137
China and the global expansion of green
energy technologies: EVs, batteries and
lithium investments in Latin America.
China y la expansión global de las tecnologías de energía
verde: vehículos eléctricos, baterías e inversiones en litio
en América Latina
1.- University of Hong Kong ORCID: 0000-0003-0282-468X.
Ricardo Lopes Kotz
1
Recibido: 17/11/2024 y Aceptado: 13/12/2024
138
139
China se ha convertido en un líder mundial en baterías de litio y ha utilizado estas capacidades para
desarrollar un importante ecosistema de innovación en vehículos eléctricos, cuyas empresas se están
expandiendo al mundo. El factor clave para la promoción exitosa de los vehículos eléctricos en China
ha sido la política industrial. Las tecnologías verdes pueden verse como la nueva frontera para la
expansión global de las empresas chinas debido a sus capacidades tecnológicas y de innovación y
América Latina es uno de los principales destinos de la inversión extranjera directa (IED) en vehículos
eléctricos, litio y baterías. El presente artículo examina el panorama y las tendencias de la IED
realizada por empresas chinas en la región, con el objetivo de analizar la posibilidad de que los países
latinoamericanos integren la cadena de valor liderada por China en energía verde como parte de sus
procesos de desarrollo y políticas industriales. Los resultados son preliminares, pero inferimos que hay
una nueva fase de participación China en América Latina post-Covid, con un cambio en el perl de la
IED: 1) las inversiones relevantes ahora se realizan no solo a través de empresas estatales, sino cada
vez más realizadas por empresas privadas; 2) los sectores de destino están cambiando lentamente
del petróleo, el gas y la agricultura hacia fuentes de energía renovables, vehículos eléctricos y minería
de minerales estratégicos; 3) los ujos de inversiones son menores en la cantidad total, pero hay un
mayor número de proyectos en la región en general; 4) los proyectos de IED se dirigen cada vez más
a sectores intensivos en conocimiento/tecnología, en lugar de sectores intensivos en capital, con un
aumento gradual de la IED totalmente nueva como modo de entrada.
China has become a global leader in ion-lithium batteries and has used these capabilities to develop
an important innovation ecosystem in electric vehicles, which are now expanding to the world. The key
driver to China’s successful promotion of electric vehicles has been industrial policy. Green technologies
can be seen as the new frontier for the global expansion of Chinese rms due to their innovation and
technological capabilities and Latin America is one of the main destinations for foreign direct investments
(FDI). The present article examines the landscape and trends of FDI conducted by Chinese rms in the
region, analyzing the possibility for Latin-American countries to integrate Chinese-led value chain in
green energy as part of their developmental processes and industrial policies. The key ndings are
preliminary,: 1) relevant investments are now conducted not only through state owned enterprises,
but increasingly made by private rms,; 2) sectors of destination are slowly changing from oil, gas and
agriculture towards renewable energy sources, electric vehicles and mining of strategic minerals; 3)
the ows of investments are smaller in the total quantity, but there is a higher number of projects in
the region overall; 4) the FDI projects are increasingly directed in knowledge/technologically intensive
sectors, instead of capital intensive ones with a gradual increase in greeneld FDI as the mode of entry.
PALABRAS CLAVE: China; vehículos eléctricos; upgrading; inversiones extranjeras directas; América
Latina.
KEYWORDS: China; electric vehicles; upgrading; foreign direct investment; Latin America.
Resumen
Abstract
140
1. INTRODUCTION
China has become a global leader in ion-lithium
batteries and has used these capabilities to develop
an important innovation ecosystem in electric
vehicles, which are now expanding globally. CATL
is the most well-known successful case in battery
production, followed by BYD, which produces
both batteries and cars, in a business model of
vertical integration. Another important Chinese
player in EVs market is Great Wall Motors. Taken
together these rms have invested signicant
funding in foreign direct investment projects for
manufacturing and assembly, mainly in Argentina,
Brazil and Chile. Other important Chinese actors
in this landscape include mining rms such as
Tianqi Lithium, Jixing Mining and Ganfeng Jixin
(Sanderson, 2022; AEI, 2024).
Green technologies and eorts towards
decarbonization can be seen as a new frontier for
the global expansion of Chinese rms due to their
innovation and technological capabilities in these
areas, and Latin America has been a region of
growing interest in this regard. Considering these
points, the present article examines the landscape
and trends of FDI conducted by Chinese rms in
the region, aiming to analyze the possibility for
Latin-American countries to integrate Chinese
FDI in green energy as part of their developmental
path and industrial policies.
Ford’s popularization of combustion vehicles led
the way for the creation of immense wealth for oil
companies in the XX century. The popularization
of electric cars could create wealth for the mining
companies that access the minerals needed
for producing the batteries for these vehicles,
something that will bear a cost for the environment.
