Will China offer a helping hand to Venezuela?

The economy of Venezuela, Latin America's largest oil producer, is on the brink of collapse, complete with dropping oil prices, heavy debt and a shortage of various necessities. The question of whether China will lend a helping hand has recently been drawing attention.

A top Venezuelan economic official recently said that the country has reached a deal with China to improve the conditions of an oil-for-loans deal. According to the official, all conditions, including time frames and investment amounts, have been greatly improved. 

A Chinese spokesperson, Hong Lei, said at a press conference on May 17 that the two sides have agreed to explore effective means of making their financing cooperation more flexible, but he gave no specifics. 

Financing cooperation is a commercial venture between financial institutions and companies belonging to two sides. Funds have already been used for economic and social development programs in Venezuela, as well as cooperation projects between China and Venezuela, creating tangible benefits for both sides, said Hong. 

Given the change in global oil prices, the two sides agreed to explore effective means of enhancing the flexibility of a bilateral financing cooperation, according to Hong. 

China has lent some $50 billion to Venezuela over the last decade, but Venezuela—deep in economic crisis in for the past several years—has been unable to pay China back. The Financial Times reported in October 2014 that China has already extended loans to Venezuela and could continue to extend them indefinitely.

Venezuelan President Maduro declared on May 13 that the state of economic emergency started earlier this year will be extended for at least another 60 days. He believes that the country will remain in a state of emergency for the rest of 2016 and possibly all of 2017.

Although oil prices rebounded slightly in recent months, they cannot rescue the Venezuelan economy. The IMF predicted that the country's GDP will shrink by 8 percent in 2016 and 12 percent in 2017. The CPI was expected to reach 720 percent, or five times the official figure. 

Venezuela is in the middle of a deep economic recession. The country is facing a shortage of food and electricity, which Maduro’s opposition has attributed to the president’s poor management. Nevertheless, Maduro insists that he will remain in office until his term expires in 2019.