China's Surge in Latin American Markets: Policy Challenges and Responses

Theories of economic development have yet to fully explain the remarkable ascendance of China in the global economy. From the standpoint of Latin America and the Caribbean (LAC), China's reform trajectory looks nothing like the market‐based policies adopted in varying degrees in the early 1990s. Rather, China's transformation has been a lesson in experimentation with various policy combinations. This raises key questions concerning how the LAC region can best contend with China's growing presence in its markets. Whereas Mexico and Central America face stiff competition from China in low and intermediate technology‐based industries (textiles, electronics, auto parts), South America has experienced vibrant growth since 2002 led by raw material exports to China, but at the expense of manufacturing exports. This article analyzes new patterns of complementarity and competition in the China–LAC relationship, and it highlights the need for a more targeted competition policy on the part of the latter.