The lithium-ion battery is a game changer due to
its capacity for powering digital devices, the fact
of being small-sized, safe, and oering a long
time of use (autonomy) before needing to be
recharged. These batteries have made possible
the extensive production and use of electric
vehicles. Investments in R&D capacity for ion-
lithium batteries and governmental subsidies for
the purchase of electric vehicles are the main
policy drivers leading the development of these
sectors. In 2021 China sold half of the world’s
EVs. However, this development has not been
without costs. From 2009-2019, the total cost
for the government stood at just under 100 billion
USD. Almost half of the total corresponded to EV
purchase subsidies (Dezan & Shira associates,
2020).
As the industry’s capabilities grew, subsidies have
been lowered and R&D investments have risen.
Between 2018-2020, each year’s R&D spending
was almost six times the spending on R&D
for the 2009-2017 period, showing a growing
concern with innovation and upgrading, which
fuel the global expansion of its rms. The research
will include a theoretical framing regarding the
importance of technology and upgrading and has
a focus on qualitative analysis using the case study
method mentioning the main investments in the
countries in the region, semi-structured interviews
were conducted with specialists in related elds in
order to ascertain the nature and trends of China’s
FDI in Latin America.
The article will be structured as follows: the rst
section will analyze the importance of technology
for economic growth while reviewing concepts
such as upgrading. It is an important topic as
technological capabilities are the reason that
explain why China is able to invest abroad and
compete with established developed countries
in key strategic sectors. The second section will
analyze the development of ion-lithium batteries in
China; the third section oversees the upgrading in
the EVs sector. And the fourth section verses on
the general trends of Chinese investments in Latin
America’s energy sector, with a focus on specic
projects, located mainly in Argentina, Brazil and
Chile. The conclusions analyze all these facts and
present the preliminary results of the research
summarized in four key points.
141
2. ANALYTICAL FRAMEWORK: THE IMPORTANCE OF
TECHNOLOGY AND UPGRADING
Technology is a fundamental input of economic
growth, as it engenders productivity gains across
dierent sectors. In this sense, technological
upgrading provides stimulus and supports the
process of economic development. From the
perspective of late industrializers or emerging
countries, it is a necessary input in order to promote
catching up with global markets. Domination of
the leading technologies of each historical period
allows nations to capture the higher value-added
activities and the resulting rents in order to foster
economic growth.
Solow (1994) was perhaps one of the rst to
point out the importance of technical advances
for sustained economic growth, by separating
this factor from the inputs of capital and labor
which were prominently featured in classical
economic models. Romer (1990) follows on this
thread, but presents an endogenous model of
economic growth, highlighting the importance
of human capital for technological change.
However, in a sense, this tradition dates back to
Joseph Schumpeter’s “Capitalism, Socialism, and
Democracy” (1942), which analyzes economic
change and the role of innovation and technology
in increasing productivity. One main subject that
remains across these studies is the prevalence
of state-led policies or market institutions as
propellers of technological change.
Market-led growth often focuses on the role of
rms as actors in the process of technological
development, while also recognizing the
importance of institutions. Institutions are the
rules of the game which help to organize the
economy and the market (North, 1990). Examples
include securing property rights, an adequate
system of intellectual property, opportunity for
high quality education, among others (Acemoglu
and Robinson, 2012). The State-led growth
perspective relies on public policy and the agency
of the state, through industrial policy and other
mechanisms, to foster growth and innovation.
The concept of the developmental state was
coined by Chalmers Johnson (1984) to explain the
development of Japan in the post-War period and
later has been applied to other cases in Southeast
Asia, such as South Korea, Taiwan, Singapore,
Hong Kong, among others (Haggard, 2018).
Technology policy is a tool by which the State acts
to foster the development of specic economic
sectors that are deemed strategic for a country. It
can be seen dierently from the perspective of a
developed country and another who is still trying
to catch up to the international technological
frontier. However, the perception that technology
is central for economic growth is one key aspect.
Technology policy aims to bridge the gap between
investments in basic science and research on one
hand; and the activities of rms and industry on
the other (Lundvall and Borras, 2005).
These policies are based on the notion that market
failures need some form of intervention in order to be
solved and that markets may not be the most ecient
allocators of resources for invention and innovation.
Arrow (1962) arms that markets tend to underinvest
in new technologies due to the unpredictability of the
resources and the time that needs to be invested in
order to produce protable results from R&D. The
author rearms the importance of the public sector
in this process, in order to maximize spillover eects
as well as promoting invention and innovation as
public goods.
Even if investments in innovation do not generate
immediate gains through commercially viable
products, they can spillover to other activities over
time. Mazzucatto (2014), for example, shows the
importance of the investment in military research
in the United States (conducted mainly by the
government agency DARPA) that ended up creating
many technologies, such as infrared waves, the
GPS, the internet, touch screen technology and
even computers. These technologies were then
scaled to civilian and commercial use, engendering
new whole industries and high protability in
subsequent decades.
