The Caribbean and U.S.-China Strategic Competition: Next Phase of the New Cold War?

Introduction

Although the U.S. remains the dominant geopolitical force in the Caribbean, China has established itself as the “other” great power in the region, exerting influence from the Bahamas in the northern part of the archipelago of island-states, south through the Greater and Lesser Antilles and into the Guianas on the northeastern shoulder of South America. China is adept at economic statecraft, but unlike the Soviet Union in the last Cold War, Beijing has not sought to establish military alliances and bases in the Caribbean—at least not yet. Chinese efforts in the region are likely to increase considering the continuation by President Xi Jinping of an ambitious foreign policy agenda during his third term. Like it or not, Caribbean countries have become a geopolitical cockpit for the United States and China.

Effective Economic Statecraft

China’s economic statecraft in the Caribbean has been highly effective, with Beijing generally regarded as a good partner. As in Africa and Latin America, large state-owned companies, backed by state development banks, searching for natural resources as well as construction projects and markets, have spearheaded China’s penetration into the region. China’s trade with the Caribbean has gone from being negligible in the 1990s to China becoming one of the top trade partners for several Caribbean countries, including Barbados, Cuba, the Dominican Republic, Guyana, Suriname and Trinidad and Tobago. Chinese exports to this group of countries in 2021 were over $9 billion, according to the International Monetary Fund’s (IMF) most recent data in its Direction of Trade Statistics; Caribbean exports to China are considerably lower, well below a billion dollars (IMF).

China has become a force in Caribbean infrastructure development, ranging from hotels and hospitals to roads and telecommunications. In the 2000s and 2010s, Caribbean leaders, many of them taking part in larger regional forums, which combined Latin American and Caribbean governments, became aware that China was stepping up its engagement in the Western Hemisphere. For example, the Forum of China and Community of Latin American and Caribbean States, commonly known as the China-CELAC Forum, was launched by China and the 33 CELAC member states during a visit by Xi Jinping to Brasila, Brazil in 2014 (China-CELAC Forum, February 7, 2018). China’s increasing diplomatic and financial focus on the region coincided with diminished U.S. interest at the end of the Cold War. Chinese companies and Chinese banks quietly began to fill the void. According to the author’s estimates, China’s two major development banks, China Development Bank and China Export-Import Bank, are estimated to have lent Caribbean countries a little over $5 billion during the past two decades (Inter-American Dialogue).

Chinese development banks offered a less time-consuming process than Western-dominated multilateral lending institutions, demanded less transparency and disclosure, and were often willing to supply credit at below market interest rates. While this appeared to be a great deal for the borrower, in some cases the fine print carried the option that, in the event of failure to pay, the Chinese lending institution would assume control of the asset in question. This has led some Western governments to warn about the possibility China could use leverage gained through lending or “debt-trap diplomacy” as a means for Beijing to gain control over strategic assets like harbors and railways. Similar concerns exist in the Caribbean, where China has emerged as a major lender to Jamaica ($2.1 billion), Suriname ($773 million) and the Dominican Republic ($600 million) (Congressional Research Service, May 4). While these are small sums when compared to other recipients of Chinese loans like Pakistan, Ethiopia and Venezuela, they are large in proportion to the Caribbean countries’ economies. Moreover, China’s Belt and Road Initiative (BRI), which initially focused primarily on  Eurasia, has been expanded to the Western Hemisphere, first to include Latin America and eventually the Caribbean. Today, Caribbean countries that have joined the BRI are Antigua and Barbuda, Barbados, Cuba, Dominica, the Dominican Republic, Grenada, Guyana, Jamaica, Suriname, and Trinidad and Tobago (Journal of Current Chinese Affairs, 2022; Global Times, December 26, 2021; PRC Embassy Grenada, August 7, 2021).

Why the Caribbean?

 China turned to the Caribbean starting in the early 2000s for four major reasons.

