The Bahamas – China Paradox

First Published: 2005-02-16

The recent China-Caribbean Trade Forum in Jamaica was attended by a large Bahamian delegation led by the prime minister. It is a portent of things to come, analysts say.

China's rising energy demands and tourism potential are big factors in plans to expand its global influence. And those plans are also aimed at isolating Taiwan completely.

Chinese Vice President Zeng Qinghong and a 120-person delegation arrived in Jamaica earlier this month on the last leg of a Latin America and Caribbean tour that also took him to Mexico, Peru, Venezuela and Trinidad-Tobago.

The tour had both political and economic goals. Twelve of Taiwan's 26 remaining diplomatic allies are in Central and Latin America. And China's huge, booming economy gives it an edge in the fight with Taiwan over diplomatic recognition.

China and Taiwan split in 1949 when the Communist Party came to power on the mainland, and the two have been rivals ever since. Taiwan was expelled from the UN in 1971 and while the US has recognised the mainland government since then, it is also committed to defend Taiwan.

The Bahamas switched its support from Taiwan to China in 1997, when former Prime Minister Hubert Ingraham visited Beijing. Sir Arthur Foulkes was appointed non-resident ambassador two years later, and Prime Minister Perry Christie visited China last fall, promising to set up an embassy there soon.

Sir Arthur is now vice president of the Bahamas-China Friendship Association and has nothing but good words to say about China. He echoes the Foreign Ministry's line that there are "no undue concerns" about our relations with China and Cuba. But Tough Call has indications to the contrary.

China has made a strategic decision to eliminate Taiwan as a presence in the region and a lot of dollar diplomacy is going on to achieve that. In this feeding frenzy we should not overlook the fact that Taiwan is a functioning democracy, while there are still serious human rights issues with the People's Republic of China.

But the main concern seems to be our sense of of priorities. For example, is it smart to commit our limited resources to embassies in Beijing and Havana when the one right next door in Haiti is not fully functional? Surely what happens in Haiti is far more important to the Bahamas – we will be the first to feel the heat if that country collapses.

Our politicos seem "strangely infatuated" with China, diplomatic sources say, perhaps because it is so exotic and so far away. And Caricom sees China as a "third world" ally against the US in the globalisation process. But discounting the usual government rhetoric, do the gains from such a relationship – for the Bahamas at least – outweigh the cost of alienating our primary diplomatic and trading partner, or of diverting our limited resources and energies?

Of course, no one can deny that the basis for some kind of relationship does exist. In addition to official Chinese aid – including an offer of $30 million for a sports stadium here – the Hong Kong multinational, Hutchison Whampoah, has made billion-dollar investments on Grand Bahama in recent years.

Hutchison is the world's top port developer and operator, and is a part of Cheung Kong (Holdings) Ltd, whose chairman is Li Ka-shing, Asia's richest man. Mr Li founded the company in 1950 and is said to have close ties with the Chinese leadership. Hutchison also owns Freeport Harbour Company and the Grand Bahama International Airport.

COSCO, the state-owned Chinese container company, has registered ships under the Bahamian flag and wants to expand Freeport's dry dock facility to handle bigger vessels. COSCO is linked to the state-owned China International Trust and Investment Corporation. And Li Ka-shing is also a board member of CITIC.

China's trade with the Caribbean in 2003 was almost $1.5 billion, with a Chinese surplus of more than $1 billion. Jamaica and Cuba are the biggest trading partners in the region because of their mineral resources. But the Bahamas is a big export market in the English-speaking Caribbean…mostly clothing, toys and souvenirs.

China is also a member of the Caribbean Development Bank, contributing almost 6 per cent of its total capital, as well as millions of dollars in concessional loans and technical assistance to regional borrowers.

At the recent Jamaica forum, the Bahamas and other Caricom countries were accredited as official destinations for Chinese tourists. The Chinese government can easily direct tour groups to approved countries as a form of aid. At the end of last year, 61 nations had the designation, including Cuba.

With a population of 1.3 billion, the prospect of Chinese tourism is encouraging more nations to break ties with Taiwan, just as Grenada did last month and Dominica did last March. China is also cooperating with Cuba on hotel projects…A joint venture between the two nations has opened a 5-star hotel in Havana and is building another in Shanghai.

Cuba is already negotiating direct flights from China, but the main candidates for a regional air hub are the Dominican Republic or Jamaica, tourism officials say, not the Bahamas. Currently, Chinese visitors have to make difficult transfers in Canada, Europe or Russia to get to the Caribbean.

Last year some 20 million Chinese travelled abroad and the World Tourism Organisation predicts that by 2020 China will be the world's leading tourist destination and the fourth-largest tourist source nation. But only about 7,000 Chinese visited the Caribbean last year, and almost all went to Cuba.

