This paper aims to dissect and analyze the relationship between the twin-island state and the Asian superpower to see who exactly is the biggest benefactor. Antigua and China’s economic histories are explored. This paper finds that although both parties benefit, Antigua’s benefits are in the economic short-run with very little long-term benefit. China benefits stronger from diplomatic power within the Latin American and Caribbean region.
The twin-island state of Antigua and Barbuda lies in the Eastern Caribbean. The nation has long seen Chinese interest in its natural resources and governments. China-Antigua and Barbuda relations date back to 1983. The YiDa International group has agreed to build a $1 Billion-dollar resort, commercial, and residential development on the minor outlying Guiana Island and surrounding land which was bought by YiDa from the Stanford Liquidators who are in charge of the disgraced financier Allen Stanford’s estate.
Although at a glance this investment deals and grants seem like the rocket fuel the Antiguan economy needs, the rising involvement of China in the economies of Antigua and Barbuda and other Caribbean nations should be investigated. This paper endeavors to do so and ask why this investment is occurring and what are its implications. It maintains that Chinese investment in Antigua may have a short-term economic effect with regards to aggregate demand but have little to no effect on other economic indicators. It will study the effect of Chinese Investment on factors such as unemployment, trade, inflation, and tourism.
The paper will start with delving into the existing literature between Chinese economic and diplomatic interventions in developing countries before delving into the Antigua’s economic profile and history with China. It will then outline theoretical analysis of data measuring the impact of Chinese investment on the Antiguan economy and conclude with a discussion of the results and conclusions and recommendations for the Antigua and Barbuda government on how to leverage Chinese investment for long term economic empowerment of the nation.
In regards to Chinese investment in Latin America and the Caribbean, much research has been done of late by many economic authorities and private parties. China’s Foreign Direct investment to the Caribbean has grown more than five hundred percent between 2003 and 2011 and their stock in the region was estimated to be near five hundred million in 2011. He also outlines what he calls the “Drivers of Chinese Investment in the Caribbean” (what makes the Caribbean so attractive to Chinese investors). Two of these drivers are China’s interest in “chequebook diplomacy” (buying a foreign government’s political side on international disputes) and the Caribbean’s rich agricultural sectors and mineral resources.
China represents a huge market for food, raw materials and capital from investment. It is also a great potential source for development assistance. China’s presence in Africa has already proved to increase the economic good fortunes of the continent. Africa’s exports to China grew by nearly 50% between 1999 and 2004. China receives 10% of the continent’s exports. This increase in exports was accompanied by a rapid increase in Chinese involvement in extractive industries such as mining on the continent. However, the benefits are only enjoyed by a few -- those who own the exportable materials and exporting businesses and those in government.
Caribbean countries such as Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, and Trinidad and Tobago have had increased diplomatic relations with China since the 1980s. China’s motives are partly influenced by economics and partly by politics. China has little use for the small amount of resource and mineral support that these islands can provide unlike Africa which is resource abundant.
China’s exports to the Caribbean totaling $4.21 billion in 2013, more than double its imports from the region that year ($1.88 billion) and it’s Overseas Direct Investment stock in the region totaled $62.1 billion. With China’s increasing influence in the region, scholars recommend that political powers such as the United States of America should be wary of China’s involvement in the Caribbean region and possible implications in the effectiveness of U.S. policy in the Caribbean. The United States and part of Europe such as the United Kingdom and France have long ignored the region or seen of it merely as a holiday destination instead of an important diplomatic or trade partner.
The United Nations has also weighed in on this topic. In a report presented at a Summit on the Global Agenda for the World Economic Forum in Abu Dhabi, the writers Taotao Chen and Miguel Pérez, come to the conclusion that Chinese firms have invested, on average, $10 billion per year in Latin American and Caribbean countries and that these equatorial nations should continue to encourage Chinese companies to diversify their investments there. The report also comments on the rapid rise of Chinese Outward Foreign Direct Investment since 2003 and details the sectors in which these Chinese firms invest. These sectors include mining, financial intermediation, transport, manufacturing, and real estate. It also details the practices of Chinese firms’ infrastructure contracts with the most common contractors being CSCEC (China State Construction Engineering Corporation), and Sinohydro.
As China looks to promote its “One China Policy: international, it also is driven by international geopolitical interests. China began to reform its economic and diplomatic strategy in the 1970s. It began to welcome and partake in foreign investment and appear to cooperate and interact on the global stage. The nation rebuilt itself from subsistence to a global superpower, exporter extraordinaire with increased membership and participation in international organizations. As it grew, its influence did as well, reaching further corners of the globe, including the Caribbean. As a result of this shift, China saw in developing regions such as the Caribbean a vessel to quench its need for “new markets, investment opportunities and new sources of raw materials to sustain its economic growth.”
As one can see, the literature on this subject is vast, however it does not pinpoint on the effects of Chinese investment and aid on individual nations. Bernal’s “The Dragon in the Caribbean: China–CARICOM Economic Relations” is the most specific piece of literature— pinpointing CARICOM nations and giving intimate details about the relationships between each one and China instead of broadly referring to Latin America or the entire Caribbean. This paper plans to remedy this by making a contribution to better understanding the benefits and drawbacks of Chinese Investment in Antigua and Barbuda specifically. In the next section, Antigua’s recent economic environment will be analyzed.