China Power

China and Latin America: Back to the Future

China’s foray into Latin America builds on an extensive history.

China and Latin America: Back to the Future
Credit: REUTERS/Carlos Vera

China is wont to surprise, but few recent developments seem to have caught observers as much off guard as the country’s current foray into Latin America, especially the projected transcontinental railway traversing both the Amazon and the Andes tabled during Chinese Premier Li Keqiang’s recent visit to the region.

But rather than being new, these admittedly still embryonic relationships can also be seen in the context of a status quo ante of the 16th-18th centuries, a period when commerce between China and Spanish America formed the lynchpin of trade routes spanning four continents, ushering in the global economy that remains with us today. Two centuries of Anglo-American economic and political dominance have relegated the previous 250 years of global integration into relative historical obscurity.

The Manila Galleon

This particular story begins exactly 450 years ago in 1565, when Spaniard Andrés de Urdaneta first found a route eastwards across the Pacific, from Asia to the Americas. In the age of sail, in a vast and uncharted ocean, and after several unsuccessful attempts by the Spanish, finding the right winds and currents was a navigational feat worth an account of its own, and was recognized at the time with festivities and even works of theater.

For our purposes, it suffices to note that the commercial importance of a safe and dependable bidirectional link between Asia and the already well-established Spanish colonies in the New World was immediately apparent. Manila was founded soon after in 1571, anchoring the new trade route that came to be known as the “Manila Galleon” or “Nao de China,” which brought goods from China and wider Asia across the Pacific in exchange for silver from American mines in “New Spain” – Nueva España – which in turn provided the basis for China’s burgeoning money supply.

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Acapulco and Manila – both serving as entrepôts for their wider regions, Asia and Spanish America – were connected across what is now Mexico to the Caribbean where goods were transshipped on the Flota de Indias, the West Indies Fleet, to and from Spain. Chinese silk, ivory, porcelain, and jade were joined in Manila by spices from the Moluccas, lacquerware from Japan, and cinnamon and cotton textiles from the Philippines for the journey east. In the other direction, Spanish wines, olive oil, and manufactured goods were added to the silver for shipment to Asia.

The ships that were built for this purpose were among the largest ever constructed, reaching some 2000 tons in an age when most large ships were only a quarter of the size. The Manila Galleons were the super-container ships of their day, sailing the Pacific leg of the world’s first global trade route, connecting the New and Old Worlds with Asia and with each other.

Silk remained an important commodity, but so central was silver to this trade that, rather than considering it a latter-day Silk Road, we might instead call it “La Ruta de la Plata,” or “The Silver Way.” It was, nevertheless, very much a continuation of China’s long history of international trade, albeit in the opposite geographical direction.

The First Global Currency

During this period, about 85 percent of the world’s silver was produced in the Spanish colonies of the New World – notably Mexico and Peru – and one-third or perhaps more of it ended up in China as a result of this trade. Although China had invented paper money, during this period the huge Chinese economy ran on silver and copper. Although imports of New World silver took time to ramp up, demand exploded as the Chinese economy boomed on the back of exports. By the latter part of the eighteenth century, it seems that Spanish America was supplying essentially all of China’s money demand.

Both cause and consequence was that the coin known variously in English as the Spanish or Mexican dollar or peso became, insofar as there was one, the standard currency in Asia. This “real de a ocho” – also known as the “peso de ocho (reales),” whence “pieces of eight” – minted in constant weight and purity and circulating widely in Asia, the Americas, and Europe, emerged as a global currency, arguably the world’s first, predating the similar role of the U.S. dollar (which is in fact derived from it) by several centuries.

The effects are still with us: Although the last Manila galleon sailed in 1815 (this year also therefore marking a bicentenary), shipments of silver picked up again once Mexico stabilized after its independence from Spain. The currency was emulated as well as copied. The Japanese yen and Hong Kong dollar were both derived from, and set equivalent to, what was by then the post-independence Mexican dollar, distinguished by its iconic eagle. More important still, the Chinese Yuan was in 1889 set at par to the Mexican dollar. If the yuan develops into a global reserve currency, it will in some ways be restoring the “real de a ocho” to its previous status.

The First Globalization

This globalization was, as today, as much about culture as trade and finance. American crops such as maize, chili, peanuts, tomatoes and sweet potatoes, rapidly spread to Asia, influencing demographics within China itself, as well as local cuisines. In the other direction, fashion based on Chinese textiles, the mantón de Manila and china poblana, became iconic in both Spain and its colonies.

The process included people as well. The ships’ mixed crews were often predominantly Asian, in particular Filipino. Mexico City had a Chinatown from the early 1600s. Indeed, for two centuries, Mexico was arguably the center of the world, the place where Asia, Europe and the Americas all met and where people from the world over intermingled and exchanged everything from genes to textiles. Mexico City was a cultural and intellectual center as well; with a printing press as early as 1535 and universities decades before any North American counterparts, it was a city of books, writers, and students. The first “world city” was not New York, London, Paris, or Hong Kong, but rather the capital of New Spain. Lima and Havana were not far behind.

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Today’s tightly-linked globalized world derives not so much from the Industrial Revolution as from this earlier period. The pivotal role of Spanish America and China has been obscured and superseded by the prevailing narrative of Anglo-American predominance in everything from the economy to technology to military power. But it is difficult, if not impossible, to fit the modern rise of China – a non-Western power with a pre-enlightenment culture – into this narrative. It is, however, more easily accommodated by moving the start of the narrative back by two and a half centuries.

La Ruta de la Plata Redux

Latin America, like much of the world, is experiencing a “pivot to Asia,” or perhaps more accurately, a pivot back. The new narrative arc will need to reach back to this early modern period, to the “Ruta de la Plata,” in order to explain and accommodate current developments toward a more multi-polar form of globalization.

The Silk Road, which as a concept is a modern and indeed Western invention, provides an attractive paradigm for the arrangement of China’s relations with its neighbors and beyond. It is not just nostalgia that led Chinese President Xi Jinping to propose a “Silk Road Economic Belt,” for the Silk Road conjures up a set of relationships based on something other than the so-called Washington Consensus.

The concept of “La Ruta de la Plata” offers China and South America a similar opportunity to reference critical commercial relations centuries before New York and London were financial capitals; from, indeed, a period before the United States even existed. Just as on the new Silk Road, one can already see China proposing infrastructure and transport projects, from a new canal through the Central American isthmus to transcontinental railroads, to complement existing interests in natural resources. In a similar parallel, China is establishing relations with regional groupings – the China-CELAC (Community of Latin American and Caribbean States) Forum comes to mind – that pointedly exclude Western powers. In addition to looking forward, therefore, China and Latin America might also find themselves looking backward to a period bookended by the two anniversaries – 1565 and 1815 – occurring this year.

Peter Gordon is editor of the Asian Review of Books; lawyer Juan José Morales and PBEC Director Germán Muñoz are former Presidents of, respectively, the Spanish and Mexican Chambers of Commerce in Hong Kong. Both write for the Spanish- and English-language press on issues of business, history and culture.