China: The Villain or the Hero?

By: Diakia Straker

China’s impressive growth and its reach across the world have sparked some concerns on the international stage and the literature remains divided on China’s motive for its ‘Going Global Strategy’. On the one hand, China is seen as a threat to the USA-led world order, and on the other hand, China is hailed as a saviour to many of the world’s emerging markets.

In this SRC Trading Thoughts, we consider whether China is a force for good or evil in the Caribbean and engage on the topic of how best the Caribbean can leverage its trade and investment relationships with China.

China, the Purported Villain

China has grown to become one of the largest trading partners for several countries, in some cases even replacing the USA. It has also emerged as a global leader in areas such as technology and manufacturing. This rise has not gone unnoticed by some western writers who have been very critical of China’s strategies and motives.

China’s remarkable growth is regarded as a challenge to the dominance of the USA in the Caribbean. The Caribbean is often regarded as the USA’s backyard, and has been touted as a US-protected ‘region, as reflected in the “Monroe Doctrine”. China’s rise to prominence in the region would be seen as a threat to the USA’s influence on the Caribbean and to its security and global dominance.

Over recent years, China has developed and maintained military ties with the region. For example, China has sent military personnel to Caribbean islands, such as Haiti, and on other occasions for training. With the Caribbean being considered the USA’s ‘third border’, China’s continued military involvement and presence pose great concern to USA’s security officials. China has been accused of having great potential to spy on and intervene in a country’s sovereignty and security.

Similarly, China’s growth has propelled it to become one of the largest contributors to Outward Foreign Direct Investment (OFDI). This is evident in China’s strides with its mega foreign policy, The Belt and Road Initiative (BRI). The BRI is a signature foreign policy of China, which aims to transform economic relations and trade between China and the world. One method of effecting this policy is through gifts and grants and via loans of large sums of money.  

The BRI is not without its critics. China has been accused of lending significant sums of money to cash strapped countries with limited flow of capital, then leveraging that debt to undercut a country’s sovereignty and gain access to its sovereign assets. The media has dubbed this practice ‘the debt trap’.  One example of this is the controversy with the China-Pakistan Economic Corridor (CPEC), a framework to facilitate infrastructural developments in Pakistan under the BRI, through which Pakistan increased its debt burden. In 2017 when Pakistan ran into repayment challenges, the port was leased to China for 40 years.  Another instance of some apprehension concerns the opaque nature and the processing of the loans by the Chinese.  In some cases, countries that have engaged China have amassed unstable debts which the IMF has been unable to bail them out of due to their lack of transparency.

China, as Purported Hero

Many developing countries, like those in the Caribbean, experience severe development challenges, and for them, external aid is welcome. Richard Bernal, one of the doyens of Chinese-Caribbean relations, in his article ‘Chinese Foreign Direct Investment in the Caribbean’, notes that despite the region not having any special attraction for Chinese Foreign Direct Investment, such as large markets or significant sources of energy or supplies of raw material, China has nonetheless prioritized its investments here. Whether or not it is to garner goodwill or to assure diplomatic support, Caribbean governments have been grateful. Our vulnerable position and slow growth rates have placed us in positions where inward investments, from any source, are seen as critical to greasing the creaking wheels of development.

Over the past ten years, the Chinese Government and private companies have invested billions of dollars in the Caribbean. They have done so through gifts, loans and other forms of investments. For example, China invested US$720 million in the North-South Highway in Jamaica, provided loans of over US$2.5 billion to Trinidad and Tobago, and over US$56.5 billion in The Bahamas. Though the stock of Chinese FDI in the Caribbean has been relatively small compared to the total FDI in the Caribbean, its welcome aid.

In her Raul Prebisch Lecture at UNCTAD 2019, Prime Minister of Barbados, the Honourable Mia Amor Mottley, noted that in the global realm, the Caribbean is invisible. However, China, the second largest economy in the world, has seen us and has intentionally included us in its Going Global Foreign Policy and in the BRI. Several Caribbean countries such as Barbados, Jamaica and Trinidad and Tobago have accepted this initiative to advance this transnational project which is aimed at enhancing economic relations. These Caribbean countries believe that these engagements can facilitate their transformation into investment hubs that will facilitate trade, promote foreign direct investment and foster economic growth. 

Recommendations for a Caribbean Strategy

The question then is, how can the Caribbean structure a balanced relationship with China?

As China strives to integrate into the global economy, it has been, and will continue to be, met with fears of global domination by Western powers.  Whatever its intentions and motives, China, under the leadership of President Xi Jinping, appears to be seeking to redefine development strategies and export its own model to the rest of the world and its actions speaks volumes.

While treading carefully, the Caribbean must take cognisance of the different way in which China operates and seek to foster a strategic relationship with it.

According to Richard Bernal, the Chinese market is underpenetrated by the Caribbean and there are underutilized opportunities for Caribbean exports. More resources should be diverted to exploiting such opportunities. As China is a very large market, the Caribbean is certainly unable to compete in traditional exports such as sugar. However, we may have a competitive advantage in specialty and niche markets, such as rum, tropical produce and spices. Greater market research for trade and opportunities technology transfer should be at the forefront of our foreign policy.

Finally, as Caribbean-China relations deepen, measures should be put in place to facilitate scrutiny and accountability. With the close relationship Caribbean nations currently enjoy with the IMF and other international financial institutions it should be easy to use their standards to promote transparency and anti-corruption practices that will improve public perceptions of Caribbean-Chinese partnerships.

Diakia Straker is a Graduate Research Intern at the Shridath Ramphal Centre for International Trade Law, Policy & Services (SRC) at The University of the West Indies, Cave Hill. The SRC is the Caribbean’s premier trade policy training, research and outreach institution: