BRICS Plus:The Economic Bond Between China and Brazil

By Tatiana Bokova

The economic relationship between China and Brazil stands as a testament to the transformative power of international trade and cooperation. The two states established diplomatic relations in 1974 and have maintained friendly ties since then. In 1993, they formed a strategic partnership to promote mutual interests and strengthen bilateral relations. China has been Brazil's primary trading partner since 2009, with bilateral trade volume increasing from US$9 billion in 2004 to US$164 billion. Additionally, China has invested US$66 billion in Brazil between 2007 and 2020.

The China-Brazil economic partnership has developed rather rapidly in recent years. According to The General Administration of Customs ("China Customs"), the bilateral trade volume between states reached 1.14 trillion yuan (about US$165.6 billion) in 2022, up 8.1 percent year-on-year.

Currently, China and Brazil have reached an agreement on two intergovernmental cooperation documents, the “China-Brazil Strategic Plan 2022-2031” and the “China-Brazil Implementation Plan 2022-2026”. Furthermore, during Brazilian President Luiz Inácio Lula da Silva’s state visit to China in April 2023, the two countries signed 15 bilateral agreements worth approximately US$10 billion. These agreements cover various areas aimed at enhancing bilateral trade and investment.

In 2022, the Ministry of Commerce of China established a provincial and state economic and trade cooperation mechanism under the China-Brazil High-Level Coordination and Cooperation Committee mechanism. This marks the first time the two sides have conducted trade and economic docking. The activities between China and Brazil provincial and state governments, institutions, enterprises, and other organizations are of great significance and have received considerable attention from both sides. The dialogue between the provinces and states is a powerful platform for institutionalizing China-Brazil economic and trade cooperation.

The First China-Brazil Provincial and State Economic and Trade Cooperation Seminar was successfully held on 9 September 2023, during the 23rd China International Fair for Investment and Trade. The seminar aimed to promote profitable industries and project opportunities in provinces and states of both China and Brazil, with a focus on economic and trade cooperation. Results of trade, investment, and technical cooperation in various fields, including agriculture, manufacturing, energy transformation, digital economy, and green and low-carbon development, were also shared.

"No matter how the external environment changes, the mutually beneficial and complementary characteristics of the two economies provide bilateral trade and economic cooperation with an endogenous impetus and an inexhaustible source. This will certainly contribute to the overall development of the two economies," commented Gao Feng, official representative of China's Ministry of Commerce.

China's exports to Brazil include a range of high-tech goods, such as digital processing equipment, air-conditioning appliances, optical instruments, electrothermal devices, electronic chips, electric motors, and generators. Additionally, Brazil imports consumer goods, including telephone parts and accessories, fabrics, air conditioners, converters, televisions, batteries, and other products from PRC. It is worth noting that significant advancements have been made in the agricultural sector. Soybeans have been a consistent driver of export growth to China over the years, and other products such as meat, fruits, and honey have also contributed significantly. Notably, four protocols have been signed between the two states, covering the export of pears and cotton meal from China to Brazil, as well as heat-treated beef and melons from Brazil to China.

Investments play a pivotal role in the dynamic relationship between China and Brazil, serving as catalysts for economic growth, infrastructure development, and technological innovation.

Brazil is the primary investment region for China in Latin America. The high entrepreneurship of Chinese investors is evident, and many well-known companies (e.g. BYD and Great Wall Motor) have increased their investments in Brazil, making positive contributions to promoting local economic development, increasing employment and improving people’s welfare.

Over the past ten years, China’s investment in Brazil has grown at an impressive average annual rate of 30 percent. The People’s Bank of China and the Central Bank of Brazil signed a memorandum of cooperation last year to establish a Renminbi clearing mechanism in Brazil. This initiative aims to promote green and sustainable development in both countries.

Chinese companies have confidently invested in various sectors in Brazil, including oil and gas, mining, electricity, infrastructure, agriculture, manufacturing, and finance. Furthermore, they have boldly expanded their investments into new areas such as high-tech, environmental, and low-carbon technologies. Chinese investment in the energy and information technology sectors has resumed since 2021. Investment and infrastructure construction partnerships are expanding, and the US$20 billion China-Brazil Capacity Expansion Cooperation Fund has been officially launched. Moreover, China’s Ministry of Commerce and Brazil’s Ministry of Economy agreed to sign a memorandum of understanding on sustainable development investment cooperation to promote investment in low-carbon and clean technologies between the two countries.

Despite significant progress in the development of trade and economic co-operation between both states, there are some obstacles to its further development. One of the major obstacles is the competition between the two countries in world markets, especially in commodities. There is also some danger of Brazil’s dependence on the export of raw materials to China, which could negatively affect the country’s economic development in the long term. In addition, inadequate infrastructure, logistical bottlenecks and regulatory complexities increase transaction costs, hindering the competitiveness of both economies.

In addition, fluctuations in geopolitics, trade policy and diplomatic tensions can affect bilateral trade flows and investments, bringing uncertainty to the business environment. Some experts point to the possibility of a conflict of interest between the PRC and the US, which could affect cooperation between the countries. In this case, it is necessary to find a compromise and establish a dialogue between all stakeholders.

In conclusion, Brazil is a crucial trading partner and market for China. The trade cooperation between the two sides is highly beneficial, and their complementary industrial structures have further strengthened bilateral trade relations. Frequent high-level exchanges and policy coordination between Brazil and China have expanded the cooperation space between the two countries, building a model of bilateral friendly exchange based on equal treatment and mutual benefit.

The economic partnership between China and Brazil embodies a complex interplay of challenges and opportunities. While geopolitical uncertainties, trade imbalances, infrastructure deficits, environmental concerns, and intellectual property issues pose formidable obstacles to bilateral cooperation, they also present avenues for strategic collaboration and innovation.

Despite these challenges, both nations are well-positioned to capitalize on emerging prospects and deepen their economic ties. Through diversification of trade and investment, infrastructure development, sustainable practices, technology cooperation, and policy coordination, China and Brazil can foster a resilient and mutually beneficial economic relationship. The two countries will also actively explore opportunities for investment cooperation in the digital economy and green development. Both states will promote cooperation in multilateral frameworks such as the WTO, G20, BRICS, the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries (MACAO Forum), etc.

Source: InfoBrics