Written by Alex Calvo.

Reports on Chinese Leader Xi Jinping’s state visit to the United Kingdom have centered to a large extent on bilateral economic relations, including FDI (foreign direct investment) and the City’s role as RMB offshore trading centre. However, no look at Anglo-Chinese relations is complete without an examination of national security issues, and this includes Beijing’s policy in the South Atlantic. Beijing is key partner for Buenos Aires, both in the economic and defence industry arenas, while providing diplomatic support for Argentine’s claims to the Falklands.

Growing trade and investment, and financial support for Buenos Aires

China’s thirst for commodities and Argentina’s extensive natural resources are the main drivers behind expanding bilateral trade. According to a report by Argentina’s Chamber of Commerce, it hit a historic record in 2014, amounting to 11.5 percent of the Latin American country’s foreign trade and having multiplied by 16 since 1994. China is also playing an increasingly important role in Argentine infrastructure construction, geared towards the exploitation of the country’s significant natural resources. An example are the Nestor Kirchner and Jorge Cepernic dams in Patagonia, which prompted President Cristina Fernandez de Kirchner to refer on 1 August 2015 to the “comprehensive strategic partnership established between China and Argentina”, describing it as “an example for strategic relations around the world”. China is providing USD 4.7 billion euros to finance the dams, built by a subsidiary of Chinese engineering and construction conglomerate Gezhouba Group.

Beijing’s provision of RMB swaps is also very important for Buenos Aires, given her difficult relations with the international financial markets. The US Council on Foreign Relations has noted that “Last year Argentina activated the swap line, and has since drawn a reported $2.7 billion of an available $11 billion. Under the agreed terms, the RMB may be freely converted into dollars. This is significant for Argentina, whose dollar reserves have plummeted from $53 billion in 2011 to $31 billion today. As such, the swap lines are being used less to settle Chinese goods trade than as a palliative for those unable to rely on the U.S. Federal Reserve, or in Argentina’s case most of the international banking system”.

Chinese diplomatic support for claims to the Falklands  

Beijing’s tradition policy is to explicitly support Buenos Aires’ claims to the Falklands. In December 2011 then Chinese President Hu Jintao’s special envoy Jiang Shusheng, and chairman of the Standing Committee of the National People’s Congress, said “solidarity with Argentina on the Malvinas issue is an invariable position of China’s foreign policy”. China is keen to emphasize the alleged parallels, in her view, between the Falklands and Taiwan. Both Beijing and Buenos Aires believe the wishes of the population involved to be no bar to their territorial claims. The PRC may also be interested in the natural resources, oil and fisheries, found around the islands. In addition, China may also see the Falklands through the prism of her growing interest in the Antarctic.

Defence industry cooperation: the key to Buenos Aires’ rearmament? 

Following the 1982 Falklands War and fall of the ruling military Junta, successive civilian governments let the Argentine defence budget shrink, with most funds devoted to personnel expenses and most hardware not properly maintained. While the extent to which Buenos Aires is ready to invest to recover her lost military capabilities, we can note that China plays a growing role in the country’s defence procurement. The most significant deal in place is the provision of five offshore patrol vessels, provocatively labelled “Malvinas Class”, a version of China’s Shipbuilding Industry Corporation (CSIC)’s P18 export corvette. According to Brazilian web magazine Naval Power the deal may involve building two ships in China and co-producing three in Argentina. These vessels are 95-meter-long, displace 1,800 tons, and have a maximum speed of 25 knots. Their armament can include a 76 mm main gun, two 30 mm cannons, up to eight anti-ship missiles, and two triple torpedo launchers. They can also carry a helicopter.

There has long been speculation about the possible acquisition of Chinese FC-1/JF-17, with Defence Minister Agustín Rossi publicly confirming it was on the cards in March 2015. The JF-17 Thunder, co-developed with Pakistan, is replacing the US-made F-16 as the latter’s air force workhorse. Jane’s describes it as “Powered by a single Russian-designed but Chinese-built Klimov RD-93 (RD-33 derivative) turbofan, it has a top speed of Mach 1.6 (at altitude); a radius-of-operation of 648 n miles (1,200 km) as a fighter and 378 n miles (700 km) as a ground attack platform”, adding that it has “seven underwing/fuselage hardpoints, and is equipped with an internal GSh-23-2 twin-barrel cannon. Weapon options include up to four PL-5, -7, -8 or -9 short-range air-to-air missiles (AAMs) or four PL-12/SD-10B medium-range AAMs; two C-802A anti-ship missiles; two anti-radiation missiles; five 500 kg bombs; twin launchers for up to eight 250 kg, MK-20, GBU-12 or anti-runway bombs; single 1,000 kg bomb or GBU-10; or up to three mission pods”.

There have been some speculation about a naval variant of this plane, and if confirmed it would multiply its potential value for Buenos Aires. Other possible areas of cooperation in the defence industry are the “co-production in Argentina of the Norinco VN1 wheeled armored personnel carrier (APC) and co-operation in building a new ice-breaker, naval tugboats, mobile hospitals”. In 2011 the Fábrica Argentina de Aviones (Argentine Aircraft Factory: FAdeA) signed a deal to start co-producing China’s Changhe Z-11 light helicopter.

Cooperation in space: purely civilian?  

China is building a space tracking station for lunar exploration in Neuquen (Patagonia), which is scheduled to start operating in 2016. Although Argentine official sources stress its purely civilian nature, not everybody accepts this view at face value. For example Richard D. Fisher Jr. (Senior Fellow, Asian Military Affairs, International Assessment and Strategy Center) told the U.S.-China Economic and Security Review Commission on 18 February 2015 that “A Chinese-armed Argentina with access to Chinese space ISR may be able to better threaten war to take the Falkland Islands”.

Conclusions

China has become one of Argentina’s top trade partners, while providing much needed investments in a number of areas, including infrastructure. In addition to project finance and FDI, Beijing has also made available to Buenos Aires RMB swap facilities, part of China’s drive to internationalize her currency and of vital importance to Argentina given her troubled relationship with foreign investors and international financial institutions. Beijing remains a steadfast supporter of Argentine claims to the Falklands, underscored by their shared political culture and Chinese interest in the region’s natural resources. China’s shadow also looms large in Argentine military procurement, as clear from the purchase of five offshore patrol vessels and continued speculation over the FC-1/JF-17 warplane. Therefore, there are powerful reasons for the UK to carefully follow Chinese policy towards the South Atlantic, since Beijing may provide Buenos Aires with the economic, diplomatic, and military, means to change the balance of power in the region. Thus, while bilateral anglo-chinese economic relations are indeed important, they should not monopolize the attention of analysts and policy makers to the detriment of national security.

Alex Calvo, is a guest professor at Nagoya University and a member of Taiwan’s South China Sea Think-Tank and CIMSEC (The Center for International Maritime Security). He tweets @Alex__Calvo and his work can be found here. Image credit: CC by Ministerio de Cultura de la Nación Argentina/Flickr