Double Handshake

Zhou Xiaochuan, the head of China’s central bank, has been one of the headline-grabbers from the Inter-American Development Bank (IDB) summit, which is wrapping up today in Medellin, Colombia. Zhou was the new guy at the meeting; China only became a member of the IDB in January, shelling out a US$350 million loan to join.

Zhou swallowed his butterflies and made his first address at the meeting, duly talking about the “huge potential” in China-Latin American trade and cooperation and reeled off some eye-catching statistics: 30% annual growth in bilateral trade since 2001, from US$15 billion to US$140 billion.

Earlier in the week, Zhou made waves by voicing his concerns about the US dollar’s supremacy as the global currency, proposing that the International Monetary Fund consider adopting a basket of currencies to replace it as “super-sovereign reserve currency.” Barack Obama didn’t warm to the idea, but US Secretary Treasury Timothy Geither seemed to. Presumably Zhou and Geither had a bit of time to discuss it further in the de-Pablo Escobar-ed setting.

As if to drive his point home, Zhou announced a US$10 billion currency swap (that is, US$10 billion-worth of yuan and pesos) between his country and Argentina at the IDB meeting. It is the first currency swap between China and a Latin American country. Argentina has an election coming up on June 28, and having the extra funds will give them a measure of security in controlling the peso’s value.

Argentina’s central bank president, Martin Redrado, was quick to point out that the deal is a contingency plan; the country doesn’t need it at the moment. And, another asterisk behind the deal:

“The fact that China represents such a small share of Argentina’s total trade (less than 12 percent) suggests limited impact on FX, but is an important political gimmick at this time (convertibility will remain an issue),” RBS wrote in a research note issued on Tuesday.

Gimmick or no, Zhou proved that even in an international setting like the IDB summit, China will look for ways to extend its reach (and currency priorities).

Image: China Daily

There was one other agreement signed during Chinese Vice President Xi Jinping’s visit to Latin America last week not related to energy or commodities. China named Colombia an official tourism destination, the 9th country in Latin America secure such status. Other countries officially sanctioned by Beijing include: Argentina, Brazil, Cuba, Mexico, Peru, Venezuela, Chile and Costa Rica.

There are lots of impressive projections about China’s number of overseas tourists. From the Latin American Herald Tribune article linked above:

China is the fourth largest tourist-sending country in the world, surpassing Germany, Britain and the United States, and projections are that some 47 million Chinese will travel abroad as tourists in 2009 and 65 million in 2012.

Less impressive, however, is that the only direct flight between China and Latin America I’ve heard about was launched last year: Shanghai-Mexico City. And without direct connections, Chinese travelers to Latin America end up flying far out of their way to avoid layovers in the US and European countries that require transit visas. A friend of mine told me he spent 30 hours flying from Beijing to Lima, with a ten-hour layover in Amsterdam.

Asking Chinese tourists to spend 60 hours in airports and planes for perhaps a week-long vacation is a tall order. And for those who do endure the transit time, jet lag and foreignness of Colombia, I can already imagine their tour bus pulling up to the beach in Cartegena:

“It’s okay, but not as nice as Hainan.”

Image: francescamichael.dk

*A pinyinization of 哥伦比亚欢迎你! or “Welcome to Colombia!”