1. The Caribbean Fits into China’s Larger, Overall Development Strategy.

For China to achieve national security and for the Chinese Communist Party (CCP) to remain in power, economic growth is critical. In order to maintain economic growth and shift from a fossil-fuel-based economy to one powered by renewables, China needs to sustain access to key natural resources. The Caribbean fits in this mix. The region offers important strategic resources, including oil, gas, bauxite, nickel and timber. The Caribbean could also be a potential source of rare earth metals, which are central to components used in new and emerging technologies, including renewable energy. [1] China currently dominates the global rare earth metals market, but it is concerned that its supply could diminish in the years ahead.

The Caribbean is also a modest market for Chinese goods, with the largest markets being in Cuba, the Dominican Republic and Jamaica. At the same time, major infrastructure projects undertaken in the region by construction companies provide employment for Chinese workers. Equally important, the sea lanes that traverse the Caribbean are strategically significant for global supply chains. The Caribbean offers commercial access to the Atlantic coasts of both North and South America for Chinese vessels transiting the Panama Canal. Although China has not established any military bases in the region, concern persists that the many infrastructure projects undertaken by its state-owned conglomerates, such as ports and airports, could be converted to military use.

2. Beijing’s Pursuit of “Reunification” with Taiwan Increases the Diplomatic Importance of the Caribbean

Of the fourteen countries that diplomatically recognize and maintain official relations with Taiwan, five are located in the Caribbean. Belize, Haiti, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines remain “diplomatic allies” of Taipei (Taiwan Ministry of Foreign Affairs). Since 2017, Beijing has successfully engineered shifts in diplomatic recognition from Taiwan to China by governments in the Dominican Republic, as well as several Central American states: Panama, El Salvador and Nicaragua (Xinhua, May 1, 2018). Should China’s diplomatic campaign succeed and Taiwan ends up with no official diplomatic relationships, its case for sovereignty will be weakened. China’s use of economic statecraft has clearly been part of its argument for countries to drop Taiwan. The lure of cheap Chinese loans and investment and enhanced trade opportunities clearly influenced the decisions by governments in Panama, El Salvador and the Dominican Republic to embrace Beijing’s One China Principle.

3. The Caribbean provides a convenient arena for Chinese Statecraft as Beijing Seeks to Navigate a new Cold War with the United States

As the U.S. has maintained strong support for Taiwan and seeks to contain China’s expansion in the Indo-Pacific region and elsewhere, China has used the Caribbean to cultivate new friends and allies—right in the U.S. backyard. China has remained steadfast in its support for the Maduro regime, purchasing Venezuelan crude despite U.S. economic sanctions; providing a measured degree of support for Cuba; and in 2021 gaining diplomatic recognition from Nicaragua, which is headed by the dictatorial Ortega family, who are close to Russia (Xinhua November 24; PRC Ministry of Foreign Affairs [FMPRC], June 8; Global Times, December 10, 2021). At the same time, Chinese economic statecraft in the form of loans and grants as well as cultural outreach through Confucius Institutes and academic exchanges has given Beijing the image of being a good partner in much of the region, including the Eastern Caribbean, Barbados and Trinidad and Tobago.

With no colonial past in the Caribbean or earlier great power aspirations in the region, the good partner image has been paired with a narrative that presents China as offering an alternative development model to that promoted by the U.S. and the West. Part of the narrative promoted by the CCP in the Caribbean is that, under its pragmatic leadership, China has maintained political stability, while pulling millions out of poverty in a relatively short period of time. Hence, China’s purportedly, more successful model is portrayed as preferable to the supposedly chaotic nature of democratic politics in the U.S.

China’s “good partner” narrative has been upheld by a steady stream of high-level government officials, including Presidents Hu Jintao and Xi Jinping, and the establishment of embassies in most countries in the region (FMPRC, June 3, 2013). In the Eastern Caribbean, this is in contrast to the U.S., which manages diplomacy for the Eastern Caribbean out of the Embassy in Barbados. The proliferation of Confucius Institutes (to advance better understanding of Chinese history, language and culture as well as developing business and press contacts), and the provision of medical equipment during the COVID-19 pandemic, have also helped “tell the Chinese story well” (Inter-American Dialogue, January 2022). Moreover, some in the region saw the U.S. as too slow to respond to Caribbean requests for help during the pandemic, something that has gained China goodwill.

