Microsoft Word - Danaf_numbered.docx CARIBBEAN QUILT 2023 VOL. 7 NO. 1 79 Conditional Support: Chinese Development Aid in the Caribbean Omar Danaf Centre for Caribbean Studies Faculty of Arts & Science, University of Toronto Omar Danaf is a fourth-year undergraduate student at the University of Toronto majoring in Political Science and American Studies. He has interned at various political organizations, including the office of a U.S. Senator, a U.S. intelligence agency, and private sector think tanks. In combination with his coursework, these experiences have cultivated an interest in how strategic competition between the United States and China has affected the Caribbean. KEYWORDS: Development Aid Maritime Silk Road Intiative MSRI Chinese-Caribbean Relations Chinese-Caribbean Trade Rare Earth Elements Sino-Taiwanese Com- petition ABSTRACT In recent decades, China has emerged as a significant economic power operating within the Caribbean, analyzing its foreign policy strategy in the region of paramount importance. This essay will seek to identify the ideology undergirding China's foreign policy within the Caribbean, using these insights to analyze the effects of Beijing's increased engagement within the region. This essay will argue that Beijing has sought to create close ties with several Caribbean states by launching numerous generous development assistance projects, attaching conditionalities to these projects to effectively incorporate partner states into their export and ideological network. China views the Caribbean as a valuable political partner, as its proximity to the United States makes its potential alliance with China a prominent counterfactual to Western hegemony. To achieve this argument, I will highlight how China’s Maritime Silk Road Initiative (MSRI) has influenced China’s grand strategy within the Caribbean, as it seeks to incorporate the region into a broader economic network to challenge Western economic systems. I will then highlight how economic considerations influence China’s bilateral relations with some resource-rich Caribbean states, investigating China's diplomatic approach to increasing its access to natural resources in the region. Lastly, this essay will investigate how China's development assistance-based strategy has impacted the Caribbean. This will cover its negative and positive effects on domestic industries while exploring how China's ambitious economic expansion has stoked social discontent in the region. In recent decades, China has emerged as a significant eco- nomic power operating within the Caribbean, analyzing its foreign policy strategy in the region of paramount im- portance. This essay will seek to identify the ideology Caribbean Quilt Journal Homepage: https://jps.library.utoronto.ca/index.php/cquilt/index CARIBBEAN QUILT 2023 VOL. 7 NO. 1 80 undergirding China's foreign policy within the Caribbean, using these insights to analyze the effects of Beijing's in- creased engagement within the region. This essay will ar- gue that Beijing has sought to create close ties with many Caribbean states by launching numerous generous devel- opment assistance projects, attaching conditionalities to these projects to effectively incorporate partner states into their export and ideological network. China views the Car- ibbean as a valuable political partner, as its proximity to the United States makes its potential alliance with China a prominent counterfactual to Western hegemony. To achieve this argument, I will highlight how China’s Mari- time Silk Road Initiative (MSRI) has influenced China’s grand strategy within the Caribbean, as it seeks to incorpo- rate the region into a broader economic network to chal- lenge Western economic systems. I will then highlight how economic considerations influence China’s bilateral rela- tions with a number of resource-rich Caribbean states, in- vestigating the diplomatic approach China has used to in- crease its access to natural resources in the region. Lastly, this essay will investigate how China’s development assis- tance-based strategy has impacted the Caribbean. This will cover its negative and positive effects on domestic indus- tries while exploring how China's ambitious economic ex- pansion has stoked social discontent in the region. China’s actions within the Caribbean have been guided by its strategic desire to economically incorporate developing states into a vast Sinocentric trading network, with Beijing attempting to create an economic coalition amongst the Global South to challenge Western dominance. The Carib- bean thus stands out as an ideologically significant region for China, as its proximity to the U.S. makes it a potentially symbolic rebuttal to Western economic hegemony. Despite its close proximity to the United States, the Caribbean has 1 Gahman, Levi, Gabrielle Thongs, and Adaeze Greenidge. 2021. “Disaster, Debt, and ‘Underdevelopment’: The Cun- ning of Colonial-Capitalism in the Caribbean.” Develop- ment (Society for International Development) 64 (1-2): 112–18. https://doi.org/10.1057/s41301-021-00282-4. 