybeans continues to rise.

China's exploration of alternative trade routes can be likened to the historical endeavors of Admiral Zheng He during the Ming Dynasty (1358-1644), who explored new routes between India and Africa. Modern challenges such as prolonged geopolitical conflicts have necessitated strategies like the Chancay Port and the China-Europe freight train service launched in 2013.

Chile's mid-June request to join the Regional Comprehensive Economic Partnership (RCEP) underscores the region's economic transformation. Chile already benefits from a free trade agreement with China, facilitating the export of copper, lithium, wine, and fruit, including 377,000 tons of cherries in the 2023-2024 period.

By joining RCEP, Chile will connect its 33 existing trade agreements to the Asia-Pacific bloc, further enhancing China's economic footprint.

In 2023, trade within the RCEP region rose to $5.6 trillion. The region attracted $234 billion in greenfield investments. With anticipated protectionist policies in global trade, China's growing relations with Peru, Brazil, and Chile highlight its strategic pivot toward South America.