Home' Trinidad and Tobago Guardian : June 4th 2015 Contents BG16 COMMENTARY
BUSINESS GUARDIAN www.guardian.co.tt JUNE 2015 • WEEK ONE
China s Premier Li
by over 100 senior Chi-
nese business leaders,
visited four South
American countries for
eight days in May.
Along the way, he pledged hundreds of
billions of dollars to Brazil, Peru, Chile and Colombia; US$53
billion was announced for Brazil alone.
The Chinese pledges were met with scepticism by Western
analysts who fret over the presence of China "in America s
backyard". They used a study, conducted by the Brazil-China
Business Council, to argue that only around one-third of
China s promised investments in Brazil from 2007-2012 were
While there is no reason to doubt the findings of the study,
there is equally no reason to believe that the failure to make
the investments rested with China alone; Brazil could have
also have contributed by its inability to absorb the investments.
In several Caribbean countries, for instance, Chinese offers to
undertake projects have either been ignored or the countries
have lacked the capacity to implement them.
In any event, even if half of the monies promised by China
flows into the four South American nations, they will benefit
enormously from the build-out of much needed infrastructure
to boost their economies. The Chinese money---Western skep-
ticism notwithstanding---is important.
Caribbean economies can also do with more investment
from China in a range of sectors if they are to overcome the
lingering effects of the global financial crisis of 2008 and the
recession that followed. But to do so, the China-Caribbean
relationship needs to be improved and put on a more predictable
and certain footing.
What is sure about the Caribbean s relationship with China
is that the latter now enjoys a huge trade surplus. In 2013,
China s exports to the Caribbean totalled US$4.21 billion, more
than double its imports from the region valued at US$1.88
billion that year. The sum of US$3 billion, pledged for loans
in 2013 by China s President Xi to
ten Caribbean countries, was less
than China s trade surplus with the
region for the year 2012 alone. In
other words, China recycled its trade
surplus with the region for one year
to finance its loans to regional coun-
tries from which it earns interest and gains political credit.
The huge trade imbalance is a crucial area that needs urgent
attention. Even though the Caribbean accounts for less than
one per cent of China s trade with the world, its trade deficit
with China is significant to the Caribbean. The Chinese author-
ities appear to have recognised this issue. That s why President
Xi offered the 2012 trade surplus as loans to the region. It was
a classic case of aid for trade.
But, the relationship between China and Caribbean countries
ought not to operate on an ad-hoc basis, nor should it be
reliant only on what China is willing to offer.
The region does have some bargaining capacity, and it should
use it collectively. The five elements of its capability are: the
trade surplus that China enjoys with the region; the financial
return to China of investments, including loans made to
regional countries; the valuable products China is securing
from the region such as forestry, petroleum and minerals;
political support of Caribbean countries for China s interests
in international organisations and in the global community;
and the region s strategic importance to China because of its
proximity to the United States and major maritime trade routes
and infrastructure such as the Panama Canal.
Ideally, China should be persuaded to ease its protectionist
trade policies and open its market to the 14 independent mem-
bers of the Caribbean Community (Caricom) on a non-reciprocal
basis to give the region a chance to narrow the trade surplus.
China should also expand its investment in the region to help
build much needed infrastructure and to boost sectors such
as agriculture, financial services, tourism, sea transportation
In making such investments, China should also stop making
the use of Chinese workers and equipment a condition. As
long as this condition continues, the positive impact of these
investments on employment will not be fully realised and will
fan a flame of resentment.
Of course, the Caricom countries are divided in relation to
China. Five of them continue to have diplomatic ties to Taiwan
and this inhibits Caricom from seeking to establish a structured,
long-term aid, trade and investment relationship with China.
The consequence is that each of the other nine Caricom mem-
bers pursue individual relations with China in which they are
disadvantaged, but nonetheless grateful. However, imperfect
loan and investment arrangements might be with China, these
governments are, at least, getting monies no other country
or agency is advancing to them.
Further, the monies are being provided on soft terms.
China is demonstrating a willingness to invest. It is putting
huge sums of money into South America as Premier Li s recent
In the case of the Caribbean, through two Chinese state-
owned banks, China Export-Import Bank and China Devel-
opment Bank, China has disbursed tens of billions of dollars
in Caricom countries since 2005.
But more can be done by China in the Caribbean if a Free
Trade Agreement (FTA) with strong provisions for development
assistance could be negotiated and established. On his South
American tour, Premier Li discussed the possibility of an FTA
with Colombian President Juan Manuel Santos. The matter
is, therefore, occupying the minds of China s leaders. Undoubt-
edly, there will be a few South American countries that will
conclude such FTA s with China in the near future.
If the Caribbean region is to benefit from China s obvious
interest in investing its considerable foreign reserves around
the world, it has to engage the Chinese government collectively.
The reluctance to do so by the five Caricom countries that
continue to gain from their relations with Taiwan is under-
standable, but they should give their blessings to the other
nine member states to strike an enhanced relationship with
China while the iron is hot.
The writer is a senior fellow at the Institute of Common-
wealth Studies, London and Massey College, Toronto
Strike while the iron is hot
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