Mon | Apr 22, 2019

Editorial | Chinese business group is a start

Published:Sunday | March 3, 2019 | 12:25 AM

Last week’s launch of an association of big Chinese firms that do business in Jamaica is a potentially positive development that could backfire unless it signals a real change in how they traditionally engage with the host community.

Fundamentally, that should mean greater transparency on the part of the firms. But it also requires that Jamaica, and domestic enterprises, meet them halfway.

The fact is, China and its companies, on the economic front, have, over the last decade, been the most critical game in town for Jamaica, providing the island with more than US$3 billion in foreign direct investment (FDI) and bilateral loans, including investments in sugar, bauxite/alumina and highway development. Indeed, the US$600 million, accounting for around four per cent of the national debt, that Beijing has loaned Kingston over that period accounts for the bulk of the money Jamaica has invested in infrastructure over the period. But Beijing’s largesse hasn’t, as is the case with aid from most countries, been void of strings. Chinese firms have first dibs on projects financed by China’s Export-Import Banks, while they have also won private-sector construction contracts.

Two negative perceptions have flowed from this inflow of Chinese capital. One is the fear of Jamaican construction companies that they are being outmuscled in the domestic market by Chinese firms whose size afford them economies of scale, while at the same time having access to cheap capital at home. These firms are also accused of failing to abide by Jamaica’s labour laws, which they deny. The Jamaicans reject accusations of jingoism, but warn of the constriction and ultimate death of domestic enterprises.

At the geopolitical level, the complaint is essentially the same, just writ large. The argument is that Jamaica, like developing countries in Africa and Asia that have opened themselves to a wave of Chinese investment, will not only be in danger of losing control of its economy, but of also being drawn into a Beijing-controlled geopolitical vortex, as it competes for global supremacy with the United States and Europe.

We have two primary observations.

In the 45 years since Jamaica became one of the first countries to pursue a single China policy, both countries have maintained a principled and respectful bilateral relationship. We expect the trajectory of that relationship to continue, if the principles that have characterised Jamaica’s foreign policy for the better part of a half-century are maintained. That may require righting some off-keeling of recent times.

GREATER POTENTIAL FOR PROBLEMS

In any event, China Harbour Engineering Company (CHEC) cannot lift up the North-South Highway, or any of its other projects, and transport them to Beijing.

Second, Jamaica’s debt exposure to China, relative to the island’s overall debt, is relatively small. And with Jamaica not being in the vicinity of the South China Sea, Beijing is unlikely to send gunboats across the Atlantic to enforce its interests. The exertion of soft power is, in this region, likely to be its instrument of choice.

The domestic political front is where there is greatest potential for problems, which neither the Jamaican Government, the island’s political parties, the firms that formed the Association of Chinese Enterprises in Jamaica (ACEJ) nor Beijing should dismiss. For some of the concerns of Jamaican firms are real and legitimate, notwithstanding the assurance of ACEJ’s president, and CHEC’s Jamaica boss, Hu Zhimin, that “Jamaicans having nothing to fear by way of Chinese investments”.

The firms that form the ACEJ have, up to this point, been largely shy in their engagement with Jamaicans. Differences in business culture probably account for this. Nonetheless, the approach has bred suspicion.

The ACEJ, therefore, should see itself not primarily as insulating a potentially hostile environment, but become, as Dr Zhimin says is its intention, a vehicle for encouraging good relations and a strong China-Jamaica alliance. Indeed, it ought to be the foundation of a broader Jamaica/China chamber of commerce, acting as an institution for networking and as a clearing house for business deals between the two countries.