Overstretching or Overreaction? China’s Rise in Latin America and the US Response

Remy Maduit | Authors published

Overstretching or Overreaction?
China’s Rise in Latin America and the US Response

Dr. Xiaoyu Pu is an Associate Professor of political science at the University of Nevada, Reno, USA. 
Margaret Myers is the Director of the Asia & Latin America Program at the Inter-American Dialogue, Washington, DC, USA. 

Largely abandoning Deng Xiaoping’s low-profile approach to foreign policy, China has implemented a much more active and assertive global diplomacy over the past few years, generating wide-ranging reactions, positive and negative, both at home and in other parts of the world. Considerable debate has since emerged among Chinese scholars and officials about the extent to which an increasingly assertive overseas posture will be problematic for China’s leadership in the coming years, provoking more adverse responses from host countries and other observers. The Latin American and Caribbean (LAC) region does not factor prominently in these domestic debates. Still, China’s economic relationship with the LAC is drawing wide attention. LAC trade with China hit record levels in 2019 when the region exported USD 141.5 billion in goods to China and imported USD 161.7 billion in Chinese goods.[i] China’s economic relationship with the LAC, along with expanding diplomatic, political, and security-related ties, have nevertheless provoked a strong reaction from the United States. The US reaction to China’s growing dynamism in LAC will very likely boost the region’s importance in domestic discussions in China about the risks of strategic overstretching, especially if the US–China competition intensifies in the region.

This article examines how Chinese elites are interpreting China’s growing presence in the LAC, the various ways in which the US is responding to China, and how the respective views of both powers could affect China’s future approach to the LAC. We begin by examining the internal debate in China about the country’s growing global presence, including in the LAC, with a particular focus on the question of strategic overstretching. As China’s global role expands, the various and mounting obstacles to Chinese overseas engagement have led some Chinese elites to rethink China’s overseas outreach. China’s academic community is actively considering whether and how a rapidly growing overseas profile is leading to rising backlash on the global stage. If so, they wonder, does China face a potential problem of “strategic overstretching” or a situation in which the cost of maintaining the existing system exceeds the benefits?[ii] We consider China’s growing profile in the LAC, highlighting the areas of most significant concern to the US. We conclude with an assessment of the broader implications of the internal debates for Chinese foreign policy and China–LAC relations.

Our study aims to move forward the existing research in several respects. While there are an increasing number of studies on China’s internal foreign policy debates[iii], our research focuses on a particular issue of strategic overstretching. Instead of discussing the general implications of strategic overstretching, we use this framework to examine China’s relationship in the LAC, a region that attracts growing attention from China. While many studies on China–LAC relations focus on the economic dimension[iv], our article examines the relations with a strategic framework. In particular, we investigate whether China’s concerns about strategic overstretching shape its strategy and policy towards the LAC. Regarding policy implications, our study indicates that China’s internal discussions on the perils of possible overstretching, even if not specifically LAC-focused, could promote increasingly fruitful China–LAC relations. Scholarly discussions serve as a useful feedback function for Chinese policymakers, possibly leading to better-informed and accountable overseas engagement.

Rethinking China’s Global Outreach

This section will first evaluate the Chinese debate on strategic overstretching. Then it will discuss the implications of the debate for China–LAC relations. Through the “Going-out Strategy” (走出去战略, zou chuqu zhanlüe) of the early 1990s and 2000s; the Belt and Road Initiative (BRI, 一带一路, yidaiyilu), which promotes trade and investment linkages in almost every country in the world; and the deployment of the Chinese military overseas, among other key policies and developments, China has quickly emerged as a global power. Although China’s growing global role is mainly intended to support its economic growth objectives, an increasingly extensive global footprint has meant that China faces rising challenges from actors in different parts of the world, whether local populations are concerned about China’s impact in certain industries, developing countries seeking debt-related assistance or various communities concerned about negative environmental effects of Chinese projects, among other issues. As China is expanding its presence in many parts of the world, the various and mounting international challenges have led some Chinese elites to rethink China’s global outreach. China’s foreign policy community is rethinking and reevaluating the rising and outsized backlash on the global stage. Does China face a potential problem of “strategic overstretching”? We believe that these discussions reflect a critical rethinking among Chinese elites about China’s rise on the global stage and will no doubt have implications for Chinese activity in the LAC, which some in China consider a “new frontier” of China’s global engagement.[v]

