By David Jessop

News Americas, LONDON, England, Fri. Sept. 23, 2011: Two separate developments in the last week, both involving China, demonstrates the fundamental ways in which international relationships are changing.

The first involved China subtly suggesting that it might provide financial support for Eurozone economies in difficulty. The second was the announcement at the opening of the Third China-Caribbean Economic and Trade Cooperation Forum in Port of Spain that Beijing would make available over US$1billion in loans and other assistance for Caribbean economic development projects.

In Europe many economies are in trouble. Greece, Italy, Spain Portugal, Ireland and United Kingdom have had to take drastic action to address high levels of debt and low growth. However, the markets have not been convinced that some of the Governments concerned will be able to institute the tough austerity measures they have announced. This is particularly so in the case of Greece and Italy where special pleading by powerful interest groups has caused Government to back track on measures already announced, creating uncertainty about whether the nations concerned might default.

As these nations are within the Eurozone, this has had the effect of raising questions about the whole European integration process. In economically strong and fiscally correct nations at the heart of the Eurozone like Germany, domestic political pressure is making nations reluctant to provide further financial support for those EU states that seem incapable of bringing their economies under control. Somewhat over simplified, the effect is that if economically strong nations are unwilling to bail out weak Eurozone economies, the Eurozone, and by extension the European Union, is unlikely to survive in its present form.

One consequence has been that some European nations, Italy in particular, have been looking further afield for help and have been discussing with China the possibility that it might purchase sovereign bonds or invest in local industry.

However, in the last week China has made clear politely that if this were to be so, there were broader issues it would want to discuss with Europe.

Speaking in Dalian in North East China, Wen Jiabao, China’s Premier, expressed confidence in Europe’s prospects, but noted, “we have been concerned about the difficulties faced by the European economy for a long time, and we have repeated our willingness to extend a helping hand and increase our investment”. However, Mr Wen made clear that EU countries should put their own houses in order and prevent the further spread of the sovereign debt crisis in Europe.

He also implied there might be conditions for Chinese support by suggesting that Europe might recognise China much earlier than agreed as a full market economy, a technical definition that would benefit Chinese companies involved in trade disputes; something not due to happen to 2016 under WTO rules. “If EU nations can demonstrate their sincerity several years earlier, it would reflect our friendship,” he said.

The development comes just as China has committed itself to US$1Billion of loan support for the Caribbean at the Third China-Caribbean Economic and Trade Cooperation Forum in Trinidad on September 12. The event was attended by over 200 participants and involved Ministers from Barbados, the Bahamas, Cuba, Dominica, Jamaica, