How much of Brazil does China own?

How much of Brazil does China own?

Praia de Copacabana no Rio de Janeiro, Brasil (Copacabana Beach at Rio de Janeiro, Brazil)

Ever since Brazil and China established official relations in 1974, the two countries have been working closely with each other for decades.

By the early 21st Century, China became Brazil’s largest trading partner. And Brazil developed into one of China’s most important political and economic partners in Latin America.

In 2018, the trade war between the US and China dramatically reduced the trade amount between these two giants. As China sought for a new partner to import many cruel materials, the percentage of Brazil’s export trade to China rose from 21% to 27%, and the percentage of American exports to China dropped from 9% in 2017 to 7% in 2018. After the jump in 2018 and steady growth as the trade war continued between US and China.

The bilateral trade exceeded $100 billion dollars in 2020.

Brazil’s main exports to China are soybeans, iron ore and crude petroleum, whereas the main products China exported to Brazil are telephones, semiconductor, and broadcasting equipment. In the same year, Brazil was the 6th largest import partner of China, and top 20 export partner of China. Furthermore, China is Brazil’s top import and export partner with dominant portions of 22.7% and 31.7% respectively.

As a result, the bilateral economic partnership between Brazil and China has been strong for the past few years.

Although the volatility of the Chinese stock market is overall lower with beta less than 1, the beta of these two countries’ stock markets compared to SPY demonstrates a similar trend in recent years and especially after the pandemic, due to the strong regulation by the central government of China. Due to China’s quick recovery from the pandemic in its early stages, trade between Brazil and China resumed without much interruption and helped both countries to recover from the influence of COVID-19.

Moreover, the economic conflicts between China and the US continued to emerge over the past years.

Including tariffs and various regulations of Chinese companies in the US stock market. Even mainstream Chinese mega caps were restricted. Including, the ontime Warren Buffet favorite, CNOOC. China’s national oil company. So as a result, the deterioration of the relationship between the US and China helped Brazil to develop a stronger trading partnership with China.

However, there are two sides to every coin.

The abundance of products imported from China to Brazil retrained the manufacturing industry in Brazil, since the domestic consumption is largely fulfilled by Chinese products. Moreover, the ​​current President of Brazil, Jair Bolsonaro’s attitude towards China reveals pro-US actions. Such as mirroring the US approach to handle the global pandemic. In the meantime, the US is Brazil’s second largest trade partner, but the gap in Brazilian trade volume between US and China becomes larger every year since many of American and Brazilian export products overlap. The triangle relationship between the US and China also needs to find its balance point for the interest of all three countries. 

In conclusion, there is no doubt that the Brazilian economy remains strongly related to China today. As China has been Brazil’s most important trading partner for the past 4 years. However, the complicated political relationships, especially the tension between China and the U.S. Lastly, may be a potential headwind for the booming trade relationship between China and Brazil.

How much of Brazil does China own? Written by Ziqi Wang Edited by Tianyi Li, Jimei Shen, Hong Cao, Avhan Misra, Ally Tutay

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