China is, in many ways, well-positioned to advance its global outreach. An inward-looking US Trump administration (2017–2021) and the dampening effects of the pandemic on competitors in key industries may even have generated a new period of strategic opportunity for China to expand its power and status on the global stage.[vi] Indeed, in December 2020, Chinese State Councillor and Foreign Minister Wang Yi signaled continued dedication to the BRI, noting that China’s “determination to promote international cooperation under the BRI would not change no matter how the international situation changes”.[vii] But as China considers its next steps, including concerning the BRI, Chinese elites have also advocated for a rethinking of China’s approach to overseas engagement.[viii] While still aware of the opportunities available to Chinese entities, they worry that China’s international posturing might be too bold and too assertive. In this sense, China faces a dilemma that many other great powers have historically encountered, as Edelstein[ix] explains: acting too soon could generate counterbalancing by other major powers while waiting too long could mean forgoing key opportunities.

What is the relationship between overstretching debate and China–LAC relations? Admittedly, [x]scholars of China–LAC relations are not major drivers of the overstretching debate in China. However, the overstretching debate still has important implications for China–LAC relations. First, even though academic debates in China typically do not change the fundamental direction of China’s foreign policy, some earlier studies indicate that academic discussions do often shape foreign policy implementation.[xi] For instance, China’s implementation of the BRI has become more cautious in recent years. In his keynote speech during the Second International Forum on the BRI, Xi Jingping addressed a variety of rising concerns about the initiative, including sustainability, environmental challenge, accountability, anti-corruption, and market access.[xii] To some degree, Xi’s speech was almost like a comprehensive response to domestic and international feedback on the implementation of the BRI. Second, as we will demonstrate later in this section, many Chinese analysts call for caution and prudence in the implementation of the BRI and China’s LAC policy. Finally, we find that China’s implementation of the LAC policy is becoming more cautious at least in some respects.

Our analysis is primarily based on a qualitative content analysis of various sources. In China’s National Social Sciences Database (国家哲学社会科学期刊数据库, guojia zhexueshehuikexue qikan shujuku) we have identified thirteen academic articles with “strategic overstretching” (战略透支, zhanlüe touzhi) as the article title or keywords, and these articles were published between 2015 and 2020. All these journal articles directly address the topic of strategic overstretching in international relations. In the same database, we have identified seventy-one articles on China–LAC relations with the words “China-LAC relations” (中拉关系, zhonglaguanxi) as the article title or keywords. We supplement these Chinese sources with international publications (including LAC-based scholars’ research). Our analysis focuses on two dimensions: first, how scholars and analysts discuss strategic overstretching in Chinese foreign policy; second, how scholars and analysts discuss challenges and concerns of China–LAC relations in the context of China’s global emergence.

Shi Yinhong, a professor at Renmin University, is among the scholars in China who have suggested that China may indeed face a problem of “strategic overstretch” or “strategic overdraft” (战略透支, zhanlüe touzhi).[xiii] Whereas strategic scholars and historians typically focus on the examples of empires and established powers as they use the idea of “imperial overstretch” to explain the imbalance between strategic commitments and the economic base[xiv] defines strategic overstretching more broadly, as the mismatch between strategic goals and specific tactics. Others in China’s foreign policy community similarly worry about a tendency to overestimate China’s capabilities to remake the international order.[xv]

Chinese scholars have also been critical of China’s broader foreign policy agenda. According to Shi,[xvi] under the BRI, China might have focused on too many projects in different areas, possibly distracting China from critical international policy goals. Others perceive a lack of clear and rational goal-setting. According to Yan Xuetong, a professor at Tsinghua University, to ensure a wise international strategy, China must clearly define its national interests.[xvii] Yan thinks that China is rising, but it is not yet a global power. In this context, China should prioritize its regional interests rather than its global ones. Others have noted that a coherent foreign policy strategy relies on a much clearer vision of China’s own identity and status.[xviii] Chinese Academy of Social Sciences (CASS) scholar Ye Hailin also suggests some incoherence in Chinese foreign policy, noting that Beijing sometimes pursues contradictory goals in various issues and regions, just like a person who is “chasing two rabbits in opposite directions”.[xix]

There are also different interpretations among Chinese scholars of the approaches China should take toward defending national interests, and the effects of those measures. While some worry about China’s overstretching and the potential for international backlash, others emphasize that China’s actions are mostly defensive. According to Zhou,[xx] if policy and action are aimed at defending a country’s sovereign rights, even strategically costly policies should not be considered overstretching. Shi[xxi] nevertheless warns against the prospect of international reaction to China’s perceived assertiveness. Scholars also place a different relative emphasis on the roles of military and economic means in advancing China’s national interest. CASS researcher Gao Chen suggests that China might face a potential danger of overstretching in the economic domain, but that China has not overstretched in the security domain, and ought to be doing more in the area of international security affairs.[xxii]

