During July 6-10, 2015, Wu Baiyi, Director of the Institute of Latin American Studies of CASS, led members of the innovation project team which focuses on the overall cooperation between China and Latin America to carry out a 5-day investigation in Shanghai. Wen Xueguo, Executive Vice President of Shanghai Academy, and Ji Weimin, Director of Secretariat of Shanghai Academy, took part in some investigation activities.
The move was among a chain of domestic investigations launched by the Institute of Latin American Studies. It was based on the general deployment and requirements of the CPC Central Committee and the Party group of CASS, on building an open economic system and advancing construction of think tanks with Chinese characteristics, and in combination with the strategic plan for cooperation between China and Latin America and the annual objectives for the innovation project of the institute. With a leading position in openness, financial innovation, modern equipment manufacturing and service sectors, Shanghai has accumulated rich experience in implementing pilot projects. With Shanghai as a sample, the investigation is aimed to make clear the wills and identities of government departments and market players, from the perspective of China-Latin America cooperation, identifying the problems encountered in reality, and exploring future changes in the policy environment and practical solutions to problems.
The investigation team visited 11 organizations in Shanghai, held one report meeting and took part in two academic exchange activities. The interviewed organizations break down into three types: (i) government departments and functional organizations, (ii) enterprises, and (iii) think tanks. During the interviews, the participants exchanged ideas about how to strengthen the overall cooperation between China and Latin America, and address realistic issues under the strategic thinking about building a new open economic system.
China has seen a strong momentum of growth in its economic and trade cooperation with Latin America and Caribbean area. Shanghai, for example, has reported constant increases in investment in Latin America, with the form evolving from the export of labor services to the export of capital and technologies. The investigation shows that the problems and difficulties facing different kinds of market players in the “going global” move are similar to a certain extent.
On one hand, enterprises, governments and research institutes are all concerned about the implementation of overall cooperation between China and Latin America in the context of the “One Belt, One Road” strategy. During the investigation, the project team from the Institute of Latin American Studies introduced the concepts underlying “One Belt, One Road” and the overall cooperation between China and Latin America, noting that it is intended that China relies on the multi-lateral mechanism it has established with relevant countries, actively develops economic cooperation with the countries along the routes, and builds a community of shared interests, destiny and responsibility featuring mutual political trust, economic integration and cultural inclusiveness. The strategic move can not only stimulate the domestic market in the short run, but also create new and huge market demand in the long run. In particular, the Twin Ocean Railroad Connection project is a new starting point for the overall cooperation between China and Latin America, and is consistent with the “One Belt, One Road” initiative.
On the other hand, all sides pay great attention to the uncertainties and possible risks involved in implementation of the plan for the overall cooperation between China and Latin America and other strategies for foreign cooperation: i) The systematic risks in Latin American countries, such as the political risk, institutional risk, foreign exchange risk and security risk; ii) The relatively backward policies serving the “going global” move of Chinese enterprises are not conducive to the quick relief of the risks resulting from China-Latin America cooperation. As mentioned by several interviewed organizations, the current system contains factors restricting the overall cooperation between China and Latin America, such as the excessively long approval process and excessively short period of time for a visit to Latin America, which need to be addressed.
As for the common problems that Chinese enterprises encounter in Latin America, the investigation team offered targeted suggestions and summarized the successful experience of interviewed organizations. As for the foreign exchange risk that both enterprises and financial institutions complain about, the investigation team, while confirming its inevitability, explained the systems, economic and social structures, as well as the internal and external development environment in different types of countries with varying risk levels, and reached a consensus with interviewed organizations that efforts shall be made to promote innovation in the financial system at home, fully implement and utilize the currency swap mechanism China has established with its major economic and trade partners in Latin America, and further expand the scope of signatory countries of currency swap agreements, to better avoid risks.
As for the political risk and security risk in Latin America that Chinese enterprises are concerned about and influenced by, the investigation team introduced typical cases about how to merge into the Latin American society and summarized experience of interviewed enterprises, noting that on one hand, enterprises need to merge in the Latin American society and adapt to local culture, and on the other hand, a risk warning and rights safeguarding mechanism needs to be built at the State level.
