Venezuela
Background
Venezuela and the People’s Republic of China (PRC) officially established diplomatic relations on 28 June 1974. Sino-Venezuelan relations have since gone through two distinct phases. During the initial phase, between 1974 and 1999, the two countries exchanged high-level diplomatic visits and signed 36 agreements in areas such as diplomacy, culture, science and technology, and, in particular, energy.
The relationship began to deepen at the beginning of the 1990s, when the PRC showed interest in investing in the Venezuelan oil sector, particularly in Orimulsion, a synthetic fuel based on bitumen that can be used as a low-cost alternative to coal and heavy fuel oil in power generation. The first Orimulsion agreements between the two countries were signed in 1996, which included sales and purchase agreements and direct investments in Venezuela—most led by the state-owned China National Petroleum Corporation (CNPC).
With Hugo Chávez’s ascent to the Venezuelan presidency in 1999, Venezuela’s bilateral relations with China entered a new stage. During his time in power (1999–2013), Chávez made five official visits to China (in 1999, 2001, 2004, 2006, and 2009) and signed 315 agreements with the Chinese Government. Among the most important were: 1) the Ten-Year Energy Cooperation Agreement (2001–11); 2) the agreement establishing the China–Venezuela High-Level Joint Commission (2001) (CMAN, in Spanish); 3) the agreement to upgrade bilateral diplomatic relations to a Strategic Partnership for Shared Development (2001); 4) two agreements establishing the China–Venezuela Joint Funds (2007); and 5) the agreement establishing the High-Volume and Long-Term Joint Fund (2010).
A core element of the Chávez administration’s strategy was strengthening political relations with the PRC to reduce the influence of the United States in Venezuela. Chávez held the view that the United States posed a threat to his hold on power, as evidenced in president George W. Bush’s support of the failed 2002 military coup against him, which was followed by a two-month shutdown of the national oil industry promoted by local opposition groups. These conflicts solidified Chávez’s decision to gradually reduce ties with the United States and start a process of embracing the PRC—a country that aligned with some of his foreign policy objectives.
Despite his intentions, Chávez faced a particular reality: the United States had been Venezuela’s top trading partner and main source of foreign direct investment (FDI) for many years. The challenge for the Venezuelan President was to create a strategy that would decouple the country’s economic engagement from the United States and replace it with other markets. From Venezuela’s perspective, China was part of this equation because of its significant economic growth during those years and its openness to strengthening economic ties with developing countries. Critical to this decision was the expectation that, after joining the World Trade Organization (WTO), China would enjoy a long period of economic growth, which would require access to additional energy resources.
Based on this, the first three high-level meetings between presidents Hugo Chávez and Jiang Zemin, one in 1999 and two in 2001, reinvigorated bilateral political relations and established a framework for strengthening economic ties. In December 2004, Chávez visited Beijing, where he publicly presented to president Hu Jintao a strategy for strengthening the bilateral relationship around the oil industry. This included measures to foster new global value chains (GVCs) based on the supply of crude oil to the PRC. This plan involved major Chinese state-owned companies, including CNPC, China Petroleum and Chemical (Sinopec), and China National Offshore Oil Corporation (CNOOC), in the following activities: 1) purchasing Venezuelan crude oil; 2) investing in oil fields; 3) maintaining the sale of Orimulsion to China until 2006; 4) attracting investment in the petrochemical sector; and 5) creating a loans-for-oil financial scheme known as the China–Venezuela Joint Fund (CVJF). The Chávez government also pledged to buy upstream machinery such as drilling equipment, carbon pipes, and vessels produced by CNPC subsidiaries. The PRC and Venezuela also agreed to invest in a refinery in Guangzhou Province that would process heavy crude oil extracted from Venezuela.
The new oil-based GVC brought significant revenues to Venezuela but also elevated the bilateral relationship to a new stage in which several high-level meetings took part between Venezuelan and Chinese officials. It is also important to note that the Venezuelan Government used part of this new income stream to finance both a massive infrastructure plan around the country, including the construction of more than 30,000 units of housing, and social programs. Regarding the latter, it is worth noting that the Venezuelan Government sold many high-value Chinese products at subsidised prices or distributed them free to working-class people to ensure political support. This strategy contributed to Chávez’s re-election in October 2012.