2 Mendez, Alvaro, and Chris Alden. “China in Panama: From Peripheral Diplomacy to Grand Strategy.” Geopoli- tics 26, no. 3 (2021): 838. failed to create sustained economic growth and benefit from trade globalization, leading to its exploitation and un- derdevelopment by the West.1 This has influenced the re- gion's unique relationship with China in two ways. First, the Caribbean's classification as a region that has failed to economically benefit from the neocapitalist system led by the United States has made it a region of emphasis for the CCP, as ‘small states’ left behind during the neocapitalist revolutions of the 1980s are of distinct significance to China’s attempts to create a “Sinocentric [trade] network” spanning the Global South that can challenge the Eurocen- tric economic and political norms governing international politics.2 China frames this coalition as an inclusive alter- native to the West’s current dominance of the international system, as it will incorporate developing economies into China’s vast export market.3 Second, China’s ideological beliefs have made the Caribbean an area of pronounced importance for Beijing due to the region’s difficulty gener- ating economic growth despite its geographic proximity to the United States, as this neatly demonstrates the West’s exploitative relationship towards the Global South. 4 If Beijing could develop close ties with the Caribbean and partially displace the West's economic and diplomatic he- gemony, it would achieve a symbolic political victory, showing that China could compete with and even beat America in its backyard. To this end, China has drawn heavily from its MSRI initiative to guide its actions in the Caribbean. This broad ideological strategy intends to achieve structural changes to the global economy by creat- ing maritime trade flows that situate China as the de facto leader of international maritime trade through its vast ex- port network.5 This ideological cornerstone of Chinese foreign policy explains why economic considerations are central to Beijing's approach to the Caribbean. They seek to incorporate the region into a more extensive trading https://doi.org/10.1080/14650045.2019.1657413. 3 Ibid., pg. 838-839. 4 MacDonald, Scott B. 2022. “Introduction.” In ‘The New Cold War, China, and the Caribbean : Economic Statecraft, China and Strategic Realignments.’ Cham: Springer Inter- national Publishing AG. 5 Ibid., pg. 839; 844. CARIBBEAN QUILT 2023 VOL. 7 NO. 1 81 network to significantly augment Chinese soft power in distant parts of the world. China's high demand for natural resources has led to its calculated courtship of resource-rich Caribbean states such as Guyana, Cuba, and Jamaica, aiming to gain access to new streams of natural resources. China relies on develop- ment assistance to garner close relations with these poten- tial client states, allowing several Caribbean nations to se- cure significant material gains through developing close economic and political ties with China. Due to China's on- going economic expansion, it had become a significant consumer of rare earth elements such as nickel and bauxite, with its 'thirst' for these natural resources being "one of the most compelling drivers of [its] foreign economic policy."6 This has led to Beijing's interest in cultivating close rela- tions with Caribbean countries with significant mineral de- posits, such as Jamaica and Guyana, attempting to access these resources through its state-sponsored investment in Caribbean domestic resource production sectors.7 To this end, China has directly invested in Caribbean resource pro- duction companies through its state-owned enterprises (SOEs), seen through its purchase of a 70% controlling stake in Guyana’s Omai Bauxite Mining corporation, using this purchase to make its Chinese state-owned aluminum giant the largest bauxite producer in the global market.8 To secure these favourable deals, China rolled out an exten- sive campaign to assuage the Guyanese government, com- plete with a 15.3 million dollar public debt write-off that held symbolic value due to the Caribbean's high rate of ex- ternal debt.9 This acquisition strategy is not exclusive to 6 Bernal, Richard L. “The Growing Economic Presence of China in the Caribbean.” World Economy 38, no. 9 (2015): 1427. https://doi.org/10.1111/twec.12204. 7 Valle, Valeria Marina. “Latin America and the Caribbean Satisfy China’s Hunger for Energy, Minerals, and Metals.” Latin American Policy 4, no. 1 (2013): 2–3. https://doi.org/10.1111/lamp.12001. 8 Bernal, Richard L. “The Growing Economic Presence of China in the Caribbean.” World Economy 38, no. 9 (2015): 1427. https://doi.org/10.1111/twec.12204. 9 Ibid., pg. 1423. 