This content was originally published in the Miami Herald on August 16, 2016 under the title “Venezuela’s friends in Beijing worried”.

by Margaret Myers

All but the most steadfast of Chavistas would concede at this point that Venezuela is in a period of crisis, brought about by poor economic management and the drop in global oil prices. The South American nation now has the world’s lowest economic growth rate at negative 8 percent.

The government of Nicolás Maduro has made some last-ditch efforts to cut costs and pay off debts, but it is quickly running out of lifelines.

As it has for over a decade now, Venezuela is looking to China for much-needed financial assistance. Chinese officials are in close communication with Caracas and plans to visit China are seemingly always in the works.

But Beijing is carefully weighing the benefits and drawbacks of continued engagement with Venezuela. The oil-rich nation has featured in long-standing Chinese debates on energy security policy. Perspectives on the Venezuela situation and what to do about it still vary among the many individuals and institutions that shape China’s foreign policy.

China’s Ministry of Foreign Affairs (MoFA) has been unwavering in its support for Venezuela, President Maduro, and the Bolivarian revolution, remarking in all public instances that cooperation with Venezuela will progress undeterred.

Motivated in part by Venezuela’s vast oil reserves, China has promoted a policy of solidaritysince the Chavez years. Continued diplomatic engagement is all but guaranteed.

But the reactions from China’s policy banks — China Development Bank and China Eximbank — are slightly more nuanced. These institutions have already disbursed upwards of $60 billion in finance to Venezuela since 2007.

Bank representatives echo the Chinese MoFA’s sentiments, suggesting continued support for an ailing Venezuela. However, low crude prices are making China’s preferred model of oil-backed lending less viable. Though requested by Venezuela, new Chinese loans have yet to materialize.

Chinese companies, like their international counterparts, are feeling the effects of Venezuela’s deepening economic crisis and of the rapidly deteriorating security situation in Caracas and elsewhere. CNPC’s Baoji Oilfield Machinery Company took a break from Venezuela in 2015 following a period of intense political protests. Plans for a Chinese bullet train connecting Venezuela’s rural areas were similarly abandoned in early 2015.

Concerns are apparent in some Chinese media reports and editorials, which portray Venezuela’s economic woes and Maduro’s worsening reputation, as well as possible negative implications for a heavily-invested China.

Also evident, however, is a far more optimistic, long-term view of China’s debt situation, wherein China’s 30-year loan terms allow sufficient time for global oil prices to rise and for Venezuela to change course.

Despite the diversity of reactions to the Venezuela crisis — or perhaps because of it — the China-Venezuela partnership persists, if more cautiously.

Engagement in recent years was aimed at slowing Venezuela’s downward spiral. Beijing took some measures in 2014 to help Venezuela avoid overpayment on one tranche of the China-Venezuela Joint Fund, for example. A $4 billion loan from China to Venezuela was also used that year to augment the latter’s foreign exchange reserves. More recently, there was talk of allowing Venezuela to make principal-only payments to China.

These measures would suggest some openness on the part of China to the possibility of restructuring existing loans in the event of Venezuelan default.

The better bet is to plan for a post-Maduro political environment. China is doing this too, reportedly, through meetings with Democratic Action representatives and other opposition leaders. Chinese leaders similarly met with opposition candidate Henrique Capriles in the lead-up to the 2012 presidential elections.

Notwithstanding these efforts, it is highly likely that Chinese entities will incur economic losses in Venezuela in the coming years. Preferential treatment can only do so much to alleviate the effects of all-out economic crisis.

Beijing is committed to maintaining a presence in Venezuela, however. Strong government-to-government ties have greased the wheels for Chinese investment in recent years, but Venezuela and China will be of strategic importance to each other regardless of the future leadership’s political leanings.