China Invests Heavily in Brazil, Elsewhere in Pursuit of Political Heft

In the Washington Post, John Pomfret reports that China’s recent upsurge in investment in Brazil seeks to extend its political – as well as economic – clout:

The investments in Brazil reflect China’s “going out” strategy, which seeks to guarantee natural resources for development purposes and to shield the country’s state-owned enterprises from slower growth at home. Flush with more than $2 trillion in foreign exchange reserves, China has directed its state firms to scour the globe for opportunities.

As it does so, China is playing by its own rules, giving its firms an edge over U.S. and other multinational companies bound by internationally mandated restrictions intended to promote fair competition. In addition, Brazil and other developing countries, which once saw China as an ally, are now realizing that Chinese companies are competing on their own turf for resources and market share. And some analysts say the United States has been slow to perceive that China is using investment to build political heft.

In the first half of this year, China’s investment in Brazil topped $20 billion, more than 10 times all of China’s previous investment in the country. That puts China on track to be Brazil’s No. 1 investor for 2010, compared with 29th in 2009. China’s investments are also booming elsewhere — from Peru, where one-third of the minerals sector is in Chinese hands, to Japan, where Chinese mergers and acquisitions quadrupled from 2008 to 2009.


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