10 Horta, Loro. “A Brave New World: China Embraces the Guyana, as China sent over $100 million in aid for infra- structure projects in Jamaica to strengthen its relationship with the Golding government, using this relationship to open the door to Beijing's investment in Jamaica's alumi- num sector.10 Caribbean leaders have been able to capital- ize on China's desire to secure long-term investments in the region, as host countries often leverage investment from Beijing to increase domestic resource production, evi- denced by its creation of a "state-of-the-art" sugar produc- tion facility in Guyana, nearly doubling sugarcane produc- tion in the country.11 This strategy has the potential to gen- erate lasting benefits to Caribbean economies, as China's investment signals its willingness to strengthen the econo- mies of partner states in ways that its Western competitors have historically been unwilling to do.12 Ultimately, Chi- na's need for natural resources will be a crucial facet of its engagement with the Caribbean, as host countries will likely solicit large aid packages from Beijing in exchange for access to their valuable natural resources. Despite China's notable investments in several resource- rich Caribbean countries, its development assistance pro- jects are often undergirded with economic conditionalities designed to significantly increase Chinese migrant flows to host countries, creating tension with local businesses that often cannot compete with Chinese-owned businesses. China's development assistance projects represent multi- million dollar investments that have a chance to route sig- nificant sums of money to small Caribbean economies and rejuvenate portions of their private sectors.13 However, the Caribbean has failed to benefit from these projects in such Caribbean.” Defense & Security Analysis 25, no. 4 (2009): 428. https://doi.org/10.1080/14751790903416749. 11Bernal, Richard L. “The Growing Economic Presence of China in the Caribbean.” World Economy 38, no. 9 (2015): 1421. https://doi.org/10.1111/twec.12204. 12 Gustafson, Bret. “The New Energy Imperialism in the Caribbean: The Caribbean Has Some of the Highest Utility Rates in the World. Decades of Fossil Fuel Dependence, Foreign Profiteering, and Domestic Debt Made It So.” NACLA Report on the Americas (1993) 49, no. 4 (2017): 421–28. https://doi.org/10.1080/10714839.2017.1409013. 13 MacDonald, Scott B. 2022. “Introduction.” In ‘The CARIBBEAN QUILT 2023 VOL. 7 NO. 1 82 a manner. China views these projects "as lucrative [con- struction] activities whose profit has to go to Chinese firms," systematically excluding local labourers and con- struction companies from participating in these ventures.14 As a result of its preferential selection of Chinese contrac- tors, China 'exports thousands of migrants to the Caribbean countries it sends assistance to, with a significant number of Chinese migrants sent to work on development projects staying in the country and creating distinct communities known for their ownership of successful small busi- nesses.15 Beijing strategically includes terms in develop- ment projects that prevent partner states from limiting Chi- nese migrant inflows and preventing recipient states from establishing economic barriers regulating migrants' in- volvement and ownership activities in domestic indus- tries.16 As a result, Beijing’s assistance projects drastically increase Chinese migrant inflows to the Caribbean, allow- ing China to use these groups to enhance Beijing’s soft power in the region.17 This complicates the relationship that China’s seemingly benign development agenda has with the Caribbean, as aid projects are meant to usher in deep economic connectivity with China and their host countries, often having a detrimental impact on local busi- nesses that have to contend with highly competitive Chi- nese supply chains. This practice has led to the “soaking up [of] small businesses” in countries where large infra- structure projects are built, creating a dynamic in which Chinese expatriates drive local competitors out of business and create foreign-owned monopolies that closely mirror Western multinational corporations, exporting profits gen- erated abroad. 18 In this sense, development assistance poses similar challenges to Caribbean governments as the restrictive loan packages offered to the region by the West, New Cold War, China, and the Caribbean : Economic Statecraft, China and Strategic Realignments,’ 93-94. Cham: Springer International Publishing AG. 14 Tudoroiu, Theodor, and Amanda Ramlogan-Gangabis- soon. “The Myth of China’s No Strings Attached Develop- ment Assistance : a Caribbean Case Study,” 6. Lanham, Maryland: Lexington Books, 2020. 15 Ibid., pg. 156. 16 Ibid., pg. 151. 17 Ibid., pg. 151. obfuscating China's seemingly benevolent intentions. De- spite this, however, development projects will continue to be a salient characteristic of Sino-Caribbean relations, bringing with it a set of economic conditionalities that have the potential to damage the local Caribbean industry. Political competition with Taiwan has been a defining fea- ture of Sino-Caribbean relations, as several Caribbean states’ recognition of Taiwan has led to intense competition between the two nations in the region. This has benefitted several CARICOM members, as China has sought to use development assistance flows to reward its regional allies, a dynamic which has been used to gain funding to modern- ize domestic industries by several governments. CARICOM has a unique relationship with China, as six of its fifteen member states recognize Taiwan, making it one of the few remaining battlegrounds