China in the Caribbean: The New Big Brother

When Chairman of the Standing Committee of the National People’s Congress (NPC) Wu Banggou arrived in the Bahamas in early September 2009 on the second leg of his Americas tour, it quickly became clear that he was not on vacation. As China’s top legislator and the highest-ranking member of the Chinese government to ever visit the Bahamas, Chairman Wu’s entourage included 150 Chinese officials and business leaders. The delegation signed a series of critical economic deals, including an agreement for mutual protection of Chinese and Bahamian investors, a multi-million dollar loan to help build a highway to Nassau’s international airport, and additional support for a major cricket stadium under construction (Caribbean Net News, September 10).The visit was hailed as a major diplomatic event by the Caribbean press, while Chinese media emphasized that the two sides were ready to intensify exchanges and that the Bahamas “would unswervingly stick to the ‘One China’ policy” (Xinhua News Service, September 5). In 2008, bilateral trade between the two countries had surged to $386 million, more than double the year before, and sustained growth was expected in 2009 despite the onslaught of the global financial crisis (CaribbeanPressReleases.com, September 5). Chairman Wu was greeted warmly by Bahamian Prime Minister Hubert Ingraham, who had overseen the normalization of diplomatic relations between China and the Bahamas in 1997, during a previous term in office. Indeed, as this rising Asian power becomes more deeply engaged with the tiny micro-states of the Caribbean, China is positioning itself to be an increasingly influential actor in a distant part of the world traditionally attached to its principal rival, the United States.

At first glance, China and the Caribbean would appear to have few interests in common. China, with a population of over 1.3 billion, has undertaken an impressive economic expansion that has earned it renewed recognition as a global power. The sovereign states of the English-speaking Caribbean consist of small, micro-states with sluggish levels of economic growth. This region of 12 countries includes the island nations of Antigua and Barbuda, the Bahamas, Barbados, Dominica, Grenada, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago—as well as Belize, which is located on the Atlantic Coast of the Central American isthmus, and Guyana, which is located east of Venezuela along the northern coast of South America. The global financial crisis that began in the United States in late 2008 has devastated the Caribbean economies, and muddied the prospects for the region’s future growth. While China has been both a primary driver and beneficiary of world economic growth, the Caribbean has, for the most part, been a reactor to it. It is this difference that makes China an alluring, yet potentially dangerous economic partner.       

Trade and Strategic Issues

Trade between China and the Caribbean has expanded dramatically in recent years. According to the International Monetary Fund (IMF), trade between China and the Caribbean Community (also known as CARICOM, this 15-member regional grouping includes all the countries of the English-speaking Caribbean plus poverty-stricken Haiti, the former Dutch colony of Suriname, and the tiny British territory of Montserrat) grew by a factor of 100 between 1990 and 2008, from a paltry $20 million to over $2 billion [1]. Antigua and Barbuda is China’s top trading partner in CARICOM, with trade worth about $600 million reported in 2008. Trinidad and Tobago, Jamaica, the Bahamas, and Dominica round out China’s top five CARICOM trading partners. For these nations, trade with China is surely a boon, but because China has little demand for their products or services, trade is heavily one-sided. In 2008, 93 percent of CARICOM-China trade came in the form of Chinese exports to the region. Only Dominica approached a balance of trade, exporting over $60 million in goods to China in that year. In the last ten years, Chinese exports have consistently made up more than 70 percent of total trade (IMF Trade Statistics Directory.). This imbalance is cause for concern but is more indicative of the severe economic imbalance that plagues the Sino-Caribbean relationship.  

