China has become Peru's largest trading partner and export market in recent years. Peru exports mainly minerals and fishmeal to China, while importing manufactured goods. Chinese investment in Peru was initially in mining and has grown over time. The Peru-China Free Trade Agreement entered into effect in 2010, further strengthening economic ties between the two countries.

1. China and Peru relations
Conference given at the University of International Relations and
Peking University
May 16, 2014
Carlos Aquino Rodríguez
 Director of the Institute of Economics Research and Professor at San Marcos National
University, Peru
 Specialist in Asian Economies
 Peru’s Official Translator of the Japanese language
 Master and Doctor Course at Kobe University, Japan
 Visiting Professor at Universities in Asia
E-mail : carloskobe2005@yahoo.com
Web site, Blog, Facebook

2. Index
 I. Introduction
 II. Peru and China old relationship
 III. State of economic relations: Trade, Investment,
Economic Cooperation
 IV. FTA agreement between Peru and China
 V. Chinese culture influence
 VI. Conclusions

3. I. Introduction
 On November 2nd, 1971 Peru and the People Republic of
China established diplomatic relations. On March 1st, 2014
was the fourth anniversary since the Free Trade Area,
FTA, agreement between the two countries entered into
effect.
 China became in 2011 the biggest export destination and
trade partner of Peru, over the United States, which was
the traditional top partner, and given present perspectives
that position will continue in the future
 Peru has an old history of relations with China.

4. II. Peru and China old relationship
 The first contact between these countries began in 1849,
when Chinese immigrants began coming to Peru. From
that year up to 1872 around 100,000 Chinese came to
Peru, mostly from the southern part, in present day
Guangdong province.
 Peru became the first country in Latin America to receive
Chinese immigration in a large scale
 Peru became in 1874 the first Latin American country to
establish diplomatic relations with China
 (But in fact relations seems to be older than that. From the
second half of the sixteen century the Acapulco-Manila
Galleon trade made possible the exchange of goods
between China and Mexico –and Peru-, through
Philippines)

5. http://commons.wikimedia.org/wiki/File:Andres_Urdaneta_Torna
viaje.jpg

6. III. State of economic relations: Trade, Investment,
Economic Cooperation
 After Peru suffered a period of economic stagnation and
political instability, in 1990 the new government introduced
economic reforms that opened the economy to foreign
trade and investment, and at the same time political
stability was attained. So the economy began to grow
again.
 Peru is a middle income country, with a Gross Domestic
Product, GDP, per capita of 7,000 dollars (year 2013) and
a population of 30 million people.
 It has achieved sustained growth of its economy in the last
decade and has an increasing participation in the global
economy
 Has a strategic location in South Pacific with vast natural
resources and variety of climates, in a territory of 1.28
million km2

7. Graphic 1: Overview of Peru economy
Source: http://www.proinversion.gob.pe/RepositorioAPS/1/0/JER/PRESENTACION_PAIS/PPT_Por%20que
%20invertir%20en%20Peru%20en%20ingles%202014_pptx.pdf

8. Graphic 2: Overview of Peru economy

9.  Peru has the fastest growing economy in Latin America
 It has a sound macroeconomic environment, low inflation rate
(2-3% per year), low public external debt (less than 20% of
GDP), and high Foreign Exchange Reserves (around 65
billion dollars or 33% of GDP)
 Since 1990 Peru embarked on the task of getting more
involved with Asia. Peru is present now in the Asia-Pacific
Economic Cooperation forum, APEC, the Forum for East Asia
and Latin American Cooperation, FEALAC, the Pacific
Economic Cooperation Council, PECC, and the Pacific Basin
Economic Council, PBEC.

10. Trade
 One of the engines of Peru economic growth has been
external trade, and specially demand for China.
 In 1993 the amount of Peruvian exports to China was only
of 140 million dollars, but in 2003 they reached 676 million
dollars. In the same period imports from China increased
from 90 million dollars to 646 million dollars.
 But from the last decade exports to China leaped to reach
7.8 billion dollars in 2012, though it decreased to 7.3
billions dollars last year 2013. See table 2. Imports from
China was 8.3 billion dollars in 2013.