in Taiwan and China’s diplomatic war.19 This rivalry has profoundly impacted China's interactions with the region, as Richard Bernal finds that the $25 billion China spends yearly on develop- ment assistance in the Caribbean is generally only offered to countries in the region that no longer recognize Tai- wan.20 Countries such as Dominica and St. Kitts and Nevis have used the competition to their advantage, soliciting generous aid projects from China in exchange for their sole recognition of the PRC, a tactic used by Dominica to get approximately $140 million in aid from Beijing.21 In addi- tion to increased development inflows, preferred nations receive access to an expanded Chinese export market, gaining access to higher-value exports such as maritime vessels, support equipment, and tankers, of which some CARICOM members re-export for profit.22 China's strat- egy of providing aid to its diplomatic partners thus can be 18 Ibid., pg. 165. 19 Horta, Loro. “A Brave New World: China Embraces the Caribbean.” Defense & Security Analysis 25, no. 4 (2009): 426. https://doi.org/10.1080/14751790903416749. 20 Bernal, Richard L. “The Growing Economic Presence of China in the Caribbean.” World Economy 38, no. 9 (2015): 1411; 1422. https://doi.org/10.1111/twec.12204. 21 Ibid., pg. 1423. 22 Idib., pg. 1412. CARIBBEAN QUILT 2023 VOL. 7 NO. 1 83 reliably used by Caribbean nations to gain a substantial source of development inflows, as Beijing's investments in the region indicate that it is willing to divert economic re- sources to gain diplomatic partners in the Caribbean. How- ever, as the power in this trade relationship is dispropor- tionately balanced in China's favour, significant risks re- main associated with the Caribbean's acceptance of China's development assistance. Caribbean leaders view China as a potential source of sig- nificant tourism inflows and structure their relationships with Beijing to attempt to promote Chinese tourism in the Caribbean. However, these efforts are unlikely to yield substantial returns as they ignore Chinese tourist prefer- ences and domestic opposition to Beijing's increased re- gional presence. Due to China's potential to be a significant source of tourism inflows, Caribbean policymakers "have an obsession" with capturing a significant portion of Chi- na's tourism market, leading to close cooperation with China to build Chinese-owned tourism projects in coun- tries such as St Maarten, St. Lucia, and Guyana.23 Despite policymakers' hopes that China will become a significant player in the tourism industry, it is unlikely to happen, as few Chinese tourists prefer the Caribbean over similar sea and sand destinations in Asia. The region's geographical isolation from China ultimately limits its appeal.24 Even if these obstacles could be surmounted, significant chal- lenges domestically exist to allow for the reforms and so- cietal changes that would need to be made to facilitate a significant scale shift in Chinese tourism preferences. Pri- marily would be the need for a cultural change within the 23 Tudoroiu, Theodor, and Amanda Ramlogan-Gangabis- soon. “The Myth of China’s No Strings Attached Develop- ment Assistance : a Caribbean Case Study,” 114. Lanham, Maryland: Lexington Books, 2020. 24 Ibid., pg. 114. 25 Liao, Xinge, and Dolores Sánchez Aguilera. “Chinese Tourism in the Caribbean—Destination Image and Future Expectations.” In Tourism Product Development in China, Asian and European Countries, 128; 132. Singapore: Springer Singapore, 2020. https://doi.org/10.1007/978- 981-15-4447-7_7. 26 Hearn, Adrian H. “Harnessing the Dragon: Overseas Caribbean, as studies indicate Chinese tourists expect local tour guides and officials to be proficient in Chinese while requiring cultural traditions to be accommodated by their host countries.25 There remains significant hostility to- wards China in the region,26 as high levels of cultural ten- sion in recent years led thousands of protestors in Santo Domingo to protest against Chinese business interests in 2013. 27 Events such as this have alarmed Beijing and soured potential tourists, as Chinese nationals in the Car- ibbean “feel threatened” by such occurrences, leading top CCP officials such as Vice-Premier Li Keqiang to “explic- itly [ask] for the protection of Chinese shopkeepers” and nationals in negotiations with Caribbean officials. 28 Therefore, China is unlikely to posit a notable impact on the Caribbean tourism industry, as there is relatively little interest in the region from Chinese tourists, and cultural hostility to Chinese nationals has soured prospective tour- ists. Despite China's enthusiastic engagement with the Carib- bean, it will not displace America's hegemonic influence over the region. This is for two reasons: America is the Car- ibbean's most prominent export and import market by a significant margin—making its displacement as the re- gion's primary economic partner a daunting investment that China is unwilling to take—and because any such dis- placement would likely trigger a security confrontation with the U.S. that China seeks to avoid. While China's re- cent economic advancements in the Caribbean are signifi- cant, they are dwarfed in comparison to the West's eco- nomic presence in the region, as China accounted for less Chinese Entrepreneurs in Mexico and Cuba.” The China Quarterly (London) 209, no. 209 (2012): 111–113. https://doi.org/10.1017/S0305741011001500. 