Obtaining more from the China relationship

Obtaining more from the China relationship

To a significant extent, the history of Caribbean economic development has been led by one or another nation external to the region seeking advantage for itself or for its enterprises.  

If history is not to repeat itself and the region is to gain from China’s carefully expressed desire for a special relationship, much will depend on recognising this, and channelling Beijing’s support in ways that have long term, lasting and mutual value. If the region does not, it will confirm and help deliver the view, so far only heard in private in some parts of the region, that its interest amounts to a new form of imperialism.  

Last week I wrote about China’s long-term thinking about the Caribbean and Latin America and how this had been set out clearly by China’s Premier, Wen Jiabao, when he spoke in June in Chile. I noted that what Beijing is now proposing is a more profound relationship, and suggested that careful thought and management was required as the depth and breadth of the relationship changed.

Over the last few months, I have been speaking to ministers and opposition figures about how they see the deepening relationship with China proceeding. What emerges is that while they and Governments are willing to embrace the benefits that China is bringing in development assistance, loans, expertise and more, not much consideration has yet been given to how the relationship might be broadened to leverage sustainable growth and prosperity. They also suggest that while the North American and European economic and political relationship remain of significance, it is only though Chinese investment, loans and support will they be able to deliver what they aspire to for their nations.

For Chinese support to be truly beneficial to the Caribbean, the region needs to do much more to seize the economic opportunity and find practical ways in which those in the real economy might benefit. 

It is one thing for Chinese companies using Chinese workers to find opportunity in construction, infrastructure or investment projects that will be Chinese delivered or owned on often surprisingly favourable terms, and yet quite another for Caribbean business to find opportunities in China, provide services or establish ties that will bring growth and development to the region.

In practical terms this means that if the region is also to benefit, Caribbean business has to find ways to partner with Chinese companies, develop joint ventures in manufacturing in the Caribbean for the US and Latin American markets, identify higher value added goods and services for which there might be a market in China or with Chinese business into other parts of the world, and to more generally become active in seeking opportunity in China or with Chinese counterparts.  

More specifically, this will require financing and larger regional companies to visit to explain the nature of Caribbean business and regional commercial norms to Chinese entrepreneurs; or to suggest, for instance, that the region could become a base for joint ventures to manufacture goods that for instance might access the European, US, Canadian markets under existing or new trade arrangements making use of Chinese inputs coming through an enlarged Panama Canal.

Chinese officials are presently discussing some of this with Caribbean Export and other development agencies in the region, but what is needed is for a small number of leading Caribbean companies in the region to begin to explore at for instance trade fairs in China, how new partnerships might be created and financed in the region.

Likewise the tourism sector, both public and private, also needs to respond to the ideas floated by China in Trinidad last year, not just to bring visitors to the region but to deepen co-operation and exchanges to develop mutually beneficial enterprises and institutional support.

No one should remain in any doubt about the extent of China’s interest in a deep and long lasting relationship with all of the nations of the Caribbean and Latin America. To rehearse the depth and breadth of existing Chinese initiatives would much more space than is available. 

Significantly, though there are many straws in the wind: China is upgrading its diplomatic facilities across the region; is looking at the possibility of establishing a manufacturing logistics and distribution centres in one or another northern Caribbean nation for transhipment of goods to North America, Latin America and the Caribbean; is exploring with some nations such as Suriname double tax agreements and visa waiver arrangements; and is providing equipment to a number of Caricom defence and police forces. It also signed eight agreements during the recent visit of Cuba’s President, Raul Castro, to Beijing that may see much greater Chinese involvement in many aspects of the Cuban economy including the construction and rehabilitation of infrastructure, port development, oil exploration, health care facilities, and in agriculture in relation to food production and export. 

Beyond this, at a broader level China is encouraging the internationalisation of its own currency. It is promoting, the Yuan, in trade in Latin America, particularly in relation to payments for minerals and food, with the apparent objective of supporting its use as a reserve currency and to facilitate the purchase of Chinese capital goods and trade. Separately, the Export Import Bank of China is in negotiations with the IADB to establish a Yuan fund worth US$1billion to finance infrastructure projects in Latin America and the Caribbean. 

Where this seems to lead is to the possibility that that if well considered, China’s support with Caribbean economic development could drive growth.  In this respect, a recent World Bank publication is particularly interesting, suggesting that there is a case to explore further whether the Latin American and Caribbean region might beyond Beijing’s commodity purchases and infrastructural support, leverage growth through enhanced international trade, direct investment and better financial integration with China. 

China has made clear it wants to continue to deepen its relationship with the Caribbean. There is willingness on the part of most governments to harness its positive intent towards the region. What is still missing is any significant public debate about the new relationship, how it might develop, its implications for relations with Europe and North America and how best to ensure that it results in positive long-term benefit in the form of jobs, employment and growth.

(David Jessop is the Director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org

Previous columns can be found at www. caribbean-council.org)