When considered in these debates, the LAC is generally viewed as part of an increasingly global and sometimes unwieldy BRI. Since the BRI was enshrined in the Chinese Communist Party (CCP) constitution in the 19th Party Congress, state-owned enterprises, academic institutions, and bureaucratic agencies in China have both economic and political incentives to engage overseas. This includes the LAC, which was formally incorporated into the BRI in 2018. By citing a Hong Kong-based analyst, China’s national BRI database (一带一路数据库, yidaiyilu shujuku) highlights the concerns of strategic overstretching and China’s global power projection.[xxiii] Chinese scholars and policy analysts have pointed to many potential problems when implementing the BRI in the LAC. Jiang Shixue, a professor at Shanghai University, China, suggests that China should avoid many inherent risks when extending the BRI into the LAC.[xxiv] A comprehensive China Institute of Contemporary International Relations (CICIR) report also focuses on the multiple barriers to and challenges associated with delivering China’s BRI to the LAC.[xxv] It echoes Jiang’s concerns, noting that the region has been influenced by multiple political and economic crises, which add uncertainty and risks to China’s BRI projects.[xxvi] The report also suggests some challenges associated with strategic communication in the LAC. Due to considerable misunderstanding of the BRI in the LAC, it says, some in the region might not appreciate the specific benefits of the BRI to their communities. In other cases, the LAC constituents do not even know what projects are indeed BRI-affiliated. There are also many negative narratives about the BRI in LAC countries. The situation is further complicated, according to CICIR, by still insufficient in-depth knowledge about LAC society and culture among Chinese officials and the Chinese business community. There is also a lack of coordination among the Chinese government, think tanks, and Chinese companies when implementing the BRI in the LAC, the report suggests.[xxvii]

There is much to suggest that the BRI is, at least in some instances, being interpreted in ways that diverge from official Chinese descriptions. Some in the region have regarded the BRI as simply a rebranding of many existing programs and projects in LAC, and have expressed concerns that the initiative could further exacerbate, rather than reduce, LAC countries’ existing political and economic problems, including challenges such as deindustrialization and persistent trade imbalances.[xxviii]

In addition to concerns about the BRI’s extension to LAC, the US and its sensitivities have featured prominently in China’s foreign policy calculus in the region as well as in Chinese discussions about strategic overstretching in the LAC. As Asia–LAC scholar Gonzalo Paz wrote in 2012, China, with the US in mind, has “clearly exerted political restraint in the region.”[xxix] Others suggest that China has altered its approach in the LAC based on US concerns, strengthening its economic ties with LAC countries where US influence is relatively weak, as a form of soft balancing, and to expand China’s overall economic and political presence in the LAC.[xxx] Chinese officials have also noted the US factor in official statements, suggesting that China avoids confrontation with the US in the LAC. China’s 2016 Policy Paper on Latin America and the Caribbean asserts that the China–LAC relationship “does not target or exclude any third party”.[xxxi] China’s Vice Foreign Minister Qin Gang has also stated that China’s effort to develop a relationship with LAC is not a geopolitical “power play”.[xxxii]

Chinese academics have also assessed the US factor in the China–LAC relationship, remarking on the Trump administration’s critical view of the China–LAC relationship. Cui Shoujun, a professor at Renmin University, suggests that US geopolitical influence in LAC and the intensified US–China competition will constrain China’s LAC policy.[xxxiii] Cui’s colleagues, Li Qingsi and Qiu Longyu analyze Trump’s new “Monroe Doctrine in LAC” in multiple policy domains and its implications for China.[xxxiv] Shanghai-based scholar Niu Haibin notes that the Trump administration had taken a more competitive approach towards China in the LAC,[xxxv] but believes that although Trump’s approach might have worked in the short term, it was not sustainable in the longer run. Many hope that China and the US can eventually accommodate and even complement each other in the LAC. Cao Ting, a research scholar from CICIR, suggests that China’s goal is not to challenge US hegemony in the LAC and that China should therefore avoid playing a zero-sum game with the US.[xxxvi] Cao even provides several proposals to improve the US–China–LAC trilateral relationship, including the resumption of Sino-American official or semi-official dialogue on the LAC, and the possible development of US, European, and Chinese joint ventures in LAC industries.[xxxvii]

It stands to reason that China’s ongoing discussions on the perils of possible overstretching will be amplified in the event of continued US–China competition in the region, especially to the extent that Chinese scholars continue to caution against confrontation with the US. As indicated in the next section, US anxieties about Chinese activity in the region have grown continuously since China seemingly leaped onto the stage in LAC starting in the mid-1990s.