11. COUNTRY 2010 2010 2011 2011 2012 2012 2013 2013
Exports Imports Exports Imports Exports Imports Exports Imports
1. U.S.A
6,087 5,811 5,903 7,350 6,175 7,916 7,306 8,783
1. China 5,436 5,140 6,963 6,325 7,848 7,802 7,331 8,379
1. Japan
1,790 1,336 2,174 1,314 2,575 1,499 2,226 1,433
1. Canada
3,329 539 4,232 583 3,445 588 2,692 615
1. Switzerland
3,845 118 5,937 150 5,074 154 2,967 158
Source: Aduanas del Peru:
http://www.aduanet.gob.pe/aduanas/informae/BalContiZonaPais_01122013.htm
TABLE 1: MAJOR TRADE PARTNERS OF PERU, 2010-2013, IN MILLION OF DOLLARS

12. Country/Economy 1993 1997 2003 2010 2011 2012 2013
World Total 3,344.40 6,741.75 8,939.82 35,073.25 46,386.03 45,846.18 41,511.7
Australia 14.99 16.31 53.12 117.5 115.35 99.50 130.37
South Korea 59.36 91.50 176.34 894.9 1,696.09 1,545.35 1,536.38
China 140.84 490.06 676.96 5,425.9 6,972.64 7,848.97 7,331.44
Philippines 31.99* 47.96 11.06 123.41 109.75 55.23 128.11
Hong-Kong 28.60 68.82 30.31 78.5 93.24 96.54 84.22
Indonesia 32.62* 36.33 22.67 36.61 61.49 101.18 105.31
Japan 299.04 473.57 391.16 1,790.4 2,174.76 2,575.33 2,226.72
Malaysia 57.33* 59.77 5.51 8.43 6.75 27.68 56.29
New Zealand 1.50 - 3.72 13.5 18.63. 25.82 22.55
Russia 9.90 9.48 14.18 57.9 78.80 88.43 149.76
Singapore 1.68* 11.96* 16.15 6.66 7.94 21.46 20.18
Thailand 11.71* 36.23 26.71 98.10 264.76 234.06 138.25
Taiwan (Chinese
Taipei)
118.78 159.11 147.28 293.0 365.28 261.10 211.29
Vietnam 1.62* 2.56 10.64 63.89 77.72 90.43 44.80
*Year1994
Source: Aduanas del Perú: http://www.aduanet.gob.pe/aduanas/informae/2012/generales/ExpoImpoPorContiZonaPais.html
http://www.aduanet.gob.pe/aduanas/informae/BalContiZonaPais_01122013.htm
TABLE 2: PERU'S EXPORTS TO ASIAN MEMBERS OF APEC (IN MILLION OF DOLLARS)

13. Trade
 China became from 2011 the top export destination and
the top trade partner of Peru
 Peru’s Minister of Economy Mr. Luis Castilla said on
October 2011 that he “prays every day” for China economy
to continue growing at high rates because that way Peru
will benefit from that. If China economy reduces its pace of
growth there will be less demand for Peru raw materials,
prices, of specially minerals, will decrease, exports
revenue will decrease and the country will be affected. In
fact this happened from 2012.
 See the following two figures where it is seen that price of
raw materials have decreased a little and there is strong
correlations with China economic growth rates.
 Peru exports mainly raw materials while buys from China
mostly manufactured goods.

14. Source: World Economic Outlook, april 2014, Figure 1.5 page 6

15. Source: IMF, World Economic Outlook, April
2014, page 36

16. TABLE 3: TOP 11 PRODUCTS EXPORTED TO CHINA,
2013
PRODUCT Millions of Dollars
FOB value
Total 7,331
Copper ores and concentrates 3,338
Copper cathodes 1,020
Fishmeal 856
Iron ore 855
Zinc ore 203
Lead ore 195
Silver ore 182
Zinc, not alloyed 100
Cuttle fish and squid 91
Other gasoline without lead
tetraethyl
58
Fresh grapes 45
Ores and Fishmeal (8 products): 92% of total
Source: ADUANAS DEL PERU
http://www.aduanet.gob.pe/aduanas/informae/XPaisPartMensual_01122013.htm