Nicolás Maduro, Chávez’s successor, in power since 2013, has continued along this path. Beijing has provided significant diplomatic and economic support to Maduro, including when internal opposition groups and several foreign governments challenged his legitimacy following the 2013, 2018, and 2024 presidential elections. The United States began to exert strong political pressure on the Venezuelan leader, criticising him for moving towards an authoritarian system. US administrations under Barack Obama and Donald Trump imposed economic sanctions on Venezuela, declaring it an ‘unusual and extraordinary threat’ to US national security.
China has maintained close relations with the Maduro regime, signing more than 100 agreements with Venezuela since he came to power in 2013. Most, signed between 2013 and 2018, covered critical sectors such as the oil industry, telecommunications, and infrastructure—particularly power plants, surveillance systems, highways, and railway systems. Since 2019, China’s support for Venezuela has shifted its focus to political and diplomatic relations rather than economic engagement. The last has been largely confined to the oil sector and the unsuccessful promotion by the Maduro government of four special economic zones (SEZs) intended to attract Chinese investment.
Under Maduro, the status of Sino-Venezuelan diplomatic relations has been upgraded twice. In 2014, both countries confirmed the Comprehensive Strategic Partnership, extending bilateral cooperation to include culture, science, and media. This framework also ensured Venezuela’s unconditional support for China on issues such as the Taiwan question, the South China Sea disputes, and the enactment of the National Security Law in Hong Kong. The second upgrade occurred in 2023, with the signing in Beijing of an agreement formalising an All-Weather Strategic Cooperative Partnership—the second-highest level of partnership between China and a Latin American country, surpassed only by the Global Strategic Partnership with Brazil. The current diplomatic status signals both countries’ mutual support for their ‘core interests and global multilateral frameworks’, denoting the close ‘economic and trade relations’ and frequent high-level exchanges. It should be noted that China also maintains this type of diplomatic relationship with a select group of other countries, such as Pakistan and Belarus.
In summary, bilateral relations between China and Venezuela have strengthened over the past 25 years. The two countries have signed more than 400 agreements during this period, establishing a solid institutional framework that has enabled deepened cooperation in virtually all areas. Beijing considers the partnership strategic, despite Venezuela’s many recent internal struggles and economic crises. The Xi Jinping administration has continued to value Venezuela’s resources, geostrategic proximity to the United States, and diplomatic positions on issues China regards as core interests. For Venezuela, China has been an important ally in challenging and displacing American hegemony both domestically and in Latin America. China’s presence in Venezuela is clearly felt, as Venezuelan citizens have become more familiar with major Chinese companies and brands in sectors as diverse as automobiles, telecommunications, finance, and energy.
BRI Status
In September 2018, Venezuela and China signed a memorandum of understanding for cooperation on the Belt and Road Initiative (BRI). It also became a prospective member of the Asian Infrastructure Investment Bank (AIIB) in 2017. However, none of these agreements has brought new investments or infrastructure projects to Venezuela. Since launching the loans-for-oil CVJF in 2007, the Venezuelan Government under Hugo Chávez and Nicolás Maduro had invested 62.3 billion USD by 2016 in more than 200 infrastructure projects, most built by Chinese companies. However, the significant number of unfinished projects, along with allegations of corruption surrounding them (discussed further below), has made the Chinese Government sceptical about providing further financial support for new infrastructure development in Venezuela.
Current Economic Relations
Sino-Venezuelan economic relations have experienced ups and downs since first established. The first phase, between 1974 and 1999, was characterised by growing trade but limited broader economic ties. The cumulative trade flows during this period amounted to 400 million USD. Most of the trade involved Venezuelan exports of Orimulsion to China, especially between 1996 and 1999; in turn, Venezuela imported mainly manufactured goods from China.