As for the relatively backward supporting measures at home, the investigation team found that the interviewed governmental organizations have actively taken actions, and the experience that’s worth popularizing includes i) making full use of the advantages in Internet information (Shanghai Municipal Commission of Commerce, for example, launched a WeChat public account and released information about operation, service and policies that enterprises are interested in through the platform, which has won recognition from the Ministry of Commerce and will be further popularized), ii) setting up a “going global” alliance to connect enterprises, the third party service organizations (such as law firms and financial institutions), foreign consulates in China and all the other stakeholders for deeper cooperation, iii) build a service-oriented government, to serve enterprises through purchasing services (country analysis, risk warning and financial reports) from specialized teams, and iv) establishing networks safeguarding enterprises’ rights and interests to provide feedback to relevant government departments about the problems that enterprises cannot solve themselves. Besides, the financial sector has also done a lot to implement currency settlement, advance construction of the offshore market and clearing market and facilitate purchase of foreign exchange.
During the interviews, all the participants agreed that there would be more opportunities in the future for deeper cooperation between China and Latin America. Besides traditional energy and resources, the demand for constructing a massive number of public facilities in developing countries, the demand for land use and environmental protection arising from population growth, and the increasingly growing demand for tourism at home will be major factors that attract Chinese direct investment in Latin America. During the process, the Chinese enterprises with overseas presence need to learn basic information about local institutions, laws and regulations, market barriers and risk warnings, and, on such a basis, a State-level institutional system needs to be established to avoid the risks that enterprises cannot handle themselves (such as cutthroat horizontal competition and discriminating anti-monopoly probes).
Therefore, all the participants in China-Latin America cooperation need certain adaptive adjustment. Governments shall address three issues: i) changing backward rules and regulations, ii) setting up a specialized information service team, iii) putting in place a more effective coordination mechanism. Enterprises that want to enter in the Latin American market must be well prepared in terms of resources, capital, technologies and standards, so as to merge in the Latin American society and finally realize win-win results. Research institutes need to precisely define their positioning, focus on Latin America and do a good job as think tanks for both governments and enterprises. They shall help governments develop professional policies and improve governance efficiency, and provide enterprises with professional services, such as policy consulting and risk warning.
Regarding the realistic demand arising from China-Latin America cooperation, both the investigation team and interviewed think tanks consider that traditional think tanks feature backward research and slow action, and must strengthen exchanges and cooperation both at home and abroad and learn from each other. For example, Shanghai Institute for International Studies and the Center for BRICS Studies, Fudan University work to spread the voice of China by focusing on core issues, and take a unique path in the form of organization, data collection, information and institutional construction. Shanghai Academy of Social Sciences, as another example, is making an ongoing study on construction of the assessment system and research team.
After five days of in-depth exchanges, the investigation team gained deeper understanding towards the purpose of the activity, which is summarized as follows.
First, the new normal in China’ economy and global economic competition is putting pressure on the construction of the governance system and ability at home. As a pioneer in the construction of a service-oriented government, innovation in the financial system, RMB internationalization and pilot implementation of the free trade zone, Shanghai has seen all types of export-oriented enterprises take the lead in systems, ideas and abilities. So, some of the problems mentioned are representative and worth summarizing.
Second, the cooperation between the Party group of CASS and Shanghai Municipal People’s Government on the setup of Shanghai Academy is a strategic move of CASS to innovate in its system and mechanism, and will greatly help CASS get closer to the front-line practice in China’s reform and opening-up during construction of all the disciplines and better serve the real demand of the CPC Central Committee, State Council and local governments, enterprises and social development through theoretical and policy research. With the further appearance of its “window” effect, Shanghai Academy will have immeasurable strategic values and comprehensive functions.
Third, the launch of the innovation project and major national situation investigations as well as resources allocation requirements will greatly promote development of social sciences, and particularly help researchers of international issues learn more about national situations, have a greater sense of mission and responsibility, improve research ability and change the style of working and academic studies, which is significant to the talent construction and scientific research governance of CASS in the long run.
Finally, the investigation team from the Institute of Latin American Studies deeply feels the urgent need at home for Latin American studies, and, through reaching an intent with a large number of functional departments, enterprises and research institutes on further cooperation, not only corrects the direction of development and gains academic confidence, but also increases the awareness of “getting closer to enterprises at the grassroots level for better policies”.
