Why the Lithium Triangle is Becoming Beijing’s Favourite Love Story

by Arul Braighta Arulanantham

Image Courtesy: Adobe Stock

Introduction: Beyond Resource Romance

When Salvador Allende nationalized Chile's copper mines in 1971, the world watched a peripheral nation challenge the established order of resource extraction. U.S. multinationals retreated amid accusations of excessive profits, diplomatic pressure mounted, and Chile stood defiant declaring the expropriation a "Day of National Dignity." Half a century later, another resource drama is unfolding in the same Andean plateaus.

Argentina, Bolivia and Chile collectively known as the Lithium Triangle, holds over 60% of the world's lithium reserves. These countries share more than just contiguous borders and high‑altitude deserts. They share political anxieties, economic ambitions, and a growing awareness that their collective leverage over the energy transition depends on how well they navigate one another. 

The story of China and the Lithium Triangle is not a tale of sudden infatuation; it reads more like the slow formation of a complex, 21st‑century partnership. This relationship moves significantly away from sentimental idealism or the extractive arrogance of historical empires and sits at a new style of statecraft : China is an undeniable great power whose behaviour blends material strategy with political tact and industrial discipline with diplomatic softness. If great powers have historically approached resource‑rich regions like impatient suitors demanding devotion in exchange for gifts, China behaves more like a partner who adapts to each counterpart’s emotional temperature, institutional quirks, and political mood.

Great Powers and Strategic Lithium

No relationship begins without motive, and China’s attraction to the Lithium Triangle is grounded in structural necessity rather than just desire. China processes nearly 80 percent of the world's lithium and produces 60 percent of the world's electric vehicle batteries, despite having only 7 percent of global lithium reserves. This asymmetry is the key to understanding China's strategic calculus. The country's dominance isn't in extraction but in what happens after the ore leaves the ground. By controlling refining, processing, and battery manufacturing, China has constructed what amounts to a structural chokepoint in the global energy transition. This is where China differs fundamentally from historical resource powers. 

The British Empire sought rubber and tea; the United States carved out banana republics and oil concessions. China seeks not just commodities but command over entire value chains. Chinese direct investment in lithium extraction across the region has quadrupled since 2020, with Tianqi Lithium and Ganfeng Lithium collectively controlling access to nearly 40% of global lithium production through their South American operations. But even these impressive figures understate the strategy: China doesn't merely want lithium, it wants to be the only country that can turn lithium into batteries at scale. 

But its geopolitical vulnerability is equally clear: the United States and the European Union have launched a battery‑supply‑chain decoupling project aimed at slowing China’s technological ascendancy. ​​So Beijing has two imperatives: First, to lock in the long‑term supply of lithium feedstock; Second, to prevent Washington and Brussels from constructing choke points that could disrupt China’s ascent in the EV and renewable‑energy sectors. And Beijing arrives with this adaptive behaviour that gives China a distinctly romantic aura in this geopolitical courtship.

How China Courts Differently

If there's a Chinese diplomatic playbook for resource-rich regions, it might be titled "Flexibility as Strategy." Consider Bolivia, historically one of the most challenging investment environments in Latin America, with a state-heavy approach to natural resources that has spooked Western investors for decades. In early 2023, the Bolivian government signed a $1 billion agreement with a Chinese consortium including battery giants CATL, BRUNP, and CMOC, aiming to unlock Bolivia's vast untapped lithium reserves. This breakthrough illustrates what makes Chinese resource diplomacy distinctive. Where Western companies often demand liberalization, privatization, and rigid legal guarantees before entering, Chinese state-backed enterprises demonstrate what might be called "romantic flexibility", which is a willingness to work within whatever political economic framework the host country prefers. 

China seems to have taken an approach to growth in Africa that involves not only government-directed investment but also market forces unleashed by Chinese value chains. This model travels to Latin America intact.Argentina, which has the most liberalized lithium sector in the Lithium Triangle, hosts significant Chinese involvement. Six of its sixteen active lithium projects are under Chinese ownership or partnerships, including four of the most advanced ones. Notably, Tibet Summit Resources Co. Ltd. has committed $2.2 billion to expand production capacity.