Since 1999—the year of Hugo Chávez’s election—economic relations have become increasingly dynamic, expanding beyond trade to include direct investment, financing, and infrastructure projects, most of them built by Chinese companies. This pattern largely mirrored China’s broader engagement with Latin America and the Caribbean in the twenty-first century, with two key distinctions: 1) Sino-Venezuelan economic relations have been heavily concentrated in the oil sector; and 2) the post-2019 trajectory of China-Venezuela relations was shaped by US economic sanctions and the oil embargo imposed on Venezuela.
Trade
Since the Venezuelan Central Bank and the National Statistics Institute (INE) stopped publishing economic statistics in 2014, it has become necessary to rely on external sources to assess the level of economic exchanges. According to the World Bank’s World Integrated Trade Solution (WITS), trade between China and Venezuela increased elevenfold between 2000 and 2023, from 351 million to 4.1 billion USD. Bilateral trade peaked in 2012, reaching a total volume of about 23.8 billion USD. Bilateral trade has since slumped, primarily due to the collapse of Venezuela’s oil industry and the US embargo imposed in 2019 on Venezuelan crude-oil exports.
From 2000 to 2023, 96.5 per cent of Venezuela’s total exports to China were commodities, including crude oil and its derivatives (88.3 per cent of the total), iron ore (5.9 per cent), ferrous products (1.8 per cent), and methanol (0.72 per cent). In 2023, Venezuela’s main exports to China included petroleum coke (48 per cent), methanol (14 per cent), non-agglomerated iron ore (11 per cent), copper waste and scrap (8.7 per cent), and frozen shrimps and prawns (3.5 per cent).
In contrast, Venezuela’s imports from China are more diverse. The top 20 products—worth 67 billion USD—account for only 30.3 per cent of total imports. Imports from China comprise mainly manufactured goods such as televisions, telephones, computers, and transmission equipment, as well as machinery and equipment used in the oil industry, such as tanks, carbon pipes, and drilling and sinking machinery. This pattern reflects a classic core–periphery economic relationship, in which developing countries export raw materials in exchange for higher value-added manufactured goods from industrialised economies.
It is worth noting that despite the dynamism of Sino-Venezuelan trade relations in the twenty-first century, China was not Venezuela’s top trading partner during most this period; except for 2019, 2021, and 2022, the United States held that position. This pattern underscores the continued importance of Venezuelan oil exports to the United States, as well as Venezuela’s dependence on US products.
Investment
According to the Chinese Ministry of Commerce (MOFCOM), between 2005 and 2015, Venezuela received 2.8 billion USD in outward foreign direct investment (OFDI) from China. Most of the capital is invested through 17 deals in sectors including mining, oil, automotive, telecommunications, and heavy industry. However, Chinese OFDI in Venezuela became more volatile after 2016, with negative outflows recorded in 2016, 2019, 2020, and 2021, when a total of 1.1 billion USD exited the country (see figure below). In sum, between 2005 and 2021, Chinese OFDI net inflows in Venezuela reached about 2.3 billion USD.
According to the Academic Network of Latin America and the Caribbean on China (Red China-ALC), one of the main research centres in the region, these deals included 14 greenfield projects and three mergers and acquisitions. Among these are automobile factories led by companies such as Yutong and Chery Automobile, as well as mobile phone and computer factories established through joint ventures between Chinese firms such as Huawei, ZTE, and Inspur Company and Venezuelan partners. The CITIC Group, a major Chinese state-owned enterprise, invested in a housing project in Caracas, while CNPC made additional investments in two of its oil industry projects. In the oil sector, CNPC formed four joint ventures with Petróleos de Venezuela, S.A. (PDVSA): three in the Orinoco Oil Belt, the country’s largest oil reservoir, and one in western Venezuela. According to Red China-ALC, these projects have created approximately 11,678 jobs, accounting for about 1.6 per cent of the total employment generated by Chinese OFDI in Latin America and the Caribbean in the twenty-first century.
