OBELA Analysis

China is an increasingly important partner for the countries of the region, now in trade and investment, especially in energy in South America. China's foreign direct investment (FDI) in electricity distributors in the region is noteworthy.
Despite the dominant U.S. influence in Latin America, China is slowly increasing its economic relationship with the entire region. Its economic expansion strategy is divided into three: trade flows; capital flows in the form of FDI; and the novelty is the establishment of productive enclaves.
China's presence in Latin America is a challenge to the U.S. domination of the region that it has maintained throughout the twentieth century with invasions and economic policies that have retarded growth to levels never recorded since macroeconomic data were available.

This note seeks to analyze from a macroeconomic perspective the causes and consequences of economic dynamics and trade warfare from the aggregated gross capital formation, GDP and the Business Confidence Index.

The trade war affects the business confidence whose measurement in March 2018 expressed as BCI, index of confidence in the performance of future businesses, gave 99.5 and 101.2 for China and the U.S. respectively.

The trade war is nothing more than the product of the economy of a country that was once the world commander and that today, faced with the loss of competitive capacity, seeks to blame its main rival as it did in the 1980s with Japan.  But the difference between China and Japan is substance.

China would make changes to the ownership conditions of foreign investors in its financial sector in 2020. Beijing's signal came in the context of the U.S.-China trade war.

The objective is to internationalize Reminbi. Chinese banking has been opened to foreign investors as part of this strategy and to comply with the agreements made with the IMF.

However, the Chinese government has learned the lesson of the American war against the yen sustained between 1985 and 1990, and has implemented the necessary regulatory mechanisms to open its financial system, with the purpose of countering exchange and speculative attacks.