In Chile, where the government has moved toward partial state control through the National Lithium Strategy, Chinese investment has taken a different form. In 2018, Tianqi Lithium acquired a 23.77% stake in Sociedad Química y Minera (SQM), one of Chile’s largest lithium producers.

The pattern reveals strategic pragmatism: China doesn't impose a one-size-fits-all development model. It offers downstream integration, promising that raw lithium can be processed locally, creating jobs beyond the mine gates. It provides flexible financing through state development banks, often at terms that don't trigger immediate balance-of-payments crises. And critically, it demonstrates willingness to operate in environments that Western competitors have abandoned or avoided.

Western firms retreat from such environments not merely due to risk aversion, but because of structural incompatibilities between their operating requirements and host country preferences. Publicly traded Western mining companies face quarterly earnings pressures and shareholder demands for predictable returns, making them ill-suited for political economies where state control, uncertain regulatory frameworks, and longer payback periods are the norm. They require transparent legal systems that protect property rights through international arbitration which is precisely what resource-nationalist governments resist as infringements on sovereignty.

Great Power with Chinese Characteristics?

The question worth asking is whether China represents a fundamentally different kind of great power, one that has learned from the backlash against previous resource grabs and adapted accordingly. Immanuel Wallerstein's world-systems theory offers a sobering frame: in the capitalist world-economy, core powers have historically extracted surplus from peripheral regions through unequal exchange, regardless of whether they brandished colonial flags, championed free markets, or promoted development assistance. Britain's colonial extractivism, America's Cold War resource diplomacy, and European neocolonialism in Africa shared fundamental characteristics of interference in domestic governance, exploitation through asymmetric trade relations, and structural mechanisms that perpetuated dependency. 

If great powers are defined by their position in global accumulation processes rather, then the relevant question becomes not whether China is different, but whether any rising power can escape reproducing these dynamics. The evidence suggests something more complex than either pure benevolence or pure exploitation. Unlike Western engagement, China's diplomatic approaches create sustained, predictable partnerships that African leaders can rely upon. This consistency extends to Latin America. Chinese foreign ministers have visited African nations as the first overseas trip every year since 1991; similarly, Chinese engagement with the Lithium Triangle countries exhibits institutional persistence rather than episodic attention.

This can be contrasted with the historical functioning of Western resource diplomacy. The Chilean copper nationalizations of the 1970s emerged precisely because multinational corporations like Anaconda and Kennecott had operated extractive self-contained settlements with their own infrastructure, generating enormous profits while providing limited spillover benefits to the broader Chilean economy. By the late 1950s, Chuquicamata and El Salvador were owned by Anaconda, and El Teniente by Kennecott, large mines that were mainly self-contained and self-sustaining settlements with their own cities, water and electrical plants, schools, stores, and even police forces.

The Allende administration's calculation of "excessive profits", defining fair compensation as book value minus returns above 12 percent annually reflected deep frustration with arrangements that enriched foreign shareholders while leaving Chile dependent on volatile commodity exports. The nationalization was celebrated as the Day of National Dignity, passed by unanimous vote in Congress on July 11, 1971.

China's approach avoids these inflammatory dynamics by emphasizing partnership rather than domination. The rhetoric of "win-win cooperation" and "mutual benefit" pervades Chinese diplomatic communications. Economic diplomacy does not merely involve government decisions; rather, government policy only serves the function of providing direction, offering limited support, and reducing barriers. Whether this represents genuine partnership or a more sophisticated form of asymmetric dependence remains contested. 

The Structuralist Dilemma: Can Lithium Break the Commodity Trap?

For structuralist economists the lithium boom poses a familiar yet interesting question: Can resource-endowed countries finally escape the extract-export-stagnate trap? 

Raul Prebisch's center-periphery model depicted the world economy as divided between industrialized "center" nations benefiting from dynamic manufacturing sectors and "peripheral" economies trapped in primary production with structural rigidities. The structuralist critique held that primary-export-dependent developing nations face deteriorating terms of trade due to low income elasticities for commodities versus high elasticities for manufactures.