4. Support China’s Need to Win Hearts and Minds… and Votes at International Forums

The Caribbean comprises 16 independent countries. Although many of these countries are small, they have votes at the United Nations, the Organization of American States and other international forums. This makes the Caribbean important in China’s effort to create its own world order and make certain its narrative of being the future is upheld.

The 44^th session of the United Nations Human Rights Council in 2020 brought forward the issue of votes in international forums. In June 2020, Beijing enacted new legislation on Hong Kong security without input from the government of Hong Kong or the city’s population. The main thrust of the new law was to crush democratic protests and more tightly weave the city into mainland control. The law was brought up for a vote of criticism at the UN council, pushed by the West.

For China, such a vote could not be lost; such a counter-narrative could not be allowed to gain ascendency in any international forum. China’s position was defended by Cuba, whose authoritarian government is a clear ally. The Chinese-Cuban position was that the Hong Kong Security Bill was an internal affair not open to external sanction (CGTN, July 1, 2020). Among the 53 countries voting in favor of the Chinese government position were Antigua and Barbuda, Dominica, and Suriname, putting these parliamentary democracies in the same ranks as authoritarian regimes such as North Korea and Syria. China won the vote 53 to 27. Beijing repeated this performance this fall, when it managed to block debate on human rights abuses in Xinjiang in a narrow vote. Among the 19 countries that voted in favor of blocking debate were Cuba and Venezuela (China Digital Times, October 19).

What Comes Next?

U.S.-China geopolitical competition in the Caribbean is not likely to abate. Indeed, it is likely to increase as Chinese leadership perceives itself locked in a global struggle with the U.S. over which country will be the dominant hegemonic power. China will continue its push into the region economically through its companies and banks, trade and investment, while further trimming Taiwan’s diplomatic recognition remains a top priority for Beijing vis-à-vis the Caribbean.

Despite considerable headwinds to the global economy, the Chinese footprint appears to be expanding. It remains an active buyer of oil from Venezuela, a major investor in Guyana’s oil industry (through CNOOC’s consortium with ExxonMobil and Hess) and a large purchaser of Trinidadian LNG (Guyana Chronicle, October 15). China also remains active in the mining sector: in 2020, Zijin Mining acquired Guyana Goldfields (from its Canadian owners) and in October the same company bought Canada’s IAMGOLD’s Suriname operation, Rosebel Gold Mines (Zinjing Mining, October 20). Zijin is one of China’s major gold mining companies, but is also active in copper, lead and zinc, iron and silver production, some of which are important in renewable energy development.

Chinese technology companies are also active in the Caribbean, despite U.S. efforts to discourage Caribbean countries from allowing Chinese companies ZTE and Huawei to supply key services and hardware for the digitalization of local economies. In October 2022, It was announced Huawei will establish a new office complex in Kingston, Jamaica, which will be 9,000 square feet and provide jobs for around 300 people (Jamaica Observer, October 21). Prime Minister Andrew Holness attended the opening ceremony along with Huawei’s head of Latin American operations and the PRC Ambassador to Jamaica. The good partner narrative was evident, with Jamaica’s leader stating, “Huawei provides support to customers both locally and regionally and has continued to support the government and our economy in our ongoing quest to digitize Jamaica” (The Gleaner, October 25). Huawei had also signed a Memorandum of Understanding (MOU) with the University of West Indies-St. Augustine, Trinidad and Tobago to allow the university’s students and staff to participate in the Chinese company’s talent development program (Trinidad Express, July 27).

Caribbean Countries Seek to Leverage U.S.-China Rivalry

Although most Caribbean countries will remain friendly with the U.S. and regard it as the major regional power, with geography and migration playing a role in this, some countries will use the rivalry to extract benefits from either or both of the powers. Caribbean countries also have their own national interests, which in most cases pertain to their efforts to develop climate change-related infrastructure.

Another increasingly evident factor outside the U.S. and the West is that much of the Global South does not want to be drawn into any type of new Cold War. This was evident when the West imposed sanctions on Russia in the aftermath of its invasion of Ukraine, with two-thirds of the world’s population living in countries where the government has declined to condemn Russia’s invasion, either by adopting a position of neutrality or actually opposing expressions of condemnation (Wilson Center, May 10).