17. TABLE 4: IMPORTS OF PERU FROM MAJOR ASIAN MEMBERS OF
APEC (IN MILLION OF DOLLARS, CIF)
Source: Aduanas del Peru
Country/Economy 1993 1997 2003 2010 2011 2012 2013
World Total 4,024.55 7,716.79 8,428.51 27,910.70 37,891.00 42,150.68 43,273.7
Australia 17.35 33.09 28.12 75.07 111.1 133.0 132
South Korea 99.42 230.25 277.72 1,044.25 1,497.2 1,647.6 1,588
China 90.43 195.92 646.54 5,115.3 6,364.7 7,802.9 8,379
Philippines 11.06 12.04 22.9 27.4 29.8
Hong Kong 12.29 17.04 15.19 22.80 15.8 20.5 18.8
Indonesia 40.00 120.96 221.1 245.1 206
Japan 303.62 417.99 367.40 1,336.96 1,314.4 1,499.9 1,433
Malaysia 57.77 160.44 207.0 206.9 199
New Zealand 45.95 - 16.20 56.47 68.1 119.0 80.9
Russia 15.28 21.92 56.36 183.42 513.0 334.2 339
Singapore 22.23 38.45 50.83 60.00 57.4
Thailand 32.10 372.28 443.7 452.1 651
Taiwan 60.16 112.05 133.58 327.80 442.1 461.7 442
Vietnam 4.69 52.50 102.4 113.1 131

18. Trade
 Actually China is the biggest market for Peruvian exports.
China buys most of the copper, iron ore, zinc, fishmeal,
that Peru sells abroad. And China is the second source of
imports, after the U.S.
 In the other hand, most of the textiles and garments
imported by Peru came from China as are also toys,
footwear, electrical appliances and most of the consumer
goods, and increasingly cars.
 Cheap manufactured goods from China have helped
improve the living standards of many Peruvians, especially
of poor people.
 But also cheap Chinese goods has represented a strong
competition to some manufacture sectors in Peru.

19. TABLE 5: TOP 10 PRODUCTS IMPORTED FROM CHINA,
2013
PRODUCT Millions of dollars
CIF Value
Total 7,921
Mobile Phones 730
Data processing machine 459
Motorcycles 136
Vehicles 111
Telecommunications devices 98
Other polyethylene terephthalate
with titanium dioxide
84
Other footwear with top of textile and
rubber sole or plastic
84
Other footwear 80
Other wind power generators 69
Other TV sets 76
Source: ADUANAS DEL PERU: http://www.aduanet.gob.pe/aduanas/informae/MPaisPartMensual_01122013.htm

20. Investment
 Foreign Direct Investment (FDI) in Peru has increased a lot in the last
years
 China investment in Peru was nil up to 1992. That year, Shougang
Corporation ( 首钢集团 ) bought the state company Hierro Peru that
exploits iron. It was the first big sale of a Peruvian state company after
the government began in 1990 a process of economic reforms and
opening of the economy to foreign investment.
 China interest in securing sources of raw material was the reason
behind its decision to buy the Peruvian company. It was one of the first
biggest investments by a Chinese state company of a foreign asset
outside Asia. Shougang paid around 120 million dollars for that. The
mine that Shougang bought is the only one that produces iron ore in
Peru
 China investment is mainly in mining, but lately also in oil and fishmeal
sectors.

21. Table 6: Direct Foreign Investment flows in Peru
(in millions of US$)
Source: Proinversion
YEARS
BCRP DIRECT
FOREIGN
INVESTMENTS
VARIATION
1995 2,557.0
1996 3,471.1 35.8%
1997 2,139.3 -38.4%
1998 1,643.9 -23.2%
1999 1,940.0 18.0%
2000 809.7 -58.3%
2001 1,144.3 41.3%
2002 2,155.8 88.4%
2003 1,335.0 -38.1%
2004 1,599.0 19.8%
2005 2,578.7 61.3%
2006 3,466.5 34.4%
2007 5,491.0 58.4%
2008 6,923.7 26.1%
2009 6,430.7 -7.1%
2010 8,454.6 31.5%
2011 8,232.6 -2.6%
2012 12,239.7 48.7%
2013 2/ 11,108.0 -9.2%
2014 2/ 9,400.0 -15.4%
2015 2/ 9,435.0 0.4%