Latin America has dreamed of industrial upgrading since the 1960s, when import-substitution industrialization promised to build local manufacturing capacity behind protective tariff walls. That project largely failed, collapsing amid debt crises, inefficiency, and political instability. Most of the inequality reduction achieved in the 2000s was the result of commodity-financed social spending, cash transfers, and improvements in education but did not address the region's trade structure, which remains concentrated around commodities. When commodity prices fell after 2014, the inevitable result was that these interventions could not be sustained, leading to reversal of the progress achieved in the previous decade.

Now lithium offers a new test case. Bolivia and Chile have turned to resource nationalism, promoting state ownership and control to maximize distribution of economic benefits and industrialize their entire lithium battery value chain. The ambition is to move beyond raw material exports to battery manufacturing, creating high-value jobs and technological spillovers.

Yet the structural obstacles remain formidable. Latin America, which has fallen into the middle-income trap, finds it hard to upgrade its technology and is trapped in premature industrialization and the middle-technology trap. Building battery manufacturing capacity requires not just capital investment but technological capabilities, skilled workforces, and integration into global supply chains, which are precisely the areas where China has spent decades building competitive advantage.

This is where China's vertical integration strategy creates both opportunity and constraint for the Triangle countries. On one hand, Chinese investment brings technology transfer possibilities, infrastructure development, and access to massive export markets. On the other hand, accepting Chinese partnership may lock countries into positions as raw material suppliers in a Chinese-dominated supply chain replicating the core-periphery dynamics that structuralists have long critiqued, just with Beijing rather than New York as the center.

The debate cuts both ways. Optimists note that China's long-run view on returns of investment has potentially secured it a part in Bolivia's future lithium industry, and with it, potential for enhanced geopolitical influence and control over critical supply chains. China's willingness to invest where others won't could catalyze industrial development that otherwise wouldn't occur. Skeptics counter that without deliberate policy to capture knowledge spillovers and build local capabilities, the Triangle countries risk becoming junior partners in someone else's energy transition.

The Comparative Frame: Japan, Africa, and Historical Parallels

To understand what makes China's approach distinctive, it helps to compare. Japan's resource diplomacy in the 1970s, driven by energy insecurity after the oil shocks, emphasized long-term supply contracts, infrastructure investment, and technology transfer. Japanese companies built refineries and processing facilities in resource-exporting countries, creating local capacity. But Japan's engagement remained primarily commercial, lacking the geopolitical ambition and state coordination that characterizes China's approach.

The scramble for Africa offers a darker parallel. European colonial powers extracted resources through outright coercion, creating enclave economies with minimal local linkages. Post-colonial resource relationships often reproduced similar dynamics under the guise of development assistance. And again China's diplomatic approaches combine infrastructure investment, trade partnerships, and institutional development, proving more effective than traditional Western tools of aid, military intervention, and diplomatic pressure.

Yet China's record in Africa also reveals limitations and criticisms. Some Africans criticize China for what they see as an exploitative, neo-colonial approach, pointing to low labor standards, environmental damage, and infrastructure projects that saddle countries with unsustainable debt. The "debt trap diplomacy" narrative, though extensively contested by scholars, warrants examination, particularly in the Lithium Triangle context.

The debt trap theory alleges that China intentionally overlends to countries for economically unviable projects, then leverages resulting financial distress to seize strategic assets through debt-for-equity swaps. However, systematic research challenges this narrative. A 2019 Rhodium Group study reviewing forty cases of Chinese debt renegotiations found asset seizures to be exceptional rather than routine, with most negotiations ending in debt write-offs rather than asset transfers. Research analyzing over one thousand Chinese loans to African countries found no clear evidence of debt leveraging to extract concessions. A 2023 Boston University study examining eight supposed debt trap cases concluded that debt trap diplomacy was not the driver of China's overseas lending policies. Multiple scholars describe the debt trap narrative as primarily driven by Western anxiety about China's rise rather than empirical evidence, notably, the concerns come predominantly from Western governments and media rather than from the Global South recipients themselves.

