Made-in-China besieged in Latin America

On the very day that I arrived in Lima, Peru’s capital, I heard that people had burnt China-made clothes in the Gamarra market at the end of August. The next day, thousands of people demonstrated on the street, protesting that cheap Chinese clothes had destroyed their jobs.

Gamarra is one of the largest commercial markets in South America, employing tens of thousands of people. Many commodities there are made in China, especially clothes and textiles.

Two days later, I went to this crowded market, where the buildings have floor-to-ceiling windows with colorfully dressed mannequins. One can buy all kinds of commodities at stores on both sides of the street. If you look closely, you can see that most of the goods are made in China.

Jau Kin Siu, chairman of the Sociedad Central de Beneficencia China in Peru told me that there were three reasons for the clothes-burning incident. The clothing industry in Peru has been greatly affected by the Chinese imports. Some clothes traders try to report low prices at the customs and bring down the price of Chinese clothes. And dealers have suffered losses due to smuggling from neighboring countries.

In fact, Peru has strict restrictions on imported Chinese clothes. Although China and Peru have signed a free trade agreement, the clothing industry is excluded from the agreement.

Even so, Peru has felt the pressure from China’s clothing industry in recent years. It is considering starting an anti-dumping investigation into almost all clothing and textile products.

The impact of Chinese clothes on Peru reflects the tensions between China’s rise and global development, especially the development of emerging economies.

Peru’s official data shows that from 2005 to 2012, more than 14,000 clothing and textile factories were closed and over 94,000 people lost their jobs. These  were mostly family workshops and unable to compete with their Chinese counterparts at both national and international levels.

Similar things have happened in other South American countries. Made-in-China goods have been encountering more obstacles when entering the South American market and become the target of anti-dumping investigations.

Over the past decade, the economic relations between China and Latin America have been developing rapidly. Data from the UN Economic Commission for Latin America and the Caribbean shows that China invested more than $15 billion in Latin America in 2010, which was twice the amount between 1990 and 2009, and the investment scale is still expanding.

China’s investment undoubtedly injects a powerful impetus into the economic development of Latin America. But the similar nature of made-in-China and made-in-Latin America has resulted in a backlash.

The manufacturing industry in some Latin American countries has been shrinking in recent years, partially due to made-in-China goods squeezing them out of the market. Unless Chinese enterprises open factories there, they will encounter more trade barriers.

Globally, industrial complementarity is one of the main problems that restrain made-in-China goods from going global. The arrival of Chinese goods has had some positive impacts, like bringing down inflation. But if it harms people’s jobs, the reputation of Chinese goods, or even China itself will be affected.

Employment is high on the agenda in every country. Only when Chinese goods are cheap, well-made, and drive local employment can China’s image be improved.

The author is a senior editor with People’s Daily. He is now stationed in Brazil.dinggang@globaltimes.com.cn