China-Brazil trade flourishes

With China-Brazil bilateral trade growing by 35% year-on-year to US$84.2bn in 2011, HSBC believes the trade corridor between Brazil and China to be a lucrative source of trade finance business.


China exports rose by 30% to US$31.8bn and China imports from Brazil increased by 37% year-on-year to US$52.4bn.

China became Brazil’s largest trading partner in 2009 overtaking the US, and trade volumes have continued to flourish into 2012, with overall trade in January increasing by almost 6% year-on-year, bucking global downward trends.

In contrast, OECD statistics released at the end of February show that merchandise trade contracted in most major economies in the fourth quarter of 2011. Total exports fell 1.2% compared to a 0.9% increase in the previous quarter.

OECD findings show Brazil as one of the few countries which saw growth in both imports and exports. Whereas China saw a 4.7% increase in imports in Q4, but a contraction in exports.

“You see such concern globally in Europe and the US regarding their trade flows with China, it is quite reassuring that trade grew a healthy 6% between China and Brazil in January,” Bruce Alter, head of trade, global trade and receivables finance, HSBC China in Shanghai, comments.

Such is HSBC’s belief in the strength of the trade flows that last December HSBC China led a business delegation of major Chinese companies to Brazil for a five-day visit.

The delegation consisted of senior executives from both private and state-owned Chinese companies in energy, resources, construction and other industries. During the trip they were able to meet with local entrepreneurs and potential business partners to gain a deeper understanding of the Latin American business environment.

As well as running trade delegations to Brazil, HSBC is building on its already entrenched presence in Brazil and Latin America. The bank has 800 branches across Brazil.

In 2010, the bank set up a China desk in Brazil, from which bankers on secondment from China can provide on-the-ground support to Chinese companies expanding in Latin America. Similarly there is a Latin American desk in China run by bankers
from HSBC Brazil.

The bank is also moving Magnus Montan, head of international business at HSBC Bank China to Säo Paulo to take up the role of global head of trade and receivables finance, Latin America. He will begin in his new position in April.

HSBC is also actively promoting its Rmb cross-border trade settlement services to help businesses in the two countries trade in Rmb.

South-south flows

The growing China-Brazil trade flows are reflective of the wider long-term trend of increased south-south trade.

“The development of south-south trade will be a very important driver for the global economy,” remarks Montan.

In its latest Global Connections report, HSBC predicts that those markets perceived as emerging markets will make up 19 of the world’s top 30 economies by 2050.

The report further predicts that China’s trade will grow faster than the world average, and that the country will become the world’s largest trading nation by 2016.

China’s combined trade activity is forecast to rise at an annual rate of 6.61% over the next five years and the country expands its international reach into South America and Africa.

“What is so exciting to see is how the imports into China are growing faster than the exports out of China. Domestic demand is growing as the country becomes wealthier and that will continue to be the case that the imports with grow faster than the exports in China,” remarks Montan.

The Global Connections report predicts that imports will grow at rates of 6.59% over the next five years, while exports will grow at 6.62%.

Commodity-driven flows However, Brazil-China trade flows are still typically dominated by commodities such as iron ore, soya and oil, and there is pressure for China to import more Brazilian manufactured goods.

Brazil fears that its manufacturing sector is being harmed by low-cost imported Chinese goods. Last year the country placed tariffs on Chinese goods, and imposed a tax on car imports which had had an effect on manufacturers in China.

Readdressing the trade balance between Brazil and China was a topic on the agenda of Chinese vice-premier Wang Qishan’s visit to Brasilia in February. GTR