142
Furthermore, in recent years technology is not
only linked with actual products but is intertwined
with the ability to produce knowledge. Knowledge
and information can be seen as commodities
or be characterized as intangible assets, such
as patents, trademarks, industrial designs,
marketing; in addition to other forms of knowledge,
such as business strategies, organizational
capacity, management tools, among others is an
important fact that contributes to prosperity and
development (Stiglitz, Greenwald, 2018).
The national systems of innovation approach, on
the other hand, looks at the interaction between
the state, national rms and research institutions
aiming at a broader paradigm for analyzing
innovation. Knowledge is assumed to be the
central element for the economy, consequently,
learning and innovation are the central processes
through which knowledge is reproduced and
applied into the generation of value through
goods and services. Learning occurs in a socially
embedded context and in a dynamic process
that cannot be dissociated from the modern state
(Lundvall, 2010).
In this sense, the systems of innovation approach
present and encompassing view on the subject,
by arming that countries that would be best
positioned to stimulate innovation would foster
a combination of three elements working
together: 1) the national economy and public
policy; 2) institutions such as universities and
research centers, and 3) private rms. The mutual
interaction between these dierent actors with their
respective goals and perspectives would be the
best scenario conducive to innovation (Lundvall
and Borras, 2005). None of the three elements
of an Innovation System is more important than
the other. Depending on the historical period and
the technology in question, one of these three
elements might have a greater role in generating
either radical or incremental innovations in a given
sector.
According to a Schumpeterian view, there are
breaking points of technological change which
bring about new economic paradigms. These
radical innovations alter the structure of dierent
national economies which later expand these
to a set of incremental innovations across many
industries (Perez and Soete, 1988; Perez, 2001).
In each of these stages, dierent possibilities arise
for late-industrializers and their rms, depending
on the responses, catch-up strategies, and the
global geopolitical context. These moments of
rupture and change in technical paradigms would
be the best window of opportunity for latecomers
to try to leapfrog into new products and sectors
that surpass the international technological frontier
(Lee, 2019).
According to Lee (2019) catching-up means trying
to close the gap between lower and higher-income
countries and although the process involves a
certain aspect of emulating the technologies from
the leading nations, this is not enough. Catching
up involves taking dierent paths, adapting
technologies into new usages or new scales and it
can also involve leapfrogging. By leapfrogging one
understands a process in which a less advanced
nations manages to produce a technology that
transcends the international frontier, going even
beyond that which is being produced in the
leading nations.
Upgrading can occur within economic sectors,
in the case that a country becomes more
sophisticated, more ecient and/or adds more
value to a product that is already being made.
Upgrading can also occur between economic
sectors, in the case that a country or rm ceases
to produce lower value-added goods and moves
into other economic sectors. Henry Yeung (2016)
cites the example of Samsung, which started as
a trading company focused on food and textiles
and eventually upgraded into high value-added
activities such as the production of smartphones
and computers, for example.
Overall, these perspectives emphasize dierent
aspects regarding the importance of technology
for economic growth and prosperity. There
are dierent ways to promote innovation and
upgrading if these matters are analyzed through
a predominantly market-led or state-led lenses.
Some perspectives emphasize the importance of
institutional factors such as property rights while
others see the importance of technology policy in
order to address market failures. Pundits studying
143
cases of late-development point that industrial
policy might be one of the most valuable tools in
order to foster catching-up processes. Among
other factors, (neo) Schumpeterian perspectives
point to the importance of specic windows
of opportunity, during which latecomers can
approach the international technological frontier.
Finally, the national systems of innovation approach
aim to bring a holistic perspective for studying
innovation, growth and technology, presenting a
framework that considers the importance of rms,
universities and national institutions.
The ion-lithium battery has been a game changer
due to its capacity for powering digital devices,
the fact of being small-sized, safe, and oering a
long time of use (autonomy) before needing to be
recharged. These batteries have made possible
the extensive production and use of electric
vehicles. Although rst invented in the 1970’s in the
context of growing environmental concerns about
climate change and the high dependence of oil in
economic systems, it wasn’t until the mid-1980’s
that these batterie became eective to be used in
vehicles. ExxonMobil and BP, two of the biggest
energy companies in the world, were among the
rst entities to fund research in the search for
alternative energies, predicting that combustion
vehicles would soon become obsolete.
However, in the 1980’s the tide turned with falling
oil prices fueling yet another round of global
expansion of combustion vehicles. According to
Sanderson (2022), companies investing in ion-
lithium batteries at the time realized that it would
take too long to see returns remotely similar to
those that could be rapidly achieved by investing
in oil and betting on internal combustion vehicles,
due to the fact that at that point, the investment
in ion-lithium batteries was basically still working
in the basic science stage of innovation. It wasn’t
until 1985, with the innovations made by Oxford-
based chemist John Goodenough that ion-lithium
batteries would become suitable to be used in
vehicles.
