Courting the dragon

China’s advance in the Caribbean shows little sign of abating.

Amidst 15 storey cruise ships, middle-aged men in speedos and steelpan bands, tourists in the Caribbean might be surprised to learn they are in a region of great geopolitical importance to powers far beyond its shores. The most important of those powers aside from the region’s northern neighbour, the United States, is China. Beijing is making unrelenting inroads in a broad range of sectors across the region’s economies.     

For many of these countries, doing business with China is an appealing prospect and often substantially less bureaucratic than dealings with other potential credit facilitators. A senior manager experienced in doing business with China commented, “Loan facilities offered by Beijing are often so attractive that Caribbean governments find it virtually impossible to refuse them. Local tax concessions mean China sees easy profitability and for domestic governments, gleaming new infrastructure projects are enticing vote winners.”       

Jamaica is a prime example. Chinese engineering companies have invested heavily in constructing and upgrading highways across the island. Credit was offered at a time when international financial institutions were either unable or reluctant to provide the funds needed. The story has repeated itself across the Caribbean and doesn’t stop with infrastructure. The supply of Chinese Covid-19 vaccines has further strengthened China’s political and diplomatic capital across the region.     

It’s not all plain sailing – China will get jitters if it starts to see the region as a credit trap. The senior manager explained, “Currently lending has been a little more cautious given concerns around return on investment. In addition, infrastructure projects have been impacted by environmental and socio-economic groups.”  

On the latter, there are lingering tensions with locals due to language barriers and a lack of cultural understanding, as well as the fact the Chinese bring in labour sometimes perceived as taking jobs away from the local community. 

An academic on China-Caribbean relations commented, “The Chinese are a very closed community and trust issues can develop with locals. Private sector consortiums with local developers do happen but the Chinese always use their own people and they tend to regard their work ethic as superior to that of locals.”  

The Chinese are a very closed community and trust issues can develop with locals.”

Academic, China-Caribbean relations

Experts that we spoke to broadly took the view that regional governments tend to want projects to come in on time and within budget and broadly the Chinese deliver on that. It is hard to compete with high levels of efficiency coupled with cheap credit. The UK, the former colonial power across much of the region offers numerous grants and loans to local governments but will struggle to undercut China’s appeal if it does not offer similar credit terms.

Other institutions are struggling to match the Chinese too. “I don’t see the EU doing much in the region besides streamlining visa quotas to residents to come to Europe. This misses the point – they should be investing in human capital in the region, not drawing it away to distant shores. The UK is not doing much better – its policies are unclear whilst loan and grant terms are often onerous and uncompetitive, especially in comparison to China”, commented the academic. 

The UK is not doing much better – its policies are unclear whilst loan and grant terms are often onerous and uncompetitive, especially in comparison to China.”

Academic, China-Caribbean relations

Of course, there are plenty of opportunities for creditors and foreign governments to innovate and use a little imagination in broadening their appeal to Caribbean governments. They could pitch complementary projects and work collaboratively. Travel is one such area. The Chinese are dependent on US visas mostly to get here, almost 2 days of travel. New routes should be considered such as Cuba. 

There are a lot of opportunities for the Caribbean to exploit this relationship the other way, in terms of manufacturing and selling its goods in China, tourism, the Carnival experience etc. Shipping costs have escalated, and container shortages will impact future business. Infrastructure is the core focus of Chinese development in the region, also opportunities for climate change solutions, renewable energy and agriculture. 

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