The contracts with China remain seductive for their easy no-strings-attached nature. The debt trap narrative, while reflecting legitimate concerns about asymmetric power, fundamentally misunderstands why developing countries choose Chinese partnerships: not because they're trapped, but because Western alternatives have historically proven less accommodating to national sovereignty and development priorities.

The Lithium Triangle countries watch these African experiences with interest. They possess more state capacity, stronger institutions, and greater bargaining power than many African nations. The three countries' levels of resource nationalism create distinct investment environments, giving them leverage to demand better terms. Whether they use that leverage effectively will determine if lithium becomes a genuine development catalyst or another resource curse disguised in green technology.

Perhaps the most underappreciated aspect of China's lithium strategy is how control over downstream processes creates asymmetric power and how flexibility serves as the key that unlocks access to upstream resources. Despite increasing demand, refining capacity outside China remains limited, and the lion's share of processing continues within China's control, reinforcing asymmetric trade dynamics. This bottleneck means that even if the Triangle countries successfully increase lithium extraction, they remain dependent on Chinese refining capabilities to access global battery markets. The genius of China's approach lies in recognizing that dominance over refining and manufacturing creates bargaining leverage that raw resource control cannot match. 

This is not an accident but a deliberate industrial strategy built over decades. China has invested tens of billions in battery chemistry research, manufacturing scale-up, and supply chain integration. Western countries, having largely abandoned domestic manufacturing capacity during the neoliberal era of offshore production and comparative advantage specialization, now find themselves in the awkward position of needing Chinese processing even as they worry about supply chain vulnerabilities and geopolitical dependence.

Conclusion: The Unfinished Story

The lithium Triangle's relationship with China remains fundamentally unresolved. It could become a model for how developing countries leverage natural resources to achieve genuine industrial upgrading, capturing value beyond raw material extraction and using commodity wealth to build technological capabilities. Or it could replicate historical patterns of dependency, just with Beijing replacing Washington or London as the dominant power.

What distinguishes this moment from previous resource booms is not Chinese benevolence but Chinese pragmatism. The willingness to work with state-led models, provide patient capital, and offer vertical integration creates possibilities that rigid Western approaches foreclosed. Yet that same flexibility serves Chinese strategic interests of securing critical resources, establishing geopolitical influence, and cementing control over energy transition supply chains.

Yet perhaps the more profound challenge lies in the analytical approach itself. The adage "keep your friends close and your enemies closer" captures a strategic truth often lost in simplistic debt trap narratives: understanding China's approach requires engaging with it, not reflexively rejecting it. If China represents a competitor, then studying how its flexibility operates, how its state-backed enterprises negotiate, and how its value chain integration creates leverage becomes essential for developing effective counterstrategies. Constantly invoking debt trap warnings without examining the structural reasons countries prefer Chinese partnerships risks falling behind in a race that demands pragmatic adaptation rather than ideological posturing. So, the Triangle countries must ask not whether to engage China, as that ship has long sailed, but how to extract maximum developmental benefit while maintaining strategic autonomy. 

Perhaps we can speak of "great power with Chinese characteristics", a rising power that has learned to package resource extraction in the language of partnership, that demonstrates strategic patience where others demand immediate returns, and that offers tangible infrastructure alongside geopolitical ambitions. This is neither purely exploitative nor purely benevolent, but rather a statecraft adapted to twenty-first-century realities where soft power matters, where resource nationalism commands respect, and where the country that controls the middle of the supply chain may wield more power than the one controlling either end.

The romance between Beijing and the Lithium Triangle is thus less a love story than a pragmatic courtship, where both parties understand the stakes, negotiate from positions of asymmetric power, and hope with varying degrees of optimism that this time, resource wealth might actually translate into sustainable development. Whether that hope proves justified will shape not just the energy transition but the very structure of economic power in the global system.

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(Arul Braighta is a research officer at C3S. The views expressed are those of the author and do not reflect the views of C3S.)