3. THE STRATEGIC IMPORTANCE OF ION-LITHIUM
BATTERIES: THE CASE OF CATL
His invention would pave the way for Japan-based
scientists to conduct secondary innovations
enhancing the batteries capacity, operational
system, and weight, which would ultimately lead
to the rise of electronic consumer products in the
1990’s and beyond, initially led by companies
such as Sony, Toshiba, among others. The
basic science in lithium-ion batteries, which is a
crucial step for any innovation, was developed by
researchers in the United States and the United
Kingdom. But Japanese researchers and rms did
the second crucial step: upgrading the technology
for mass production with cost-eciency. This is
the key step that allows for the expansion of rms,
new business models and innovative products. If
Sony was the mass producer for the batteries that
would be used in consumer goods, China would
occupy this place in regard to ion-lithium batteries
used in electric vehicles (Sanderson, 2022).
According to He et. Al. the Tenth Five Year plan
(2001-2005) marks the beginning of an ocial
policy for the development of electrical vehicles
in China through growing R&D investments,
denominated the “Three Verticals and Three
Horizontals”. The Three Horizontals refer to
developing technologies for engines, batteries,
and vehicle controllers, corresponding to the parts
and components used to build the Three Verticals,
which corresponds to the nished goods such as
battery electric vehicle, hybrid electric vehicle and
fuel cell electric vehicle (FCEV) (He et. Al., 2022).
144
In 2009 Beijing expanded its previous industrial
policy for the EV industry. Wan Gang, Minister of
Science and Technology and automotive expert,
was a central gure in this process. China also
launched a program to subsidize electric buses in
2009 covering ten cities, which later expanded to
include nancing for private electric car covering
six cities as the rst eorts to try to stimulate that
segment. Between 2009 and 2017 subsidies
reached a staggering US$ 60 billion. Government
procurement was a strong policy tool with local
governments purchasing vehicles from local
companies (Sanderson, 2022).
China accounted for more than 60% of global sales
of electric vehicles in 2022, showing the success of
these policies over time. The country has focused
especially on battery-powered vehicles due to its
strong capabilities in battery production. This has
resulted in the growing importance of the minerals
used to fuel these industries. In fact, lithium,
cobalt, nickel, and copper, as well as aluminum
and steel are some of the most important minerals
in the value chain. The battery is one of the most
expensive parts of an electric vehicle and this is
especially important considering that more than
60% of EVs in China and Europe are SUVs and
larger cars, which require batteries that can be two
to three times larger than those used in smaller
models (IEA, 2023).
The extraction of the minerals needed to build
electric vehicles are subject to geopolitics and
distribution conicts between countries, not to
mention the fact that they have an environmental
impact. The structure of ion-lithium batteries supply
chain has shown China’s greater dominance,
with China-based CATL (Contemporary Amperex
Technology), founded in 2011, reaching more
than 37% of the global market share by 2022.
Furthermore, the company has managed to strike
a deal in 2019 to produce ion-lithium batteries
in Germany, supplying companies such as Audi,
BMW and Mercedes-Benz in their attempt to
advance in the EVs market. It also supplies goods
to Daimler’s electric buses (Kim, 2023).
ATL was originally founded in Hong Kong in 1999
as a company manufacturing batteries for mobile
phones. In the 2000’s with the boom of mobile
phones and later MP3 players, ATL bought a
patent from Bell labs in the US to produce polymer
batteries. ATL managed to produce batteries at a
much lower cost than their Korean and Japanese
counterparts and became a supplier to major
telecommunications and electronics companies.
This period coincided with China’s entry into the
WTO and foreign direct investment was abundant.
ATL received funding from the US-based Carlyle
Group and integrated Apple’s GVC, supplying
batteries for the Ipod in 2004. The company
was on a path of modernization and in 2005
it was bought by the Japanese company TDK
(Sanderson, 2022).
CATL separated from ATL in 2011 in the context
of the boom of the governmental policies fostering
the expansion of electric vehicles in China. The
company hired foreign talent who had worked
on the joint ventures between Chinese rms and
multinational companies in the automotive sector
in order to structure its research and development
sector. CATL built a battery that lasts for 16 years,
meaning it could be reutilized, outlasting the
original car. It also continued to work on reducing
the size and weight of the batteries as well as
improving durability and safety. The reduction of
costs is a fundamental step in popularizing EVs for
mass consumption.
In 2013 CATL was contracted by BMW Brilliance,
a joint venture with a Chinese rm. The rigorous
supervision and standards of BMW helped CATL
to upgrade its processes and product quality.
According to Sanderson:
“Between 2014 and 2017 CATL’s sales
increased at a compound annual growth rate
of 263 percent. (...) In 2017 CATL led for an
initial public oering (IPO) on the Shenzhen
Stock Exchange, with the help of Goldman
Sachs. The company raised $853 million
and became the world’s largest producer of
electric car batteries with a fty percent share
of the Chinese market. It would maintain that
position consistently for the next four years.”
(Sanderson, 2022, p. 44).