Chinese-state affiliated companies have also made significant investments in Caribbean infrastructure, especially Hutchison Whampoa Limited, the Hong Kong-based conglomerate whose chairman, Li Ka-shing, is known to have strong links to the Chinese People’s Liberation Army (PLA). Active with port concessions on both ends of the Panama Canal, Hutchison Whampoa established a fully operational $2.6 billion port facility in Freeport, Bahamas in 2001 (Washington Times, November 20, 2001). This past fall, unconfirmed rumors swirled through the Caribbean that the company is in the process of purchasing the Grand Bahama Port Authority (The Freeport News, October 5). Beginning with the first China-CARICOM Economic and Trade Cooperation Forum, which took place in Jamaica in February 2005, China has convened periodic meetings with Caribbean counterparts to advance its economic interests. China is also playing a robust role in the regional multilateral banks as a member of the Caribbean Development Bank and the Inter-American Development Bank, which it joined in 2008 with a contribution of $350 billion (Inter-Press Service, May 27, 2009).

China’s overall strategy for the Caribbean has been driven by a desire to ensure the security of Chinese offshore financial holdings, woo countries with infrastructure projects and investment deals to ensure support for China in multilateral organizations, and promote the crucial “One China” policy to isolate Taiwan on the world stage.

The Taiwan Issue:  Caribbean Minnows and Asian Sharks

Now that China has become a major actor on the world stage, it is demanding the diplomatic recognition that for years had been bestowed on the Republic of China (ROC), commonly referred to as Taiwan. The “One China” policy makes diplomatic recognition of China versus Taiwan a zero sum game, which means that Beijing will not maintain relations with any state that recognizes Taipei. Only 23 nations maintain official relations with Taiwan and Latin America and the Caribbean account for half of these, making the Commonwealth Caribbean a competitive arena in which both Beijing and Taipei have a strong interest. China, in competition with Taiwan, offers economic support to the Caribbean through trade, aid and investment, which returns the favor—for the most part—by maintaining the “One China” policy.  

Taiwan’s alliances with the Commonwealth Caribbean have been whittled down by Beijing’s increasingly skillful diplomacy in recent years. The Bahamas defected in 1997, and the island nation of Dominica severed ties with Taipei in 2004. Not long after that, Grenada—still grappling with the legacy of the communist takeover that prompted U.S. military intervention in 1983—turned its back on its staunch anti-communism rooted in the Cold War era to open its arms to China in 2005. Four countries—Belize, St. Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines—recognize Taipei over Beijing, but the support of these Caribbean nations often comes down to dollars and cents. In 2008, 91.5 percent of China’s trade with CARICOM was with countries that recognize Beijing. Only 8.5 percent of China’s trade was with countries that recognize Taipei despite the fact that more than half of the people in CARICOM live in Haiti, a state allied with Taiwan [2].  

In the case of St. Lucia, the competition between China and Taiwan veered into the theater of the absurd as the debate became heavily polarized along political lines leading up to the 1997 election of Dr. Kenny Anthony as prime minister. As a result, recognition of China became a domestic issue with Anthony’s party, the St. Lucia Labor Party, supporting Beijing while Sir John Compton, leader of the United Workers Party (UWP), favored Taipei. These internal divisions are often rooted in ideological differences but enhanced by the “dollar diplomacy” practiced by both China and Taiwan in the Caribbean. When Anthony was elected prime minister in 1997, he switched allegiance from Taiwan to China within the first four months of his administration.  During his administration St. Lucia was the recipient of much Chinese aid, especially in preparation for the Cricket World Cup, hosted by the West Indies in 2007. Four key Chinese aid projects, including the construction of a national stadium and a psychiatric hospital were used to woo the tiny nation out of Taiwan’s dwindling fold. Nonetheless the extent to which China’s “internal affair” with Taiwan was a domestic issue in St. Lucia became clear when the island’s most recent electoral results provoked a change in recognition of the “One China” policy.

The general election of December 11, 2006 saw a return to power of two-time Prime Minister Compton, and St. Lucia’s position on the Taiwan question was once again in play. With a population of almost 170,000 and an estimated GDP of $1.8 billion, the tiny nation emerged as a key fighting ground in the geopolitical battles for diplomatic recognition between China and Taiwan. On April 30 2007, St. Lucia formally recognized Taiwan and within a few days China withdrew its diplomatic corps (New York Times, May 2, 2007). In reality, St. Lucia’s switch does not represent a turning of the tides back to Taiwan but instead merely re-emphasizes the fact that recognition of China or Taiwan in the Caribbean is not an ideological issue, but instead one fueled largely by economic opportunism.     

