China and the Caribbean – Lesson from History?

Developing Answers Through Dialogue

The Peoples Republic China (PRC) has over the last decade steadily increased its economic involvement across the globe and in the Caribbean region. Caribbean Labour Solidarity asks whether this a positive or a negative development or is it colonialism or imperialism in a new guise. CLS feels that there is a need to start a discussion on these developments.

Participants are asked to contribute to the discussion in order to develop answers through dialogue.

On this short paper I will examine the background to China’s new found role in international development; the part it plays in the economic structures of the Caribbean; examples of what it has done; criticism and critiques of China and the regional governments; China’s response to local and international criticism; and the role of CLS in this discussion.

The two Chinas?

This paper will not examine the history of the conflict between mainland China, the Peoples Republic of China and Taiwan, the Republic of China (ROC). However, it should be noted that UN switched recognition to Beijing and withdrew it from the ROC.

Since then the number of countries that recognise the ROC government diplomatically has fallen to about 20. China regards Taiwan as a breakaway province that it has vowed to retake by force if necessary.

The Background To China’s New Found Role In International Development

Relations between China and the countries of the Caribbean have strengthened since the mid-2000s. These are likely to expand under President Xi Jinping following his speech to 19th Communist Party congress in October 2017. Xi heralded this period as the dawn of a “new era” of Chinese politics and power in which the nation would transform itself into “a mighty force” that could lead the world on political, economic, military and environmental issues.”

Xi said that China did “not pose a threat to any other country” and did not seek global hegemony but “no one should expect China to swallow anything that undermines its interests”.

Xi’s speech can be seen as the culmination of the Silk Road Economic Belt and the 21st-century Maritime Silk Road, better known as the One Belt and One Road Initiative (OBOR), The Belt and Road (B&R) and The Belt and Road Initiative (BRI), a development strategy he proposed in September and October 2013. That focuses initially on connectivity and cooperation between Eurasian countries and the (PRC). The objective of this initiative is to create a global trading grid centred on China.

The Belt and Road Initiative (BRI) has now been expanded to include Africa and the next logical step in its development is for it to reach South America and the Caribbean. Xi has emphasized relations with the region more than his predecessors, having met with Caribbean leaders in Trinidad and Tobago in 2013.

China’s engagement with the Caribbean is primarily economic in nature and appears to be tied to Beijing’s broader efforts to gain access to key markets, expand Beijing’s political links to Caribbean countries, and build goodwill throughout the region. Political and diplomatic concerns –competition with the ROC for diplomatic recognition – also drive Beijing’s involvement in the region.

Beijing may view the Caribbean as strategically important by virtue of its proximity to the United States; the major maritime trade routes and infrastructure, such as the Panama Canal and the region’s many ports; and the fact that the countries of the region sit of the UN and other international bodies.

China’s economic engagement is visible and concrete, focusing on construction of physical infrastructure. Such projects by nature garner widespread attention from local populations as well as leaders and foreign observers, which provides China opportunities to leverage its economic engagement for outsized diplomatic benefits.

The Part China Plays in the Economic Structures of the Caribbean
Examples of PRC Projects in the Caribbean:

Chinese-Financed Projects in the Caribbean

Development finance, particularly for infrastructure projects, is an important component of China’s engagement with the region. US based he National Defense University’s William J. Perry Center for Hemispheric Defense Studies, wrote in 2013 that:

The explosion of Chinese bank-financed infrastructure and resort projects in the Caribbean and the Andes is fuelling a wave of work by Chinese construction companies and workers in the region. An estimated $75 billion in such loans have been made in the past two years, with the use of Chinese companies typically a key condition for the funding.

Development finance manifests most frequently in the form of market-rate loans from Chinese banks for large infrastructure projects. In recent years, two Chinese state-owned banks, China Export-Import Bank (China Exim) and China Development Bank, have pledged, disbursed, or partially disbursed the majority of China’s loans to Caribbean countries.