China’s Growing Profile in the LAC and the US Response

Observers in the US and elsewhere have for many years watched with some concern as the LAC region – though geographically and culturally distant from China – became a major trade partner for China, with trade growing from about USD 2 billion in 2000 to nearly USD 149 billion in 2018. China–LAC trade surged in the aftermath of the 2008 global financial crisis, as China faced decreasing demand from Europe and the US for its exports, and has continued growing ever since.[xxxviii] China’s LAC offerings have also quickly expanded from mostly low-skilled manufacturers to a growing range of high-tech products and services, including high-speed rail, 5G telecommunications infrastructure, and ultra-high-voltage electricity transmission lines, among many other cutting-edge products. The LAC region – especially South America – also remains a critical source of natural resources for China. Soy, crude oil, iron, and copper accounted for 59.2 percent of all Chinese imports from the LAC from 2013 to 2017.[xxxix]

In addition to trade, China’s investment in the LAC also gained momentum in the 2000s. Based mainly on Beijing’s food security calculus, Chinese companies have grown their presence across the LAC and other agro-industrial supply chains to better control supply and pricing.[xl] Chinese mining investment in the area is also prolific, as is an investment in both renewable and traditional energy sources.[xli] Chinese firms have additionally expressed interest in developing about 150 transport infrastructure projects in the LAC since 2002, including numerous road, rail, port, and other deals.[xlii] Some of the more sizeable proposals, such as the USD 50 billion Bi-oceanic Railway, stretching between ports in Peru and Brazil, would aim to transport Brazilian soy and other goods to Peru, facilitating trade in essential commodities.

With China’s rapidly expanding presence in mind, both the George W. Bush (2001–2009) and Barack Obama (2009–2017) administrations monitored China’s growing engagement with the LAC. They expressed concerns about certain aspects of the burgeoning relationship, such as the effect of possible Chinese currency manipulation on regional manufacturing competitiveness.[xliii] However, these administrations also suggested that China’s growing presence could positively affect growth across the Americas. The Obama administration sought to increase US competitiveness through more extensive US engagement with the region. As Ben Rhodes, Obama’s deputy national security adviser noted in 2011: “There is a cost to disengagement. It’s very much in the United States’ interest, in the hemisphere’s interest, for us to signal that we’re committed”.[xliv] At the time, Chinese and US officials also upheld a key dialogue mechanism – the US–China Sub-Dialogue on Latin America and the Caribbean – aimed at discussing opportunities for bilateral and triangular cooperation while minimizing misunderstanding and miscommunication.

Concerns about China’s growing presence in the LAC intensified under the Trump administration (2017–2021), along with a perceived view of US and Chinese influence in the LAC and other regions as something of a zero-sum game. This is due in part to the administration’s broader hardline and punitive approach towards Beijing, which overturned four decades of diplomatic practice.[xlv] It is also the result of shifts in China’s approach to the region that has corresponded with the development of the BRI. The region saw a considerable uptick in Chinese activity following the development of the BRI in 2013, for example, often in those areas upheld in Chinese policy documents as the BRI areas of focus, including infrastructure development, financial integration, digital connectivity, and people-to-people connectivity.[xlvi] Growth in Chinese technological trade and investment, in particular, as part of the Digital Silk Road, has been a top US concern, with competition related to the deployment of 5G telecommunications now a point of considerable contention in the China–US relationship. In the LAC, Brazil has been something of a 5G battleground of late, as the US and China assert their respective interests.[xlvii]

Increasingly negative US views of the China–LAC relationship were first evident in the Trump administration’s National Security Strategy, which noted that “China seeks to pull the region into its orbit through state-led investments and loans,” while also expressing concern about China’s support for “the dictatorship in Venezuela”.[xlviii] The shift was also apparent in early speeches by Trump administration officials. Former Secretary of State Rex Tillerson voiced his concerns about China’s engagement with the LAC in January 2018, warning the region about its ties to China and describing Beijing’s ambitions as imperialistic. Later, during an October 2018 trip to the region, then Secretary of State Mike Pompeo expressed concerns about China’s “predatory economic activity” in LAC. The US Southern Command’s 2019 Posture Statement concluded that “Russia and China are expanding their influence in the Western Hemisphere, often at the expense of U.S. interests”.[xlix] The document maintained that in the future, China’s investments in port infrastructure in the hemisphere could potentially enhance its global operational posture and expressed special concern about China’s investments around the Panama Canal.[l]