Moreover, St. Lucia’s flip-flop represents an exception, as most other English-speaking Caribbean states have moved decisively toward recognizing Beijing.  Meanwhile, gaining confidence from its ever-expanding economic prowess, China is learning quickly to play the dollar diplomacy game.  The PRC has an advantage over Taipei in this endeavor to the extent that its foreign ministry operates unconstrained by the scrutiny of either a legislature or independent media, and its willingness to dig into its deep pockets have already paid some dividends.  Dominica’s Primer Minister Roosevelt Skerrit switched recognition in 2004 after receiving a pledge of $112 million over a six-year period from Beijing.  Though in 2003 Grenadian Prime Minister Keith Mitchell said that maintaining relations with Taiwan is “practical,” by 2005 he had changed his tune, signing a joint communiqué in support of the “One China” policy. In exchange, Beijing promised financial assistance to rebuild and expand Grenada’s national stadium for the 2007 Cricket World Cup; construction of 2,000 housing units; new hospital facilities; agricultural support; a $6 million grant to complete projects previously financed by Taiwan; and an additional $1 million scholarship fund [3].  

Furthermore, Caribbean governments are intrigued by the idea of China as a potential partner for trade and investment. As a rising superpower without a colonial or “imperialist” history in the hemisphere, China is in many ways a more politically attractive partner than either the United States or Europe for some local politicians confronted with increasingly anti-American constituencies. China, in this view, offers a more benevolent version of the “Big Brother” role typically played by Western powers. Nevertheless, most analysts recognize that the Caribbean’s embrace of China—to the extent that this has actually occurred—is potentially linked to their perception of neglect and disinterest from the United States.

China and the Caribbean: A Delicate Embrace

More than 8,000 miles separate Beijing from most Caribbean capitols, but given the historical, economic and political differences between China and the Caribbean, distance has not diminished the eastern economic powerhouse’s interest in forging ties with these tiny Caribbean islands. Nonetheless, China’s engagement with the Caribbean has intensified significantly in recent years and small Caribbean states can no longer ignore the dragon in their midst. Today, virtually every Caribbean nation—including those that do not formally recognize China—has extensive political and economic contacts with the nascent economic powerhouse in East Asia. This marks a dramatic change from the days when Caribbean nations lacked significant economic or diplomatic relations with China. Recently, a surge in trade between China and the Caribbean, increased diplomatic recognition of China in the region, and a flurry of official visits have signaled a significant strengthening of Sino-Caribbean ties.  

While the reasons for this are complex, the relationship between China and the Caribbean hinges on two critical components: China’s economic might, and its focus on diplomatically isolating Taiwan. Economic cooperation is the underlying basis for Caribbean interest in strengthening ties to China. As an economic powerhouse that is well equipped to deal with the effects of increasing globalization, China stands opposite the vulnerable Caribbean and can offer the attention of a superpower to a region looking to take part in the globalized economy. The desire to strip Taiwan of its remaining allies, as a step toward reincorporating it under the domain of mainland China, has given the Caribbean a level of political salience in Beijing that it would otherwise lack. Yet, the true shape of China’s relations with the Caribbean will be determined by broader global forces and the dexterity with which Chinese policymakers and their Caribbean counterparts are able to forge mutually advantageous ties. It is clear that China is mapping out a long-term vision for engaging with the Caribbean, but it is too early to tell whether this vulnerable region will sink or swim as a result.    

Notes

1. Direction of Trade Statistics – International Monetary Fund, July 2009.  Exports of a country to the world by partner and Imports (c.i.f.) of a country from the world by partner, https://www.imfstatistics.org (accessed July 2009).
2. Direction of Trade Statistics of International Monetary Fund and author’s estimates.
3. Daniel P. Erikson and Janice Chen,” China, Taiwan and the Battle for Latin America,” The Fletcher Forum of World Affairs, Summer 2007.