China’s involvement in the region has not only been significant in financial terms but has also been subject to high-level political involvement. For example, at the 2011 China-Caribbean Economic and Trade Cooperation Forum meeting, then Chinese Vice Premier Wang Qishan promised $1 billion in preferential loans to Caribbean countries.

Another recent initiative which has further strengthened China’s relationship with the region was the first Ministerial meeting of the China- Community of Latin American and Caribbean States (CELAC) Forum) held in China in 2015. In this meeting, the foreign minister and representatives of the Peoples Republic of China and the foreign ministers of member countries of CELAC met under the theme, “New Platform, New Starting Point”.

Here Xi Jinping noted that China has set a goal for bilateral trade between China and Latin America and the Caribbean at a target figure of $500 billion US over the next 10 years and an investment target of $250 billion in the same period. China indicated its interest to cooperate with Latin America and the Caribbean in a wide range of areas including: training of human resources, transfer of technology, infrastructural development, climate change, energy, natural resources and cultural exchanges.

From 2005 to 2012, China Exim and China Development Bank loaned about $4 billion to the Bahamas and Jamaica. $2.5 billion of this amount (from China Exim) financed much of the construction of the Bahamas’ $3.5 billion Baha Mar resort and casino, which was slated to open in late 2014. The resort’s development company, Baha Mar Ltd., expects the resort to boost the country’s gross national product by 10%. The loans to Jamaica mostly financed projects like roads and shoreline reconstruction.

In 2013, China announced a $2 billion contribution to the Inter-American Development Bank’s “China Co-financing Fund for Latin America and the Caribbean.” Over the next six years, the People’s Bank of China will contribute to this fund “to support public and private sector projects that promote sustainable economic growth in the region.”

In Jamaica the North South Highway has been completed, allowing traffic between Ocho Rios and Kingston to taken just over an hour to complete the journey compared to the to hours plus using the old road. The China Harbour Engineering Company (CHEC), which is undertaking the project, spent about US$700 million on the project. The concession agreement, which gives CHEC the right to build, own and operate the road for 50 years, also allows the Government to recoup the money it spent on the highway over the life of the agreement.

CHEC will also get 1,200 acres of land along the highway as part of the arrangement.

During his June 2013 visit to Trinidad and Tobago, President Xi reportedly promised ten Caribbean nations a total of $3 billion in loans, although specific details about the timing, financing, and purpose of the loans have not been disclosed.

In 2013, Hong Kong-based HKND Group won a 50-year concession to design, build, and operate a canal through Nicaragua. The estimated $50 billion project is intended to provide an alternative route to the Panama Canal for goods traversing the Atlantic and Pacific oceans.

Chinese companies are involved in port infrastructure projects in the Caribbean, this is possibly to capitalize on the commercial boost Caribbean ports expect from the Panama Canal expansion in 2015, which is projected to double the canal’s tonnage capacity by 2025 and make transit more cost-effective, and the proposed Nicaragua Pacific/Caribbean canal.

It was announced in 2014 that China’s Xinfa Group Company Limited will build an alumina plant in the north of Jamaica parish. In addition, a coal-fired plant to provide energy for the alumina plant will also be built. These works will involve foreign direct investment of approximately US$3 Billion.

In 1995, a Hong Kong-based conglomerate, Hutchison Whampoa Limited, entered into a partnership with the Grand Bahama Development Company to develop a deepwater container port in Freeport in the Bahamas. The conglomerate, which initially invested $2.6 billion in the port, operates the port and related logistical infrastructure, including an airport. The conglomerate later expanded the port and developed a cruise ship harbor and passenger terminal.

State-owned China Harbour Engineering Company reportedly plans to invest between $1.2 and $1.5 billion in a transshipment port in Jamaica. The location of the facility and the development timelines remain unclear. Chinese companies have also invested in ports in Suriname, Venezuela and elsewhere in the Caribbean.