22. STOCK DE
APORTES AL
CAPITAL POR PAÍS
DE ORIGEN
(Millones US$)
País 2012 % % Acumulado
España 4,818.57 21.25% 21.25%
EE.UU. 3,012.47 13.29% 34.54%
Sudáfrica 1,740.17 7.67% 42.21%
Chile 1,643.90 7.25% 49.46%
Brasil 1,334.91 5.89% 55.35%
Reino Unido 1/ 1,314.93 5.80% 61.15%
Canada 1,276.23 5.63% 66.78%
Suiza 934.65 4.12% 70.90%
México 897.90 3.96% 74.86%
China 796.48 3.51% 78.37%
Italia 733.51 3.23% 81.61%
Colombia 569.32 2.51% 84.12%
Países Bajos 2/ 486.39 2.15% 86.26%
Japón 436.79 1.93% 88.19%
Noruega 402.82 1.78% 89.97%
Otros 2,275.31 10.03% 100.00%
TOTAL 22,674.35 100.00%
*Stock actualizado a
diciembre de 2012.
Table 7: Stock of FDI in Peru by country of origin, million dollars
Source: http://www.proinversion.gob.pe/0/0/modulos/JER/PlantillaStandardsinHijos.aspx?ARE=0&PFL=0&JER=1537

23. Investment
 In the last years Chinese companies have announced and
are carrying out big investment. For example Chinalco
Aluminiun Corp. invested 3.5 billion dollars in a copper
mine called Toromocho, in the central part of Peru.
Another big investment is the project Pampa de Pongo, of
the Nanjinzhao Group Co. Ltd. for 3.28 billion dollars that
will produce iron.
 According to statistics by the Ministry of Energy and Mines
of Peru, by January 2014 there is an amount of 59.58
billion dollars of investment mostly being currently carried
on the mining sector, of which investment from China
accounts for 23.23% of the total, or 13.83 billion dollars,
the biggest one.

24. GRAPH 3: ESTIMATED PORTFOLIO OF MINING PROJECTS BY
MAIN INVESTOR
Source: Ministerio de Energía y Minas: “Cartera estimada de proyectos mineros, January 2014”, page 3

25. Investment
 In addition to that on April this year the company resulting
from the merger of Glencore and Xstrata agreed to sell the
copper project Las Bambas located in Apurimac, and sold
it for $5.85 billion to a Chinese consortium led by MMG
Ltd., which is owned by China Minmetals, and included
Guoxin International Investment Corp. and Citic Metal Co.
When the mine come into production it could increase by
more than a third the amount of copper produced in Peru
 On November 13 2013 it was announced that China
National Petroleum Company through its listed company
PetroChina bought Petrobras Peru unit for $2.6 billion. The
Chinese firm bought all the shares of Petrobras Energia
Peru S.A., which has three oil and gas fields in Peru.

26. Investment
 Also a Chinese company, China Fishery Group Limited
(CFGL), bought last year the fishmeal company Copeinca
(for a total of nearly US$300 mlls), and seeks to control a
larger part of the production of fishmeal, of which China is
the largest buyer of Peruvian production. By March 2014
CFGL and a group of Chinese investors under the name
Fosun are the bidders to buy the fishmeal company
Diamante, with a price tag of $850 million. Peru share in
world export of fishmeal is around 41% and China is the
main world importer of that product with a share of 41% of
the world total.
 But some Chinese investment has run into trouble,
especially and notoriously Shougang Corporation. Since it
began operations, every year, they have had trouble with
its labor union that had gone on strikes very often.

27. Investment
 It seems that the new China investment is trying to avoid
these problems (as been seen in the operation of
Toromocho copper project).
 The Industrial and Commercial Bank of China (ICBC)
established an office in Lima in the year 2013 with a capital
of 50 million dollars to lend companies in Peru who want to
buy goods from China
 Chinese investors have shown interest in others sectors,
like agro industry and infrastructure
 Also there is a need to attract more Chinese tourists, who
travel in bigger number all over the world.