Growth in Chinese soft power diplomacy in the LAC has also been a growing area of concern for US academics and officials during the Trump presidency. An array of actors in the region – ranging from Confucius Institutes and the International Department of the Chinese Communist Party delegations to foreign-language media outlets, think tank missions, and cultural troupes – is tasked with shaping views of China in the LAC and other regions. As Chinese scholars Zhao Kejin and Gao Xin noted in 2015, as the BRI continues to take shape:

“[d]iplomacy is no longer confined to the domain of foreign affairs, but it has become a multiplayer, multi-task undertaking for China – transformed from a mere governmental function under the control of the Ministry of Foreign Affairs to one that includes the work of the Party, the government, the National People’s Congress, the Chinese People’s Political Consultative Conference, the People’s Liberation Army (PLA) and so forth.”[li]

Growing diplomatic and economic outreach may already be shaping the external environment in ways that will facilitate continued China–LAC engagement. According to Global Attitudes Surveys by the Pew Research Center, nearly all of the LAC’s largest economies (including Mexico, Argentina, Chile, Peru, and Brazil) now have a more favorable view of China than the US.[lii] Some, such as Brazil, have adopted a more favorable view of China for several years. Mexico and Peru began viewing China more positively in 2017.

Despite some limited controversy about the quality and cost of the delivered equipment, China’s extensive medical assistance to the region has also done much to maintain generally positive views of China across the region.[liii] As China–LAC relations scholar Enrique Dussel Peters noted, “the prompt response from China in aiding Mexico has been generally well received,” even amidst concerns about import pricing.[liv] A preliminary scan of Twitter suggests that many of those in the LAC who have expressed discontent about China and COVID-19 are among those who already held critical views of China and/or its role in the LAC before the pandemic. In other cases, such as in Brazil, negative commentary on China and COVID-19 has often been politically motivated – an effort, more than anything else, to demonstrate allegiance to Brazil’s president, who has been openly critical of China’s presence there.

As diplomatic networks grow and economic ties deepen, US officials across the political spectrum also increasingly worry about the degree of Chinese political and diplomatic influence in the region. The US Congress has claimed that China’s relative importance as a trade and financial partner has the potential to affect government-level decision-making vis-à-vis China (see US Bill S.4528). Scholars have also speculated that China’s growing economic leverage in the region has been used to ensure that Chinese companies are awarded key contracts.[lv] Indeed, China’s investment in some of the region’s most critical economic sectors has already led some governments in the LAC to change investment-related regulations to further promote continued Chinese engagement.[lvi] China’s growing global influence is also occasionally evident in international fora. In a joint statement before the United Nations Human Rights Council in July 2020, Cuba, on behalf of fifty-three countries, including LAC nations Antigua and Barbuda, Dominica, Nicaragua, Suriname, and Venezuela, supported the adoption of the law on Safeguarding National Security in the Hong Kong Special Administrative Region by China’s top legislature. China’s security law in Hong Kong has been strongly opposed by officials and lawmakers in the US. Since the passage of the law, then President Donald Trump, by executive order, suspended preferential treatment for Hong Kong, noting that the Special Administrative Region was no longer sufficiently autonomous to justify differential treatment of China.[lvii]

Of great concern to both US officials and industry at this juncture is growing competition with Chinese firms in LAC and in an increasingly wide range of sectors, including tech, finance, and agriculture, where US companies have been active for many decades. These concerns are largely based on a view that China is not operating according to international investment standards, and that some Chinese deals are the result of behind-closed-door, government-level decision-making. China’s propensity for opaque deal-making has drawn criticism not just from the US, but also from LAC non-government organizations and other observers, noting prospects for corruption,[lviii] and concerns about an “uneven playing field” for US and other non-Chinese companies.

