Closer trade link develops with Chile(2)

FAW Chile was set up in 2010, and as a test started selling trucks in the market. In 2012, the company decided to expand in Chile and sell cars from BYD, Greatwall and Chery in December, while the Chinese car brands become more and more recognized.

"The Chinese auto brands are very competitive in Chile, and the market share has been growing fast. FAW is ready to continue to expand sales in Chile," said Salazar.

It is estimated that Chinese cars account for 10 percent of the market share in Chile, and the figure is expected to rise to up to 13 percent in 2012.

But it's not only about Chilean economic growth and stability. Chile's commitment to boosting investment is another catalyst for Chinese investors.

Statistics from the Chilean government show that the nation is expected to have new investment projects worth $213 billion from 2012 to 2026 in mining, energy, infrastructure, service, telecommunications and tourism.

According to Chile's chamber of commerce for construction, electricity-related infrastructure requires the largest volume of investment, thanks to the increasing price of electricity.

In December, a group of ministries led by the Ministry of Economy of Chile announced 20 measures to promote FDI in energy, water resource, mining, urbanization, and environmental evaluation.

"We welcome Chinese investment," said Alvaro Jana Linetzky, director general of international economic relations with the Ministry of Foreign Relations of Chile.

Chinese investment used to go mainly into the mining, agriculture, processing manufacturing and fishery industries.

"Chinese companies are expressing strong interest in investing in infrastructure projects. Renewable energy is another major sector that will see a huge influx of investment from China", he added.

According to Wen Sanpin, general manager of Corporation ZTE Chile SA, "around Latin America, Chile is strategically important for ZTE and the company's business in the market is very hopeful".

The leading Chinese telecom equipment company set up its branch office in Chile in 2004, and by 2011, sales revenue of ZTE Chile was $47 million.

To promote the brand in the Latin American market, ZTE spent $10 million to set up a laboratory at the University of Chile, which displays the company's latest high-end products and technologies.

The laboratory came into operation in June 2011, and it also provides training programs for students majoring in technology at the university.

Not an easy market

But Shao Yingjun said Chile is not an easy market, and there are severe challenges ahead for Chinese investors.

Shao said Chinese investment in Chile wouldn't see rapid growth in the short term, as the Chilean market is very different from other Latin American countries.

"It is a very open market with mature and well-developed laws and regulations. It is a market that is highly competitive and also a market where the labor cost is almost the most expensive in Latin America," Salazar explained.

Furthermore, Chile has set the same strict standards in carbon emissions as in Europe when it comes to the entry of foreign auto brands, although it is smaller than Brazil in market size, he said.

Chinese auto brands, in the minds of many Chilean consumers, are "much cheaper but not good in quality".

They need to "improve the value, the quality and the branding of their cars", he added.

Another problem is the high cost of labor, which are squeezing profits. In 2011, labor costs rose by 7.2 percent from a year earlier in Chile, according to government statistics.

"The labor cost is much higher in Chile. The products and services we provide here have to meet the European standard, and it's surprising, right? But it's true," said Wen.