28.  La caratula dice: A LA
CONQUISTA: La compra de
Las Bambas le dará a China un
tercio de la producción de
cobre del Perú. Lo que se viene
puede ser aun mas
sorprendente
 (The title page says: TO THE
CONQUEST: Buying of The
Bambas will give China a third
of Peru's copper production.
What's come next may be even
more surprising)
Magazine “Poder”, April 24 - 2014,
Issue No 62
http://www.poder360.com/home.php?id_country=7

29. Economic Cooperation
 In the last years China has given some money as
economic cooperation to Peru and lately scholarships to
Peruvian students to learn Chinese language. Also it has
established four Confucius Institutes with Peruvian
Universities to foment Chinese culture and language.
 China is a member of the Inter American Development
Bank

30. IV. FTA agreement between Peru and China
 Peru has a FTA in effect with China from 2010. Peru
expects to sell products with more value added to China.
 The FTA agreement was initially opposed by some
companies in Peru that were afraid of competing with
China. In the agreement sensible sectors to China
competition in Peru like textiles, garments, footwear were
to a large extent exempted from the lowering or elimination
of tariffs
 But Chinese imports are, for some Peruvians companies,
unfair competition because of dumping and subsidies.
 A representative case is of Chinese shoes, which even if
they have antidumping duties imposed on them from the
year 2000, have came to dominate the market for imported
shoes.

31. Graphic 4: Number of imported Chinese shoes (with uppers of rubber or
plastics) and share in the market of imported shoes (in thousands –
right hand-, and in %)
Source: Quarterly Dumping and Subsidies Bulletin of Indecopi, december 2011, pag 5:
http://www.indecopi.gob.pe/repositorioaps/0/5/bol/boletin_dumping_y_subsidios/Dic11CFD.pdf

32.  By March 31, 2011, the following products from China have
antidumping duties: several kinds of footwear (up to the year 2016), a
kind of stainless steel flatware (up to the year 2016), several kinds of
zippers (up to the year 2015), several kinds of poplin fabric type (up to
the year 2015), several kinds of cotton fabric and mixtures with
polyester (up to june 2014), a kind of cotton denim fabrics (up to the
year 2015), several kinds of plain weave fabrics (up to year 2015),
several kinds of sandals (up to november 2014).
 Additionally on December 2013 anti-dumping duties were imposed on
five types of clothing—polos, shirts, pants and shorts, innerwear and
socks—imported from China. The duties imposed on polos, shirts,
innerwear and socks are between US$ 0.14 and US$ 1.00 per
garment, while the duties on imports of pants and shorts are
equivalent to US $ 3.73 per garment.
 By March 2013, 8 antidumping duties were imposed to China, one to
United States, one to Pakistan, one to Vietnam, and one to India.

33.  Peru expects from the FTA also more investment from China, not
only to exploit raw materials, but also to produce manufactured
goods for the internal market that is growing, and also to produce
in Peru and from it export to countries whom Peru has FTA
agreements. Peru has achieved FTA agreements with major
markets like the U.S., European Community, Canada, most of
Latin American countries, Japan and South Korea.
 Peru is in negotiations in the Trans Pacific Partnership agreement,
TPP, that will form a large free trade area in the Pacific region.
 Peru has formed with Chile, Colombia and Mexico the “Alianza del
Pacifico” or the Pacific Alliance, of 4 Latin American countries with
borders in the Pacific Ocean and they will have a free trade area
among them.

34. V. Chinese culture influence
 It is said that perhaps 10% of Peruvians has some
Chinese origin.
 Chinese immigrants influence in Peru is well known in
several subjects and for example one strong is in food.
 Interest in China is increasing. China has established 4
Confucius Institutes in four Peruvian Universities
 Peruvian government has begun giving scholarship for
studying in China. CONCYTEC, the official institution for
science and technology is offering financing for studies of
Master, Doctor Course, special training and Chinese
language in Chinese Universities

35. VI. Conclusions
 China is an important economic partner of Peru. It is the
biggest market for its exports, and an important source of
investment. These two roles will increase in the future.
China’s need for raw materials will increase and its
companies are looking to control the source of these raw
materials.
 China economic growth at high rates is also important for
Peru. In the last two years prices of minerals decreased
because of a slowdown in China economy and this has
affected Peru.
 Also, Peru has big expectations on increasing exports to
the Chinese market thanks to the FTA, but this will depend
on creating goods suitable for their consumers.

36.  Peru and China are nations experiencing robust economic
growth.
 They are middle-income countries with a growing middle
class, where internal demand is playing a bigger role in
fueling economic growth.
 Peru and China can strengthen their trade, investment and
other economic ties, and expand their people-to-people
exchanges.
 It is important knowing better each other to avoid
misunderstandings.’
 There is a need to know the Chinese market to sell more
value added goods and also to industrialize more the
country (and need to learn form China development
experience).