While Caribbean countries have generally been open to engagement with China, they were quick to take strong positions on Russia following its February 2022 invasion of Ukraine. Considering that Russia has little trade with the Caribbean, the main action by governments in Antigua and Barbuda, Dominica, St. Lucia and Dominica came from halting applications by Russians to their Citizenship by Investment Programs (CIPs) (IMI, March 5). They were also articulate in their condemnation of Russian aggression at the United Nations, voting to condemn the invasion.

But China still looms larger in Caribbean affairs than Russia. This became evident with Barbados, when. in November 2021, the island-state ended its relationship with the British monarchy. The British press was highly critical of Barbados, with some in the U.K. blaming China for seeking to bring the Caribbean island-state under its sway. This view was resented in Barbados. While it is true that Barbados has seen growing Chinese investment in roads, homes, sewers and a hotel, it does not mean that Barbados is suddenly a Chinese dependent (Investment Monitor, January 11). In response to claims that Barbados was trading one empire for another, Prime Minister Mia Mottley stated: “For you to focus on China in the Caribbean without recognizing the role that China is playing in Europe or the North Atlantic countries is a bit disingenuous, and really reflects that we are seen as pawns, regrettably, rather than a country with equal capacity to determine our activity” (Kawasachun News, August 8, 2021).

One of the major challenges for the U.S. is to create a coherent Caribbean policy. Indeed, it can be argued that China’s becoming the Caribbean’s significant other has been helped by Washington’s relative disinterest in the region. A central component of any coherent U.S. response to China in the Caribbean is for Washington to reconsider its own approach to economic statecraft. As U.S. government finances face many demands, most recently helping facilitate oil and gas shipments to Europe and rebuilding infrastructure, funding for Caribbean infrastructure projects continues to be guided to the Inter-American Development Bank or World Bank. This is complicated by the status of most Caribbean countries as middle-income economies. As a result, they have less advantageous borrowing  terms than poorer countries, despite high levels of debt, squeezed fiscal situations and limited access to international bond markets.

Moreover, the ongoing U.S. mantra to its neighbors of discouraging doing business with China or accepting its loans (the debt-trap diplomacy argument) has rubbed many Caribbean leaders the wrong way. Most Caribbean countries are keenly aware that closer relations with China are not appreciated in Washington; however, the U.S. approach has often had the appearance of the U.S. talking down to Caribbean countries, not to mention a willful ignorance of Caribbean security needs, which are increasingly defined in terms of sustainability and resiliency.

The Biden administration is seeking to give more attention to Caribbean concerns. After considerable pressure from Caribbean leaders, the U.S. leader did meet with several of his counterparts at the 2022 Los Angeles Summit of the Americas. Moreover, Caribbean concerns, such as de-risking and climate change, are getting greater attention. However, the U.S. still lacks a clear, overarching strategy to deal with China’s expanding role in the Caribbean. Unlike China, the U.S. cannot coerce its companies and banks into achieving foreign policy objectives. Nevertheless, U.S. policy towards the Caribbean would benefit from an overarching concept to tie together very disparate policy challenges encompassing the chaos in Haiti, a brittle authoritarian regime in Cuba, meeting energy demands throughout much of the region, contending with violent drug-trafficking operations, and managing climate change risk. Of course, understanding the intersection of China’s growing regional influence and these regional challenges will be an important part of any such strategy.

Dr. Scott B. MacDonald is the Chief Economist for Smith’s Research and Gradings, a Global Americans Research Fellow, and a Caribbean Policy Consortium Fellow. He specializes in the global macroeconomic issues, Caribbean and Latin American affairs, and energy geopolitics. His latest book is The New Cold War, China and the Caribbean: Economic Statecraft, China and Strategic Realignments (Palgrave Macmillan 2022).

Notes  

[1] There has been speculation that rare earth metals might be found in Jamaica and Guyana, though no major finds have been announced. https://dpi.gov.gy/mining-of-rare-earth-metals-boosting-economy/. https://jis.gov.jm/large-deposits-of-rare-earth-elements/.