In 2009, China overtook the U.S. as the largest trade partner with Brazil. Now, China has replaced the United States as the largest foreign investor in Brazil. This is definitely good news for China, though it does not mean that China will remain in this place for good.

Brazil is richly endowed with many resources and China needs them to sustain its high economic growth. Therefore, Brazil is the ideal place for China to make investments. In addition, Chinese capital has also gone to infrastructure, manufacturing and agriculture.

China is the largest developing country in the world, and Brazil is the largest in Latin America, and they established a strategic partnership in 2004. There should be great potential for cooperation between the two emerging economies, not only in the political sphere but also in economic fields.

In the past several years economic relations between China and Latin America have been developing swiftly. But some Latin Americans complained that China was only interested in purchasing resources and ignored making investments in the region. Now, this criticism should be subdued as China has become the most important investor in Brazil.

However, China’s position as the largest foreign investor in Brazil should not conceal the fact that the Baosteel, one of China’s steel-makers, suffered a setback in Brazil not long ago. In 2007, Baosteel decided to build a steel mill with a Brazilian mining firm. This project would have created 4,500 jobs for Brazil. At first, it proceeded smoothly. But then it met with strong opposition from the local government and residents, who claimed the project failed to meet environmental standards. In 2009, Baosteel had to make the painful decision to abandon the project.

This story tells us that implementing the “going-global” strategy is not an easy job for China, and Chinese investors need to prepare for unexpected hurdles in developing or developed countries.

For Brazil and other Latin American countries, in order to attract more foreign investment from China or any other sources, improving the investment environment is crucial. Some Chinese investors have been grumbling that Latin America is burdened with rising crimes, policy uncertainties, corruption, poor infrastructure, many labor strikes and red-tape.

With more direct investment in Brazil and other Latin American countries, Chinese investors need to undertake more social responsibility and “do as the Latin Americans do” so as to win support from the local communities of the host country.

We also have to recognize the fact that the U.S. is and will be the most important player in Latin America. Investment made in a single year is different from the total stock of investment. That is to say, though China is the largest investor in Brazil this year, in terms of stock, the U.S. is still the largest foreign investor in the South American country.

Finally, it is interesting to recall a mistake made by the Western media in 2004 when President Hu Jintao addressed the Brazilian congress and predicted that China would cooperate with all Latin American countries to increase bilateral trade to $100 billion by 2010 and doubled the amount of Chinese investment in Latin America (around $4 billion at that time). Due to translation problems, however, the Western media reported that China would make $100 billion investments in Latin America.

Later on, some Latin Americans started to get upset with the slow growth of Chinese investment in the region. They even criticized China as a “liar” and accused China of playing lip service and only showing interest in importing natural resources. Personally, I used every opportunity, whether in public lectures or publications, to defuse the inaccurate reporting of the $100 billion investment.

The author is a columnist with China.org.cn For more information please visit http://www.china.org.cn/opinion/node_7075399.htm

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