A new report indicates increasing concern among high-ranking officials in China that Venezuela’s economy may soon collapse, dragging an assortment of Chinese investment projects down with it.
The Wall Street Journal spoke to a number of unidentified officials who expressed alarm at the growing unrest against the socialist government of Venezuela, largely a result of President Nicolás Maduro’s failed economic policies. One official said he believed “consensus was that no new money was going to be invested” in Venezuela because China had decided to “let them fall.”
Venezuela currently is believed to have the world’s highest inflation rate, and its economy is contracting at an alarming rate. The Journal cites the International Monetary Fund (IMF) as expecting the entire economy to contract by ten percent before the year is over. Maduro has repeatedly appointed economic officials who have done little to solve the problem and much to exacerbate international alarm, such as when he appointed to a finance ministry position a “professor” who had written a paper in which he denied the existence of inflation.
Through this, China has been publicly supportive. The Journal notes that China’s Foreign Ministry denied the contents of their article or that they are thinking of pulling support out of the Latin American country. The relationship, the ministry asserted, has “brought about practical benefits for both sides.” China committed to investing up to $20 billion into Venezuela within the next decade in 2015 and hosted Venezuelan economic officials in Beijing as recently as August.
“China and Venezuela on Tuesday agreed to bolster cooperation on logistics and energy at the conclusion of the meeting of the 5th Technical Secretariat of the Venezuela-China High-Level Mixed Committee (CMAN),” Chinese state outlet Xinhua reported in August, quoting Maduro as stating that the bilateral relationship was “spiritual, cultural, and deep.” The meeting resulted in an agreement to “see 5,000 Chinese vans and 1,900 heavy refrigerated trucks added to the Venezuelan distribution fleet,” Xinhua noted.
Venezuelan officials made clear they would rather see a world in which China, and not the United States, is the world’s leading superpower. “Venezuela is betting on a future and in this future, China will permanently be there. This future is characterized by the Bolivarian Economic Agenda which is the road map that we have drawn up to face this (economic) crisis and in order to change our country’s production model,” Vice President for Planning and Knowledge Ricardo Menendez said in June.
That commitment to overthrowing the current economic order may not be enough to keep China investing, however. “At all levels in China, there’s a huge worry about what is happening in Venezuela and an understanding that a change in government is needed,” a source told the Journal. The result may be a cut in lending. Venezuela is already struggling to pay back over $50 million in loans and has attempted to negotiate deals that capitalize on its plentiful oil reserves to keep money flowing in.
A change in government may benefit the Venezuelan economy greatly, but may not necessarily also aid China. The current government is staunchly socialist, with Maduro continuing to cultivate a number of dubious alliances cemented during the Hugo Chávez era with China, Syrian dictator Bashar al-Assad, and the government of Iran. A new Venezuelan government may not be as willing to work with leftist governments, as the opposition has repeatedly argued against socialist policies during protests and called for an end to political repression as common in China as it is in Venezuela.
Cutting potential loan opportunities is just the beginning of this extraction of Chinese influence out of Venezuela. Chinese companies have also begun taking their employees out of Venezuela. That process, the Journal notes, is not only a product of Chinese government economic policy but a response to the genuine safety concerns Chinese workers in Venezuela routinely express.
Caracas is the murder capital of the world and, as visible foreigners, many Chinese feel they are targeted for muggings and kidnappings. Some Chinese companies have attempted to publish safety tips for their employees that are more confusing than helpful, such as state-owned Sinohydro Corp., which urged its workers to “avoid traveling by yourselves” but also “avoid traveling in groups.”
As a result, many are moving to nearby Colombia. The Wall Street Journal cites the Federation of Chinese Associations in Venezuela as stating that over 30,000 Chinese nationals have moved out of the country in the past two years.