145
Furthermore, the use of robotics rapidly enhanced
China’s electric batteries scale, reducing its costs
and raising its competitive capabilities (Wang,
2023). The fact that the Chinese Government
determined that Chinese electric vehicles had to
use locally produced batteries was a powerful
incentive to the industry’s expansion. In 2020
Tesla created a factory in Shanghai using CATL as
their supplier (Kane, 2020).
The key driver to China’s successful promotion of
electric vehicles has been subsidies for purchasing
EVs (given to the automakers for each car sold),
which were rst introduced in 2009. Although they
were supposed to be phased out several times
including this year, there is renewed discussion
about extending them.
1
Over time, the subsidies
have been adjusted in large part due to widespread
scale fraud by automakers who sold cars to
themselves and passed government certication
tests with larger batteries than were used in the
cars sold on the market in order to qualify for
larger subsidies (subsidies were based on battery
size). Tax rebates for EVs have also played a role
and will loom larger as China eventually phases
out subsidies. The government also introduced
a credit system in 2018. Automakers received
credits for each EV sold with the aim to force
automakers to sell more and more EVs as a
percentage of total cars sold (Yang et. al. 2021;
Dezan Shira and Associates 2022).
The cost of building this industry has been
substantial for the government. From 2009-2019,
the total cost was just under 100 billion USD. Almost
half the total were the EV purchase subsidies. As
subsidies have been ratcheted down, the state
has increased R&D spending. For both 2018 and
2019, each year’s R&D spending was almost six
times the spending on R&D for the 2009-2017
3. THE STRATEGIC IMPORTANCE OF ION-LITHIUM
BATTERIES: THE CASE OF CATL
1.- Provincial governments have stepped in to make up for the shortfall in central government subsidies (https://www.bloomberg.com/news/
articles/2023-03-07/china-s-provinces-oer-ev-sweeteners-as-national-subsidies-fade#xj4y7vzkg).
period (Dezan Shira and Associates 2022). While
many have hailed the government’s investment in
the infrastructure of EVs, it has not been costly
relative to the other types of expenditure. Four
of the top ten recipients of subsidies in China are
automotive manufacturers and most of those
subsidies are for EVs: SAIC, BYD, Great Wall and
JAC. Contemporary Amperex Technology Co.
Limited (CATL) was the eleventh largest recipient,
and two other automakers were in the top twenty
(Kawase 2022).
The goal established by the Central Government
for 2020 was for new energy and electric vehicles
to account for 70 percent of the domestic market.
Moreover, China aimed to produce two rms
ranking in the top 10 players worldwide. Electric
batteries, motors, and other components should
have reached an international level of quality and
represent 80 percent of China’s market. By 2025,
Chinese EVs rms should represent 80 percent
of the domestic market, and two homegrown
companies should be in the ranks of the 10 leading
rms with 10 percent of their total sales (State
Strategic Advisory Committee 2015). The electric
vehicle industry presents an interesting example
of China’s growing prociency in the production
of electric batteries (ion-lithium batteries), with
CATL being the most well-known success case.
Founded in 2011, the company has advanced
146
quickly in global markets and in 2021 it accounted
for more than 32% of the global market share
of ion-lithium batteries, making it the biggest
producer in the world (Sanderson 2022).
China’s domination of lithium batteries for EVs has
also been a direct product of government policy.
The government operated a “whitelist” of approved
domestic battery manufacturers which were the
only producers that EV manufacturers could use if
they wished to receive the government subsidies
for EVs. This policy led directly to the rise of CATL
and helped BYD transition from phone batteries to
auto batteries. With Guoxuan, these three are the
second, fth and ninth largest EV battery makers
in the world. From 2014-2017, CATL’s sales
increased at a compound annual growth rate of
263 percent (Sanderson 2022).
The case of BYD Auto is important and needs
to be mentioned, considering it overtook Tesla’s
position as the biggest market share in electric
vehicles, producing cars, trucks, buses, electric
bikes, among other products. BYD has been
founded in 1995, the company expanded upon
the acquisition of Qinchuan Automobile Company
in 2002 and after that it has raised HKD$ 1.6 billion
in the Hong Kong Stock Market. The rm’s electric
batteries division, called Fin Dreams, currently
holds third place among the biggest battery
makers in the world, with a 13% market share.
The rm grew very rapidly in the last two decades,
supported by the expansion of China’s consumer
market, while also being aided by the intensive
industrial policies conducted by the Chinese state,
currently holding more than 30 industrial parks
across six continents. Although most of its sales
are focused on Mainland China, the rm has been
expanding into global markets, with special focus
on Europe. According to the rm’s ocial website
it had sold more than 2.68 million vehicles (BYD,
2023) by September 2022.
By 2019, local rms, including JVs, already
dominated China’s EV market with 85 percent
market share.