In recent years, the government of Nicolás Maduro has sought to attract more Chinese investment through the creation of special economic zones (SEZs). The first initiative was launched in 2014, when President Maduro, together with his Minister of Planning, Ricardo Menéndez, established a legal and institutional framework for the creation of four SEZs near the country’s main customs ports. In 2023, the Maduro government revived this initiative by promulgating a new law that not only regulated but also actively promoted the establishment of five SEZs. During his 2023 visit to China, Maduro leveraged the SEZ framework to encourage new Chinese companies to invest in Venezuela. In May 2024, China and Venezuela signed an agreement on the reciprocal promotion and protection of investments. However, Venezuela’s severe economic crisis, institutional weaknesses, widespread corruption, and the challenging investment environment—exacerbated by US economic sanctions and the oil embargo—have constrained the inflow of new Chinese investment.
Overall, China’s OFDI flows to Venezuela have been significantly smaller than those from the United States, which has been the country’s main source of FDI over the past 25 years. In 2005, for example, the MOFCOM recorded only 7 million USD of Chinese OFDI flows to Venezuela, while the US Department of Commerce’s Bureau of Economic Analysis reported approximately 1.3 billion USD in US OFDI flows to the country. According to the World Bank, in that year, Chinese and US OFDI to Venezuela accounted for 0.30 per cent and 53 per cent, respectively, of the total.
This trend has changed over time. In 2012—the peak of Chinese OFDI flows to Venezuela—China accounted for about 31 per cent of Venezuela’s total FDI inflows. Nevertheless, the United States remained Venezuela’s largest investor that year, contributing 44.5 per cent of the total. By 2018, the situation had changed significantly: net US OFDI flows to Venezuela declined by 982 million USD, while Chinese OFDI remained positive, recording a net inflow of 328 million USD. In 2021—the last year tracked—both countries saw a decline in their respective historical OFDI stocks in Venezuela, reflecting the broader deterioration of the country’s economic and investment climate.
Finally, it is important to contextualise Venezuela’s share of Chinese OFDI relative to other Latin American countries. According to Red China-ALC, the region as a whole received about 203 billion USD in Chinese OFDI between 2000 and 2024, of which Venezuela received an estimated 3.2 billion USD, or 1.6 per cent. This makes Venezuela the ninth-largest recipient of Chinese OFDI in Latin America during the twenty-first century.
Finance
The financial agreements signed between China and Venezuela are among the most important milestones in their bilateral relationship. As mentioned above, in 2007, they established the China–Venezuela Joint Fund (CVJF), a loans-for-oil scheme in which the China Development Bank (CDB) provides advance financing to the Social and Economic Development Bank of Venezuela (BANDES), which is to be repaid by the PDVSA through oil shipments to CNPC refineries in China.
The CVJF comprises short-term and long-term funds. Short-term loans amounted to less than 5 billion USD and were signed in 2007, 2008, 2012, 2013, and 2015. Long-term loans were known as the Large Volume and Long-Term Financial Fund (FGVLP, in Spanish), which injected another 20.3 billion USD into Venezuela between 2010 and 2020. The FGVLP was similarly structured as a loan-for-oil transaction, but with a longer repayment period of 10 years and higher interest rates. It also entailed a greater commitment of Venezuelan oil exports to China. Importantly, a key incentive offered by the Venezuelan Government to secure these loans was the promise to use the funds to purchase goods from Chinese firms and award contracts to Chinese companies.
In addition to these mechanisms, China also availed substantial financing specifically targeting Venezuela’s oil sector. Approximately 11.9 billion USD in financing was provided by the CDB and the Export–Import Bank of China (China Eximbank) to the PDVSA, primarily to finance oil operations and production in the four joint ventures between CNPC and the PDVSA in Venezuela. The financing was used to acquire ships, oil upgraders, drilling and sinking machinery, and carbon pipes—many of which were procured from CNPC subsidiaries.
In sum, Chinese financing in Venezuela in the twenty-first century reached a total of 62.3 billion USD—representing the largest amount of Chinese lending to any single country. From the Venezuelan perspective, the results have been mixed. On the one hand, Chinese financing offered critical access to international credit at times when Venezuela was largely excluded from global capital markets. On the other hand, Venezuela committed a substantial portion of its future oil production to pay its debts. Due to limited transparency, it remains unclear how much of the original capital and interest from the CVJF, the FGLVP, and the oil sector loans has been repaid.