US representatives have additionally suggested that Chinese projects in LAC potentially harm regional governance and stability and that China’s support extends a lifeline to leaders with poor records of governance and can exacerbate corruption.[lix] China has been accused, especially by the US government, of propping up a failed regime in Venezuela through the extension of multi-billion-dollar lines of credit. Allegations have also surfaced about China’s lending to Venezuela, suggesting that funds issued to Venezuelan leader Nicolás Maduro have essentially disappeared, without clear benefit to the Venezuelan population.[lx] Others in the US, as well as in the LAC, have mentioned the effects of Chinese investment on corruption in the LAC.[lxi] Chinese tech is also thought to have implications for regional governance. Different from the Soviet Union’s historical outreach in the LAC and other regions, China does not intentionally export its authoritarian model.[lxii] The surveillance systems that China has sold to several countries in the region are in many cases politically innocuous, and even helpful to crime-ridden communities. But with added accessories, they can increase social control and even affect political outcomes.

China’s diplomatic competition with Taiwan in the LAC, though of interest to the US for a matter of decades now, has also triggered an especially strong reaction from US policymakers in recent years. In 2017 and 2018, after a protracted eight-year-long diplomatic truce between mainland China and Taiwan, Beijing successfully convinced Panama, the Dominican Republic, and El Salvador to sever diplomatic ties with Taipei. The LAC remains a relative diplomatic stronghold for Taiwan, but only nine countries (out of fifteen countries worldwide) still recognize Taiwan’s claim to represent the whole of China. In 2019, following China’s efforts to court Panama, the Dominican Republic, and El Salvador, the US Congress passed the TAIPEI Act to strengthen Taiwan’s diplomatic relations and partnership with other countries.[lxiii]

Going Forward

The extent of Chinese engagement with the LAC in the coming years will be based in large part on China’s economic recovery and the post-COVID-19 investment environment in the LAC, among many other variables. The topic of strategic overstretching will also feature in China’s foreign policy discourse, however, with some probable effects on overseas engagement, whether in the LAC or other regions.

China’s internal debates on strategic overstretch will also of course be shaped by a range of factors. This includes the extent to which China–US tensions continue to mount in the LAC and other regions. While the US Biden Administration will adjust its China policy to some degree, resetting the US–China relationship will not be easy and the relationship will be competitive in years to come.[lxiv] US concerns will partially depend on the nature and extent of Chinese overseas engagement in the coming years, resulting in a feedback loop of the sort proposed by Gadinger and Peters.[lxv] If China’s engagement intensifies, so will US anxieties. And if Chinese outreach slows, so might US efforts to shape it. That said, China continues to highlight its dedication to BRI objectives, and the Biden administration has signaled a sustained, tough stance on most China-related matters, including the ongoing trade war. In a December 2020 interview with the New York Times, US President-elect Biden suggested that he would not immediately reverse Trump administration tariffs on Chinese goods imported into the US.[lxvi] However, rather than viewing China’s rise as zero-sum, the Biden administration will ideally seek to work with China on issues, such as climate change and nuclear non-proliferation, which are of existential importance to both countries as well as to the rest of the world. It is promising that in April 2021, the US and China agreed to cooperate on climate change.[lxvii] The Biden administration is also inclined to focus more extensively on advancing US international leadership, including in multilateral fora, and to strengthen partnerships with like-minded allies to exert more leverage over China.[lxviii]

Reactions in the LAC, whether to US claims or the direct effects of Chinese engagement, will also inform the Chinese debate on the nature and extent of future engagement with the region and shape broader policy decisions. Several countries in the region, at the insistence of the US, have taken measures that will potentially limit Chinese activity in certain areas. This includes the election of controversial US candidate Mauricio Claver Carone to head the Inter-American Development Bank (IDB). Claver Carone has indicated that he intends to use the IDB to compete more effectively with Chinese investment in the LAC.[lxix] The US also encouraged Chile to choose Japanese firm NEC over China’s Huawei to construct an undersea cable reaching from Chile to the Asian continent.

LAC countries also have certain concerns about China’s model of engagement. There are three main areas of continued unease among regional and external observers, including China’s strategic influence in the LAC; the North–South relationship dynamic of China’s economic ties with Latin America”; and China’s influence on the “region’s liberal order”.[lxx] In addition to these broad areas of concern, some of which are of seemingly greater importance in Washington than in the LAC, are other points of contention. In most cases, these are reactions to specific instances of Chinese activity, such as the effects of extractive projects on local communities. There is some prospect in the LAC for stronger resistance to Chinese engagement, however, including as concerns China’s continued involvement in Venezuela – especially in places like Colombia, which have been heavily impacted by Venezuelan migration. China’s growing dominance in the electricity production and transmission sectors in Peru and Brazil, or other strategic sectors in the region, might also be a point of controversy for LAC audiences in the coming years, especially if the trend persists. Chinese illicit activity in the LAC, such as the illegal fishing carried out by a Chinese fleet off the coast of Ecuador and Peru in the summer and fall of 2020, could also generate increasingly strong, negative reactions among LAC communities. Expansive adverse feedback would certainly impact China’s calculus in the LAC, while also shaping China’s internal debate on overstretching.

