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Why is China spending billions in the Caribbean?

The Caribbean lacks commodities, it's not a major producer of raw materials and it has relatively little buying power. Yet China is investing billions there.

Tourism caribbean bahamas 2011 04 05Enlarge
A tourist admires fishes in an aquarium at a resort in Nassau, the Bahamas, on May 29, 2009. (Jewel Samad/AFP/Getty Images)

SANTO DOMINGO, Dominican Republic — After the tiny Caribbean island of Grenada severed diplomatic ties with Taiwan in 2005, it received a token of appreciation from the mainland Chinese government: a $55 million cricket stadium.

It was part of $132 million China doled out to Caribbean countries in aid and soft loans in the years leading up to the 2007 Cricket World Cup. At the time, the investment was seen as a not-so-subtle reward to countries that had broken off formal relations with Taipei in favor of Beijing.

Ever since, China has made that sum look like pittance.

The Beijing government and private Chinese corporations are spending billions in the Caribbean, building major tourism projects, financing roads and ports and buying companies — all of which are helping open new markets for Chinese products. The onslaught has cash-strapped Caribbean governments simultaneously praising China as a welcome benefactor and questioning what the country wants in exchange.

“Nearly every island in the Caribbean, from the smallest on up, currently has a substantial investment from China,” said David Jessop, managing director of the Caribbean Council, a London-based consultancy that works with Caribbean governments. “It seems that what nobody knows is what is motivating China.”

The total investment is difficult to quantify. China’s Ministry of Commerce reported that foreign direct investment in Caribbean countries by Chinese firms totaled nearly $7 billion in 2009, a more than 300 percent increase from the 2004 foreign direct investment of $1.7 billion. Those figures are somewhat misleading because of Chinese use of Caribbean tax havens — such as the Cayman Islands, which received $5.3 billion in Chinese foreign direct investment in 2009.

That aside, Caribbean islands have clearly been the recipients of investment by both Chinese firms and the government of the People’s Republic of China, which is financing some of the Caribbean's most notable, and largest, projects.

The boldest broke ground last month: The Chinese government's Export-Import Bank is putting $2.4 billion toward the construction of a 3,800-room resort in the Bahamas that will boast the largest casino in the Caribbean. Roughly 5,000 Chinese workers will be brought in to construct the Baha Mar resort on Cable Beach.

Others projects recently agreed to or completed by Chinese firms or the government include:

  • A 2011 commitment by Beijing to build a $600 million deep-sea harbor, highway and port in Suriname that will link the country to its natural resource rich southern neighbor, Brazil.
  • A $462 million cash infusion in a stalled beachfront resort, known as Punta Perla, on the Dominican Republic's east coast. Dominican Minister of Tourism Francisco Javier García Fernandez said he hoped the agreement would bring more investment from China to the Caribbean’s most visited country.
  • The construction and operation of a $1 billion container port in Freeport, the Bahamas, just 60 miles from Florida, by Hong Kong-based conglomerate Hutchison Whampoa Ltd.
  • A $17 million cricket stadium and $122 million in economic assistance from the Chinese government to Dominica, a country of less than 73,000 people and less than one-fifth the size of Rhode Island.
  • A $100 million purchase of a majority stake in Omai Bauxite Mining from the government of Guyana by Chinese mining company Bosai Minerals Group. Bauxite is a sedimentary rock from which aluminum is extracted.
  • The construction of Trinidad & Tobago's prime minister's official residence and the National Academy for the Performing Arts by the Shanghai Construction Co.

The number and magnitude of investments has left some mystified.

At a recent dinner between Caribbean leaders and a Chinese delegation, Jamaican officials asked, “‘What does China want from us?’” a person who was at the meeting told GlobalPost. “That’s the big question that everyone has about this: Why?"

Caribbean governments have welcomed the investment — particularly the development aid — partially because other sources have dried up. For example, aid from the United States to members of CARICOM — a bloc of 15 Caribbean states and five associate Caribbean countries — has been falling since the 1980s, said Richard Bernal, former Jamaican ambassador to the U.S. and current director for the Caribbean at the Inter-American Development Bank in Washington.

“What you are seeing in the Caribbean from China was mainly economic aid at first and now it’s starting to diversify into other areas, like tourism," he said.

http://www.globalpost.com/dispatch/news/regions/americas/110325/china-caribbean-investment-tourism