China's Premier Wen Jiabao
China's Premier Wen Jiabao. REUTERS

China offered a $10bn (£6.4bn) credit line to support infrastructure projects in Latin America as Chinese Premier Wen Jiabao wrapped up his visit to the region on Tuesday.

The programme would be implemented by China's Development Bank.

The Chinese premier also expressed his intention to double China's trade with the region to $400bn over the next five years. Besides, China would create a $5bn fund for cooperation among China, Latin America and the Caribbean.

"The Chinese government ...will continue to offer economic assistance to countries in the region that are interested," the Reuters quoted Premier Wen Jiabao as saying.

Wen also proposed a free trade pact with the South American trade bloc Mercosur and appealed for a joint fight against protectionism.

Mercosur includes Brazil, Argentina, Uruguay and Paraguay.

Analysts are seeing the development as mutually contributing to both China and the South American region.

China's huge foreign exchange reserves enable it to invest in new areas and it sees growth opportunities in the Latin American region.

At the same time, the new cooperation between resource-rich Latin American countries and China would open up new areas of investment for Chinese infrastructure development companies.

Moreover, the South American nations would be opening up a new export market for low-cost goods from China which is facing low demand from Europe and the US, its two key markets.

On the other hand, the Latin American nations could benefit from Beijing's technical skills and expertise.

"We have to combat trade protectionism, broaden the mutual openness of our markets, optimise the trade structure and diversify cooperation in terms of customs and quality control," Premier Wen said.

China is also encouraging currency swap with South American countries to push for the increased presence of the yuan in the international market. A local currency swap agreement will enable the respective nations to avoid trading in dollars and instead directly convert to the yuan.

"China is also considering the possibility of negotiating and signing agreements for local currency swap agreements and increasing the reciprocal creation of bank branches," said Wen.

China and Brazil entered into a currency swap agreement worth $30bn (£19bn) on 21 June.

Other nations which have a currency swap agreement with China are Australia, Japan and Hong Kong.