Yet, there is little to suggest that the many concerns that the US has articulated about Chinese engagement, as outlined in the previous section, are widely shared across the LAC. Despite consistent warnings from the Trump administration, regional views of China have improved – not worsened – in recent years, despite increasingly negative views of China in other parts of the world. And where concerns are perhaps shared, the benefits of potential investment would appear to outweigh the costs. As Stanford University’s Andrew Grotto[lxxi] noted about international views on Huawei and 5G, many US allies have a different threat perception of China, often informed by their strategic interests. Therefore, different countries have different conclusions about the risks, benefits, and acceptable trade-offs of Huawei and 5G.[lxxii] When considering whether to use Chinese 5G infrastructure, some countries and certainly internet service providers in the LAC are willing to accept the risk of surveillance in exchange for lower-priced equipment.[lxxiii]

The failure of US views to fully resonate in the LAC is also possibly due to a view among LAC officials that certain elements of the China threat, including China’s supposed use of “debt trap diplomacy,” have been exaggerated by US officials. Debt trap diplomacy is generally defined as deal-making that provides a lender with outsize leverage over a country’s political or economic decision-making. As then US Secretary of State Mike Pompeo said in a speech in Chile: “China, Russia, they’re showing up at the doorstep, but once they enter the house, we know they will use debt traps, they will disregard rules and they will spread disorder in your home”.[lxxiv] In the case of the LAC, however, examples of debt traps, as defined above, are exceedingly limited. China has provided extensive credit to Argentina, Brazil, Ecuador, and Venezuela, but the vast majority of these countries’ sovereign debt is owed to other creditors.[lxxv] In the LAC, China has provided most state-to-state lending to Venezuela, and may indeed have some sway over the Nicolás Maduro government’s decision-making, but China also has much to lose from its extensive ventures in the oil-rich nation.[lxxvi] China Development Bank (CDB) has had to work with Maduro on several occasions to ensure some degree of solvency. Most recently, in August 2020, as Venezuela’s oil production screeched to a near halt, Venezuela and CDB agreed to a grace period for oil-based payments on USD 19 billion in loans.[lxxvii] What is more, rather than expanding its financial presence in the region, China’s policy bank (CDB and Eximbank) finance has been on the decline for the past years. These banks, which together issued over USD 137 billion in loans to LAC governments since 2005, promised only USD 1.1 billion in loans to the government and state-owned enterprises in the region in 2019.[lxxviii]

Even the most commonly referenced examples of Chinese “debt trap diplomacy” do not support the US narrative, as Deborah Brautigam[lxxix] and others have argued. Sri Lanka’s default on Chinese debt is the most common example of a possible “debt trap diplomacy.” Sri Lanka’s default on repayments for the Hambantota Port was largely viewed as providing Chinese creditors with considerable equity in the strategically important asset.[lxxx] The reality is far more complex, however. According to Brautigam,[lxxxi] “Privatizing 70% of Hambantota to CM Ports for [US]$1.1 billion was one way in which foreign exchange could be brought into the country, allowing a balance of payments crisis to be staved off. It was not an asset seizure.” Moreover, the money obtained through leasing Hambantota port was used to increase Sri Lanka’s dollar reserves in 2017 and 2018, largely in preparation for external debt servicing as the country’s international sovereign bonds reached maturity in early 2019.[lxxxii]

With so many variables at play, it remains to be seen which Chinese views will come to dominate the overstretching debate. The definition of overstretching may end up being exceedingly narrow depending upon China’s prioritization of its national interests. According to the framework by Chinese scholar Zhou,[lxxxiii] as earlier referenced, a policy intended to defend one’s national interests should not be considered overstretching. Based on Zhou’s rationale, diplomatic competition with Taiwan should not be regarded as strategic overstretching, no matter the local or geostrategic consequences. Indeed, the security domain in the LAC is regarded by most of those engaged in this debate to be an area in which China has yet to overstretch.