Moreover, much of this money was invested by the Chávez and Maduro governments in massive infrastructure projects or the purchase of consumer goods. Among the most important projects were the national railway system, the modernisation of the country’s main heavy industry complex, the installation of a new surveillance system, new highways, electrical plants, and the aforementioned telephone, computer, and automobile factories. Despite their initial impact on the local economy—creating thousands of new jobs and developing new value chains within the country—most of these infrastructure projects were abandoned, left unfinished, or cancelled over the years due to a lack of new investments to fund them. This was also due to major failures in their management. Consequently, Venezuela lost the opportunity to invest the revenue generated from its relationship with China in a real economic development process. China took note of this situation and, since 2016, has not disbursed any new loans to any Venezuelan financial organisation.
Aid
During the twenty-first century, China has assisted Venezuela in various areas such as financing and health care, as well as training courses for public officials and scholarships for university students. China began to provide significant financial assistance in the early 2000s, with several non-payable loans disbursed to Venezuela between 2001 and 2005. In 2006, the two governments reached an agreement to establish a line of credit for the construction of 20,000 housing units. Financial cooperation between the countries was renewed in 2016 and again in 2020, when China agreed to defer Venezuela’s repayments on portions of the 62.3-billion-USD bilateral debt accumulated between 2007 and 2016. These agreements were crucial for Venezuela, as it sought to avoid further deterioration of its economic and humanitarian crises.
Additionally, since 2009, the Chinese Government has funded numerous training courses, study tours, and exchanges for Venezuelan public officials, journalists, scholars, and civil society actors. Beijing has also awarded a significant number of scholarships to Venezuelan students to pursue higher education in China. Within Venezuela, China has established a Confucius Institute to promote its culture and language.
In recent years, especially during the Covid-19 pandemic, Venezuela received substantial assistance from China to support its healthcare system. Between 2020 and 2023, Caracas received more than 110 tonnes of medical supplies. This aid included thousands of polymerase chain reaction (PCR) test kits, face masks, medical gloves, protective suits, and infrared thermometers. China’s support was critical for Venezuela, given that international sanctions and embargoes during this period had severely restricted its access to financing and products.
Key Controversies
One of the key criticisms of the Sino-Venezuelan relationship is the lack of transparency and efficiency in the execution of numerous projects financed through the loans-for-oil program, most of which involved Chinese companies. Research shows that most of the projects proposed under the framework of the bilateral joint funds were never completed. Several factors have contributed to these failures, including weak institutional capacity in Venezuela, which did not allow accountability on several projects, the absence of a long-term strategic vision from the Venezuelan Government regarding its relationship with China, especially during the Maduro administration, and widespread irregularities (unfinished projects, discrepancies in construction goals and financial budgets, and labour and social claims) and possible corruption documented by the media. Among the most notable international allegations is the reported payment of bribes by the Chinese company CAMC to PDVSA lobbyists in exchange for contracts related to Venezuela’s electricity system—a case currently under investigation in Andorra.
Critics have also pointed to the broader macroeconomic consequences of the Sino-Venezuelan cooperation model. As mentioned previously, the oil-backed loans not only locked Venezuela into long-term commitments to supply crude oil to a single market, but also led the government to prioritise debt payments to China over its other international financial obligations. The preferential treatment of Chinese debt placed additional strain on Venezuela’s other debts, such as sovereign and PDVSA bonds. A recent report by the nongovernmental organisation Venezuela Transparency revealed that the Venezuelan Government’s decisions on debt management prioritising China over other creditors were politically and ideologically motivated.
The structure of the Sino-Venezuelan relationship has also deepened the Venezuelan economy’s dependence on oil exports while further weakening its industrial base—a phenomenon known as reprimarisation or de-industrialisation—which has reinforced a new core–periphery relationship between China and Venezuela, with the latter increasingly reliant on China’s economic assistance to tackle the severe crises of the past decade. Due to the Maduro government’s control of local mainstream media, coverage of the Sino-Venezuelan relationship has portrayed it as a success, despite criticism from academia and civil society organisations, and mounting evidence to the contrary.
Key Sources
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