According to the BRICS Policy Center in Rio de Janeiro, Brazil, Chinese investments in port infrastructure in the Caribbean and Latin America are a positive development in light of diminishing U.S. and European investment after the global economic downturn. However, she warns heavy reliance on China for infrastructure investments in Latin America, the Caribbean has resulted in an environment in which construction and technology standards, and institutional ties in the region overwhelmingly favor Chinese companies. This could limit opportunities to attract non-Chinese investors in the medium-term.

Criticism and Critiques of China and the Regional Governments

Following on from the end of the British Empire, the political leaders of this region appear at a loss as to the direction that their countries are to go. The transition from anti-imperial struggle to leading government has been difficult with no one territory having a coherent plan for their development.

A number of territories have tried variants of socialism from Manley’s efforts in Jamaica to Jagan and Burnham’s attempts in Guyana. For its own reasons the Grenada experiment collapsed in 1983. From then to the late 90s the countries of the region appeared to be adrift until China arrived on the scene.

Apart from tourism, the smaller countries of the region have relied on agricultural or extractive mineral exports as their main source of foreign revenue. However, the volatility of the downstream market; high production and transport costs; and the sourcing of alternative the region has suffered the vagaries of the world market.

For example, Reynolds closed their Jamaica Bauxite Mines in the 1980s. Reflecting on this Phillip Paulwell, Jamaica’s Minister of Mining, stated in respect of the new alumina plant.

“That single act disrupted many lives, and many more have wondered if bauxite mining operations will ever return to that area of St. Ann. I have also stated that the Administration’s policy is that no one should export raw bauxite from Jamaica without specific conditions…we have stayed true to that because we are serious about building the platform for sustainable growth…”

Caribbean populations have become increasingly critical of the local economic impact of Chinese-invested projects, particularly China’s insistence on using large numbers of Chinese subcontractors and laborers on construction projects. For example, the Bahamian Baha Mar resort was expected to utilize around 7,000 Chinese workers. This number later was revised downward by almost half.

Discontent over imported Chinese labor appears to be a major driver of change in Chinese labor practices in the region. Examples from elsewhere suggest that once they have completed their role, the Chinese staff remain and establish businesses in the regions in which they work. This creation of a bridgehead, if true, could be at the expense of local businesses.

Between this local backlash and the increasing cost of paying Chinese laborers, the Inter-American Dialogue predicts Chinese projects in the Caribbean likely will rely less on Chinese labor in the coming years. Outcries over the use of Chinese laborers do not appear to have significantly affected generally positive attitudes toward Chinese projects in the region.

China’s Response to Local and International Criticism;

The Role of CLS in This Discussion.

Many outsiders may ask what role, if any, does CLS have in taking on matters outside of the United Kingdom. Its members do not live in the Caribbean, the organisation is based over 3,000 miles away from the region and it has no formal links to any organisation there.

Despite or because of our modest size CLS believes that it has a role to play in providing analysis, critique and objective criticism to entities in the Caribbean region and elsewhere on issues affecting their area. The role played by CLS in supporting the Grenada Revolution, striking bauxite workers in Guyana; alerting the world to the recolonisation of the Caribbean; combating judicial executions in the Caribbean; raising the issues of the problems faced by the Caribbean’s agriculture industries, including its banana production are but a few of the actions undertaken by our organisation.

Many members of CLS have gone on to play significant roles in Caribbean government and organisations. Some could say that when it becomes difficult to see the wood for the trees a friend outside the forest is a great help.

Dennis Bartholomew
2017/11/05

Acknowledgements: –

RJR News – http://bit.ly/2zxSK8Q.
The Barbados Nation – Various editions
China’s Expanding and Evolving Engagement with the Caribbean: Campbell and Valette – U.S.- China Economic and Security Review Commission
The Gleaner On-line – http://bit.ly/2A8Ya6g.
The Barbados Ministry of Foreign Affairs and Foreign Trade website – http://foreign.gov.bb/.
BARBADOS-CHINA COOPERATION, published in 2016 – http://bit.ly/2y1bfhn