2
As of now SAIC, Geely and BYD
have had a certain degree of success in their
internationalization strategy, especially exporting
to European markets. Other rms such as BAIC
and Chery continue to be suppliers mainly to the
domestic market. There are also smaller brands
such as Nio Inc. and Xpeng which are trying to
expand internationally. In fact, SAIC-GM-Wuling
(a joint venture with General Motors) and BYD
ranked third and fourth in the largest sales of EVs
in 2021, with market shares of 10.5% and 9.1%
respectively (Kane 2022), which means China
has reached the goal of producing two major
international players in the sector.
In 2021, China accounted for more than half of the
world’s global sales of EVs. However, the structure
of the EV market in China is still fragmented
with more than 200 rms producing parts,
components and the other steps in the EV value
chain. Trends suggest that there will be growing
competition in the domestic market between the
established rms, SAIC-GM-Wuling, BYD, Geely,
and newcomers such as Nio and Xpeng (Daxue
Consulting 2022). Sanderson (2022) points out
that government funding and subsidies that have
been directed to the industry since 2009 have
directly contributed to the rise of new rms in the
sector.
While the building of large-scale battery makers
has been successful, subsidies have encouraged
both lots of rm entry into the EV market and
allowed too many of them to continue to survive.
There were 119 producers of EVs in 2020. With
a market of approximately 1.5 million EVs, each
producer on average produced 12,600 vehicles,
far below the necessary scale economies (Kennedy
2020). The other issue is that quality of Chinese
EVs still lags behind. They tend to export only to
developing countries. While BYD sells more units
than Tesla, Chinese EV rms generally sell to the
low and middle tiers of auto buyers. The Chinese
makers comprise 80 percent of the domestic
market, which at 3.3 million cars sold in 2021
comprised 53 percent of global sales in units. In the
same year China accounted for 35% of exported
electric cars, compared with 25% in 2021. Europe
2.- McKinsey “Winning the Chinese BEV Market,” May 4, 2021.
147
Between 2005 and 2012 is estimated that China’s
total FDI toward South America plus Mexico
totaled around $63 billion, while between 2005-
2023 the total FDI of Chinese rms in the same
countries reached $212 billion. Brazil represented
just over one-third of the total, with $73.3 billion
worth of Chinese investment in 264 projects (AEI,
2024). Chinese FDI in Latin America continued
to grow until it was interrupted by the social
and economic challenges of the pandemic,
aggravated by China’s strict lockdown and zero
COVID policies. In 2020 and 2021, Latin America
saw a downfall of the total amount invested by
China in the region.
However, the investment ows grew in 2022 and
2023 – only this time, the funds were directed
toward new sectors such as solar, wind, and
hydropower as well as electric vehicles (EVs).
Mining in strategic materials such as lithium
and rare earth minerals, which are crucial as
supplies for the value chain of many advanced
technologies involved in decarbonization is also a
priority. Prominent Chinese rms acting in these
new subsectors are privately owned and/or mixed
capital companies, such as BYD and Great Wall
Motors, for example (Rhodium Group, 2024).
In Latin America in 2022-2023 the general trend
of Chinese investment has been of a higher
number of smaller projects. This means a shift
from the previous trend of big infrastructure
projects under the Belt and Road Initiative (BRI),
such as State Grid’s and China Three Gorges’
multi-billion investments in Brazil and Argentina,
for example, toward more nimble, numerous,
and technologically intensive projects (Kotz and
Haro-Sly, 2023). Albeit smaller in size, these new
projects are directed toward strategic areas.
remains China’s largest trade partner for both EVs
and batteries. In 2022, the share of EVs made in
China and sold in the European market increased
to 16%, up from about 11% in 2021 (IEA 2022;
IEA, 2023).
4. AN OVERVIEW ABOUT CHINESE INVESTMENTS
IN LATIN AMERICA
Analysts have noted that the term “New
Infrastructure,” which has appeared in Chinese
media and policy documents, as the lexicon
designating the sectors China wants to develop
at home while also becoming a competitive
global player (Myers, Melguizo and Wang, 2024).
Information technologies linked to data centers,
semiconductors, and articial intelligence are
important focuses of policymakers in Beijing, but
so are renewable energy generation and electric
vehicles. Technology is a key aspect in China’s
eorts to revive its domestic economy and
competing with the United States.
The shift in foreign investment policy reects
the changing priorities and characteristics of
the Chinese economy. Concepts such as new
“quality productive forces,” “small but beautiful,”
“indigenous innovation,” and self-reliance have
emerged as priorities for the Chinese state. The
government is trying to reignite economic growth
amid the diculties and slowdown caused by
an aging population, high youth unemployment,
the property crisis in the real estate sector, and
a recovery in consumption post-COVID that was
not as exuberant as Beijing had expected. All of
these reect in Chinese rms investing abroad,
which are trying to nd new markets and trade
partners, focusing on technology and innovation,
while also exporting overcapacity in industries
where domestic demand is falling, as the case of
EVs (Myers, Melguizo and Wang, 2024).
