China and the Middle-Income Trap in Latin America

Abstract

Abstract This chapter examines the evolving economic relationship between China and Latin America and the ways in which this may assist or hinder the latter in exiting the ‘middle-income trap’. The relationship has promoted a clear increase in the region’s dependence on a narrow range of commodity exports, one of the potential causes of the trap. However, the view that natural resource–intense sectors in Latin America have no potential for technical change has been challenged. This, together with little evidence of a Dutch disease effect resulting from such exports, calls into question the idea that the region’s growing economic ties with China are necessarily constraining. Still, Chinese competition has posed a challenge to the development of manufacturing and technological upgrading through exports of more sophisticated industrial products. Better policy design is needed to enable Latin America to take more advantage of its expanding economic relationship with China.