27 Li, Yuan. “Dominican Republic and P.R. China: Ex- change, Trade and Investment,” 13. GFDD/Funglode Fel- lows Program. Global Foundation for Democracy and De- velopment, December 2013. https://www.globalfounda- tiondd.org/documentos/dr-china-exchange-eng.pdf. 28 Tudoroiu, Theodor, and Amanda Ramlogan-Gangabis- soon. “The Myth of China’s No Strings Attached Develop- ment Assistance : a Caribbean Case Study,” 153; 161. Lan- ham, Maryland: Lexington Books, 2020. CARIBBEAN QUILT 2023 VOL. 7 NO. 1 84 than one percent of foreign direct investment in the region in 2013.29 Furthermore, China’s demand for Caribbean ex- ports is significantly lower than its Western counterparts, as its “importance as an export market for the Caribbean has not significantly increased” in recent years.30 As a re- sult, the Caribbean will be forced to continue to foster close relations with major Western countries such as the United States. Additionally, China's early-21st century expansion in the Caribbean occurred when American foreign policy was primarily preoccupied with the Middle East and Asia, with China's growing engagement in the region being nar- rowly enabled by a temporary period of American malfea- sance.31 This would likely change if China were to estab- lish itself as a viable competitor to American hegemony in the Caribbean. America has a demonstrated history of us- ing military force in the region when it perceives foreign superpowers as taking actions that are "clearly detrimental to American interests."32 The U.S. has repeatedly pro- jected military power in the region to deter encroaching su- perpowers, with America's current military operation in Haiti serving as an indirect warning to China not to chal- lenge the U.S. in its backyard overtly. As a result, commen- tators argue that "the PRC will avoid any overt attempt at undermining US [dominance] in the region,” as this will force the two powers into a security showdown that will undermine the economic advances China has sought to foreground in the Caribbean.33 Thus, America's presence in the region limits the extent of Sino-Caribbean coopera- tion, as China sticks to less controversial economic deals crafted to avoid direct competition with Western interests. Ultimately, China will continue to use the Caribbean as an economic hub to distribute Chinese goods and increase its soft power but will make sure not to challenge western he- gemony for fear of security consequences. China views the Caribbean as a region of strategic signifi- cance due to its potential to challenge Western hegemony in Beijing's great power competition with the United States. 29 Bernal, Richard L. “The Growing Economic Presence of China in the Caribbean.” World Economy 38, no. 9 (2015): 1414. https://doi.org/10.1111/twec.12204. 30 Ibid., pg. 1414. 31 Horta, Loro. “A Brave New World: China Embraces the Despite the Caribbean's political importance to this initia- tive, China has prioritized its economic welfare when in- teracting with regional states, using large development as- sistance projects as a bargaining chip to dictate its eco- nomic relationship with partner states. As a result of the lucrative investments promised by these projects, Beijing has been able to pressure many Caribbean governments into adopting domestic laws that have significantly in- creased Chinese migrant inflows while also decreasing do- mestic barriers to their extensive involvement in Caribbean economies. This has dramatically increased Beijing's soft power within the region, creating animosity towards Chi- nese expansion in many Caribbean states, as these prac- tices have eroded export competitiveness and disadvan- taged many domestic businesses. As a result of this per- ceived cultural hostility towards Beijing, Chinese busi- nesses are likely to continue to prioritize their current form of engagement in the region—focusing investment on nat- ural resources industries while incorporating the Caribbean into Beijing's vast export market. There are severe con- straints to the CCP's engagement in the region; however, chief amongst these is the close geographic proximity of the United States to the Caribbean. Due to the profound economic and secure connectivity that has emerged from this proximity, Beijing is unlikely to be able to replace America as the most significant trade and political partner in the region, declining to challenge American hegemony for fear of a militarized showdown with Washington. Caribbean.” Defense & Security Analysis 25, no. 4 (2009): 429. https://doi.org/10.1080/14751790903416749. 32 Ibid., pg. 425. 33 Ibid., pg. 425. CARIBBEAN QUILT 2023 VOL. 7 NO. 1 85 BIBLIOGRAPHY Bernal, Richard L. 2015. “The Growing Economic Presence of China in the Caribbean.” World Economy 38 (9): 1409–37. https://doi.org/10.1111/twec.12204. 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