The following cases of FDI in dierent countries
illustrate the broader trends mentioned in the
previous paragraphs. For example, in 2022, there
were two FDI acquisitions in the lithium sector in
Argentina, made by Ganfeng Lithium and Zijin
Mining Group, with a total value of $1.7 billion.
148
Greeneld investments in battery factories and
mining by Chinese automobile manufacturer
Chery and a lithium carbonate factory from Liex,
a subsidiary of Zijin Mining Group, were both
announced in Argentina in 2023 (AEI, 2024).
In Chile, the Chinese EV manufacturer BYD
announced a $290 million investment to
exploit lithium. In addition to that, automobile
manufacturer Geely acquired seven plants
globally, including one in Cordoba, Argentina, by
forming a joint venture with Renault. The plants
make aluminum parts for gearboxes that will be
used in its subsidiary Horse, which produces
gearboxes at other plants in Chile and Brazil and
supplies companies like Renault, Dacia, Nissan,
and Mitsubishi (China Daily, 2024). Chile produces
circa 32% of the world’s lithium and represented
89% of China’s imports of lithium carbonate in
2022, reinforcing the country’s strategic position
vis-à-vis the Asian partner. Moreover, much of the
lithium that is produced in Argentina goes through
Chile to be exported to China, reinforcing its
competitive prole due to logistics.
Chile has developed a national strategy to try to
move up the lithium value chain, adding value to
the sector instead of just extracting and exporting
the mineral. Although in its initial stages, Boric’s
industrial policy will focus on public-private
partnerships to try to maintain stages of the
adding value inside the country’s territory. It will
also establish the creation of a public company
focused on research and development and
technology projects linked to mineral sectors.
Moreover, Chile also detains expressive reserves
of copper, which is also used in technologies linked
to decarbonization and just general-purpose
electronics (Chile National Lithium Strategy, 2024).
As of this moment in the North American rm
Albermale and Chilean private rm SQM are the
main rms acting in Chile’s lithium sector. The rm
Tianqi Mining acquired a 22% stake at SQM and if
BYD’s project does go through, it would promote
a greater presence of Chinese rms in Chile.
In Brazil, there was continued investment by Great
Wall Motors, which in 2021 bought a Mercedes-
Benz factory in São Paulo state aiming to produce
electric vehicles and batteries. The company
continues building production capacity with an
investment plan of 4 billion Brazilian real ($776
million) between 2022-2025. The automaker
will manufacture electric cars and hybrids, in
addition to developing research and development
projects. Volvo, a Swedish automaker whose
main shareholder position has been acquired by
the Chinese rm Geely, made an investment of
881 million real in its factory in Paraná state, Brazil.
These funds will be used for the development of
products and services focusing on electromobility
and decarbonization and are part of a greater
investment cycle that is projected to reach 1.5
billion yuan between 2022-2025 (Reuters, 2024).
BYD is investing 1.1 billion reals in the Brazilian
state of Bahia to produce chassis for electric
buses and trucks, manufacture electric and
hybrid passenger vehicles (with an initial projected
capacity of 150,000 units annually), as well as
processing lithium and iron phosphate in Brazil,
that will later be exported to global markets. In
July 2023, the project was conrmed. BYD will
take over three factories formerly owned by U.S.-
based Ford Motors in the Bahia state, which left
the country in 2021 after more than 50 years
of operations in Brazil. BYD expects to start
production in Brazil in the second half of 2024
and has already partnered with local energy rm
Raizen to build charging network stations in eight
large metropolises in the country (Reuters, 2024).
The only Chinese battery manufacturing plant in
South America is owned by BYD and it’s located
in the Northen region of Brazil called Manaus. The
production started in 2020 and there are still many
improvements that could be made possible by
industrial policies and local suppliers’ upgrading,
seeing that the Manaus plant acts mostly in the
assembly of batteries, a lower value-added activity
if compared to the actual manufacturing of key
parts and components. As BYD’s plants in Bahia
start their production in 2025, there will possibly
be a greater demand for batteries and possibly
greater investments in that sector within Brazil.
However, since the country’s consumer market is
very expressive, with a population exceeding 215
million people, and sales of automobiles reaching
2.3 million in 2023 (CSIS, 2024), it is still uncertain
whether or not BYD’s battery factories will serve
149
simply to supply for the local market and/or if they
will also be used for exports to other countries,
potentially the MERCOSUR partners with whom
Brazil has a preferential agreement on common
taris based on the amount of local added value
in the end-product, for example.
In Peru, Zijin Mining has just announced a US$
250 million investment project for metal extraction,
which is still at the planning stage. Regarding the
case of Bolivia, the country lost possible funding
opportunities due to political and institutional
instability. Only very recently, in June and July
of 2023 Chinese companies began to invest
there again, with two projects focused on the
extraction of lithium. The rst amounting to US$
1.38 billion, to exploit the salt ats of Uyuni and
Copasa in partnership with local rm Yacimientos
de Litio Boliviano (YLB), and led by China’s CATL,
the battery rm previously mentioned. CATL has
66% of the shares in this project. The second one
was conducted by China International Trust and
Investment (CITIC) amounting to US$ 400 million,
which is still underway (Benchmark Minerals,
2024; CSIS, 2024).
