Dr. Scott MacDonald's blog

Chinese government officials and businesses must be rethinking their commitment to Venezuela. Although the Latin American country holds the largest proven oil reserves in the world, it remains questionable if PDVSA, the state-owned oil company, has the ability to repay the debts it has incurred in past years.

During the early years of the 21st century Chinese multinational companies (MNCs) actively engaged in Latin America. An abundance of natural resources and a growing Latin American middle class fit China’s needs for essential raw materials and a growing Latin American middle class fit the Asian country’s need for overseas markets. In turn, Latin America was able to diversify export markets for its oil, copper and soybeans.

Chinese business has come a long distance. Throughout the first seven decades of the 20^th century China was largely inward looking and disrupted by political fragmentation, famine and foreign invasion. Although Mao Zedong reunified China, it was Deng Xiaoping’s rise in 1978 that made the economy a central priority, perceived as a useful vehicle to pull millions of Chinese out of poverty and restore China as a serious international power. Two short decades after Deng, Chinese business, both state-owned and privately held, began to stride in significant numbers on to the international stage.

The Middle East’s new geopolitics are creating a more challenging environment for Asian corporations. While Iraq’s future viability as a state is questionable due to the June battlefield successes of the Islamic State of Iraq and Syria (ISIS), more terrifying is the Sunni extremist movement’s incitement for a broader regional Sunni-Shia civil war. Add to this the potential fragmentation of Yemen and Libya and the ongoing brutish civil war in Syria and we are left to ponder - will a new round of instability spread into the major oil-producing states in the Persian Gulf?