This is a rational assessment, given the limited nature of Chinese security engagement in the LAC. However, persistent and growing US sensitivities could certainly complicate further engagement in this and other areas. At present, China’s weapons sales to the LAC, which include sophisticated equipment and weapons, including radar, armored personnel carriers, multiple rocket launch vehicles, combat aircraft, and military ships, still make up only 3 percent of the combined North and South American arms import market. China’s recently renewed space program with Argentina, which supports a China-built and China-operated space facility in Neuquén province, is however an indication of growing engagement in the region’s security domain. Also, US officials have reacted strongly to interest among Chinese companies in investments with potential dual (civilian and military) use, including certain port projects in Central America. Chinese elites’ views of the relative risk to rewarding these and other projects will no doubt shape further activity in this area.

Even if Chinese scholars do not assess an overstretching problem in the LAC, the broader Chinese debate on overstretching could very well have a mitigating effect on Chinese investment in the LAC, or at least alter the nature of China’s overseas activity. As it stands, some limited steps have already been taken by Chinese authorities to try to ensure increasingly positive investment-related outcomes in host countries. For example, China’s National Development and Reform Commission (NDRC) has indicated that it is monitoring overseas investment through online searches, formal inquiries, interviews, and random inspections. “Major negative events,” such as casualties, asset loss, or incidents that affect China’s image, require a formal report from the companies involved.[lxxxiv] Several other supervisory entities have indicated that they also are monitoring firm behavior. These include the Ministry of Commerce (MOFCOM), the People’s Bank of China (PBoC), the State-owned Assets Supervision and Administration Commission (SASAC), and the China Banking and Insurance Regulatory Commission (CBIRC), among others. Also, Chinese embassies and consulates have a role in the Ministry of Foreign Affairs to report violations of NDRC guidelines. Several Chinese entities have also issued guidelines to orient the flow of Chinese financing abroad.[lxxxv]

Conclusion

China’s global emergence has generated a variety of reactions. Chinese elites are still starting to rethink the strategy and tactics of China’s rise. One particular issue is whether China has faced a problem of strategic overstretching. While most previous studies focus on the historical cases of strategic overstretching, our article examines the implications of strategic overstretching for China–LAC relations.

China–LAC relations are still very much evolving and will be shaped, among other things, by domestic debates in China about the effects of an increasingly assertive Chinese foreign policy. While China’s internal academic discussions do not change the fundamental direction of China’s foreign policy, these discussions typically shape the implementation of specific policies. Academic discussions serve a feedback function for Chinese policymakers, which might potentially lead to better-informed international engagement.

Related to China’s internal discussions of overstretching, we find that China’s implementation of some global projects (especially the BRI) has become more prudent. The sense of caution is also reflected in many Chinese publications on China–LAC relations. Chinese analysts emphasize that China should avoid confronting the US in the LAC. As China extends the BRI to the LAC, Chinese analysts also highlight the potential risks of BRI projects. Chinese concerns about US competitions and the BRI are also confirmed by some LAC-based scholars’ research.[lxxxvi]

Our analysis also sheds new light on China–US–LAC relations. Although the LAC does not feature especially prominently in internal debates on strategic overstretching, US reactions to Chinese engagement in the region certainly do. Chinese perception of US concerns in the LAC has given Chinese policymakers and analysts incentives to be cautious about China’s growing presence in the LAC. As the Biden administration is rethinking its overall strategy versus China, it is important to recognize competition while avoiding overreactions. US–China competition in the LAC will persist for the foreseeable future, and there is considerable bipartisan support in the US for a continued tough policy on China. However, the Biden administration might modify the Trump administration’s approach towards China and the LAC. Our analysis demonstrates in which aspects US concerns are reasonable, and in what sense some reactions might be overblown. Even though US–China interactions in the LAC will largely remain competitive, the US and China could potentially avoid counterproductive policies while also pursuing pragmatic cooperation.

While scholarly efforts to document possible consequences of foreign policy may help China implement a prudent international strategy, there are still uncertainties. If the LAC begins to feature more extensively in its own right as China’s footprint in the region expands, can China maintain prudence in implementing its BRI in the LAC? Can the US and China avoid confrontation in the LAC as they intensify competition globally? Chinese companies have already encountered plenty of local-level resistance in the LAC to proposed trade deals and investments. Despite some concerns about the overall effects of China’s model of engagement on the region’s economic and political well-being, most LAC pushback is, thus far, project specific. But if resistance from the LAC becomes more widespread, will there be any fundamental adjustment of China’s approach to the LAC? Many questions remain to be investigated in the future.

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