Regarding its position in Latin America, in
summary, China’s state-owned enterprises were
the rstcomers to the region in the 2000’s, building
the basis in oil and gas and agriculture investments,
aiming to access natural resources needed for
maintaining the growth of China’s economy,
through mergers and acquisitions. After 2012,
came a dierent phase of FDI, in which state-owned
rms such as State Grid and China Three Gorges
made multibillion dollar investments in generation,
transmission and distribution of electricity, which
were then considered as being part of China’s
foreign policy of economic integration known as
the Belt and Road Initiative. In this period there was
greater presence of China’s banks in this process,
such as the China Export Import Bank (EXIMBANK)
and the China Development Bank, trends that
have been going down since 2019 and, since
then, rms have taken the lead through greeneld
and browneld FDI. These processes allowed for
Chinese rms to learn about the local realities as well
as the institutional, regulatory and labor standards
in dierent countries.
5. CONCLUDING REMARKS
Regarding the development of technology and
domestic manufacturing capabilities in China,
industrial policy was essential for the growth of the
EVs market since 2009, when the Government
started acting more directly in the industry through
two dierent measures: on the demand side,
government procurement for taxis, buses and
public transportation helped to boost up the market
and subsidies for buyers were also oered. On the
other hand, in the supply side, protectionism was
used to ensure that national companies would
be the main beneciaries of government funds.
Subsidies were given to companies that produced
cars domestically, but even foreign rms were
obliged to use components made by Chinese
rms such as the batteries made by CATL and
BYD if they wanted to sell to Chinese customers.
After Covid, private companies in the EVs
and green energy sector have been investing
abroad in sectors that allow for greater prots,
and which are more intensive in technology. As
was mentioned before, these changes in the
prole of FDI are connected to the domestic
challenges and the qualitative transformation of
China’s domestic economy, which is inextricably
linked to the processes of upgrading, innovation
and technological development. In this sense,
as China’s economy transitions towards
dierent sectors such as A.I, biotechnology,
pharmaceuticals, solar and wind power generation
and equipment, electric vehicles, among others,
150
so changes the prole and strategy of Chinese
rms abroad. The recent changes in the prole of
FDI in Latin America is part of the new chapter of
Chinese rms going global. It may yet be too soon
to arm, but evidence point to the articulation of
a regional value chain in green technologies led by
Chinese rms, with Chile and Argentina producing
strategic minerals and batteries, for example,
while manufacturing capacity for EVs and solar
panels is located in Brazil, which could serve as a
hub for exports to the region as a whole.
The key ndings are preliminary, but we infer that
there is a new phase of Chinese engagement
in Latin America post-Covid, with a change in
the prole of FDI: 1) relevant investments are
now conducted not only through state owned
enterprises, but increasingly made by private rms,
especially when seeing outside of legacy sectors;
2) sectors of destination are slowly changing from
oil, gas and agriculture towards renewable energy
sources, electric vehicles and mining of strategic
minerals such as lithium and rare earth minerals;
3) the ows of investments are smaller in the total
quantity, but there is a higher number of projects
in the region overall; 4) the FDI projects are
increasingly directed in knowledge/technologically
intensive sectors, instead of capital intensive ones,
as was the case in traditional (legacy) sectors
(such as electricity generation and oil) of the pre
2019 phase, which was the year of transition with
the rst EV projects being rolled out and the post-
Covid period being the consolidation of this new
phase, which is also seeing a gradual increase of
greeneld investments as a mode of entry, vis-a-
vis a predominance of mergers and acquisitions in
the early to mid-2010’s.
In conclusion, in a context of higher taris
and protectionism being imposed on Chinese
products in developed country markets such as
Europe and the US, China will continue to focus
on the international expansion of its companies
in the Global South, and Latin America is gaining
relevance. Faced with this situation, Latin
American countries must develop their own plans,
industrial policies and strategies for technological
upgrading, innovation and production of higher
value-added goods. Chinese capital can be seen
as a positive factor for the region’s development
processes, as long as the respective countries
take control of their own macroeconomic and
institutional environments.
Trends indicate that there is a window of
possibilities and opportunities open in this regard,
especially in sectors linked to decarbonization,
renewable energy, electromobility and green
technologies. However, the countries in the region
must focus on developing their industrial policies
and innovation strategies, as well as maybe
requiring technology transfer agreements linked
to some of these FDI projects. In addition to
that, investments in education and integration of
local labor into these initiatives could potentialize
spillover eects for upgrading. Conversely, the
risk remains that Latin America could go down on
a path of dependency and continuing to export
natural resources and commodities, in exchange
for industrial goods, a historical pattern that has
deleterious eects on local societies in terms of
sustainable development.
151
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