As one observer told Tough Call: "What's so special about a $30 million stadium? American tourists spend $30 million on Bay Street every few days and the US government spends that amount every month to help secure the southern Bahamas against Haitian refugees and drug smugglers."

Still, the Jamaica forum was clear evidence of China's global reach and economic power. It's economy has averaged 9 per cent growth for 26 years and most forecasts are that by 2020 China's gross national product will exceed that of individual Western powers, other than the United States.

And China's growing interest in the Caribbean and Latin America comes as Washington has paid relatively little attention to the region in recent times, analysts say. Since 9/11, the US has been preoccupied with Afghanistan, Iraq and the Middle East. And regional alliances like Caricom have developed more coherence.

"China is just pushing through an open door across the globe — and in the U.S. backyard," said China expert Nick Lardy of the Institute for International Economics in Washington, DC.

Within the region, some see this as a reflection of political maturity: "The United States is not going to be able to provide the kind of support that some of the islands might be looking for," according to Ronald Ramkissoon, a leading Trinidad economist.

China's influence in the region has expanded because of a range of new investments in not only mines and oilfields, but infrastructure and transport. And the Chinese have pledged to invest another $100 billion in the hemisphere over the next 10 years.

The 400 agreements and business deals notched up by China last year alone "pretty much amount to a challenge to the 1823 Monroe Doctrine, which implies that Central and Latin America lie within Washington's sphere of influence," one analyst wrote.

And China's energy needs will triple over the next few decades, making it a growing rival for the US in oil and gas resources. Venezuelan President Hugo Chavez visited Beijing in December and offered to sell oil at heavy discounts, according to the Financial Times.

Chevez sees the US as an imperialist power bent on dominating the world and overthrowing him. So he is trying to sell oil to anyone but the US. This is reflected in the so-called PetroCaribe initiative which aims to provide cut-price oil to Caribbean nations – including the Bahamas – bypassing American companies.

The Financial Times says Venezuela is enlisting Iran's help to steer oil exports to China and away from traditional US markets. "Iran is training Venezuelan traders in how to best place oil in Asian markets. Part of a move to strengthen ties with China at the expense of US, which currently buys 60 per cent of Venezuelan oil."

Meanwhile, Chavez has allowed the Chinese national petroleum corporation to develop oil and gas reserves in Venezuela, and is seeking to transport oil to the Pacific by building a pipeline across Panama. Hutchison operates ports at both ends of the Panama Canal.

And according to Robert Lloyd George – a great grandson of the former British prime minister who manages Asian investment funds – China is catching up with the West "far faster than I ever dreamed," he told the Financial Times recently. "This is what we will have to deal with for the next 50 years."

Well, it is inevitable that China will be an economic powerhouse of the first rank over time. But as investment advisor John Maudlin of FrontlineThoughts.com wrote recently: "China's government will not willingly let go of power, yet that is where the markets and people are going, so there is the real potential for a crisis in the future, which can have very unpredictable results."

But the big issue for us is two-fold: First, how do we balance our all-important relations with the United States – just 50 miles across the Gulf Stream? The reality is that the US is by far the main contributor to the Bahamian economy and the key to our prosperity.

Second, how can we convince our political elites to focus on the things that really matter and eschew the glamour of foreign travel and the excitement of geopolitical games.

There is a great deal to the US-Bahamas partnership that some observers think is being taken for granted. And we think there is a lot more that Bahamian diplomacy could, and should, do to address our real problems before they overwhelm us.

This article was first published in The Tribune on Wednesday, February 16, 2005.

The column 'Tough Call' by Larry Smith is published in The Tribune every Wednesday and is reprinted here as a courtesy. Mr. Smith founded and successfully grew an advertising agency over 20 years. Under his direction Media Enterprises diversified into short-run commercial printing and publishing, and is now the largest non-fiction book wholesaler in the Bahamas. He has 30 years experience as a journalist and publicist and has contributed numerous articles and columns to the Bahamian press. A former reporter at the Nassau Guardian, local correspondent for Reuters and editor at the Bahamas News Bureau, he conceived and edited the Bahama Almanac (published 2000 by Media Enterprises), wrote the commentary for Mike Toogood's Portrait of an Archipelago (published 2004 by Macmillan Caribbean), and edited the Bahamas Environmental Handbook (published 2002 by the government). In 2003 he took a year's leave of absence from Media Enterprises to lead a transition management team at the Nassau Guardian after the paper was acquired by local investors. After leaving the Guardian he was contracted by the Tribune as online manager/editor and columnist. He has a degree in political science and journalism from the University of Miami. Mr. Smith can be contacted at: larry@tribunemedia.net

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