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Chavez Death Could Impact Trade, Diplomatic Ties With China

  • Shannon Van Sant

Venezuela is an increasingly important source of fuel for China, and the death of Hugo Chavez may impact trade and diplomatic ties between the two countries.

China’s thirst for natural resources and Venezuela’s need for loans has drawn the two countries together in recent years. China’s Foreign Ministry spokesperson Hua Chunying expressed condolences following the death of Chavez.

Hua said President Chavez was a great leader and good friend of the Chinese people who made significant contributions to Sino-Venezuelan relations.

China had forged a close relationship with the outspoken socialist leader and is Venezuela’s second largest trade partner. China has also become the single biggest source for foreign financing for the Venezuelan government. In turn Venezuela exports half a million barrels of oil a day to China and says it plans to double its oil exports to China by 2015.

“China finds itself having built up a relationship essentially with this very powerful one man leader," said Matt Ferchen, a resident scholar at the Carnegie-Tsinghua Center for Global Policy. "And now that that person is gone, everything is thrown into disarray.”

The state-run China Development Bank, which gives credit lines to many countries around the world, has spearheaded China’s investment in Venezuela. Venezuela has been repaying the $36 billion in loans from China with oil, becoming the fourth largest source of oil for China after Saudi Arabia, Angola and Russia.

Ferchen says the China Development Bank seized an opportunity.

“I see it basically as the China Development Bank having for a variety of reasons gone head first into Venezuela without really any political intentions but being very happy to have had the door opened for them by Chavez,” he said.

The post-Chavez leadership of Venezuela could change these loans-for-oil deals with ramifications for both countries, though Ferchen believes Venezuela’s next leaders will likely maintain the status quo.

“I am less pessimistic about that. I think that China, the China Development Bank and some of the other state owned enterprises that are there have done a fairly thorough job of limiting their exposure to any sort of change in the actual deals,” Ferchen stated.

China’s investment throughout Latin America has surged to more than $10 billion. Much of that investment is focused on natural resource extraction. Last year Chinese officials with the country’s National Development and Reform Commission said the China-Latin America relationship will become even more crucial over time.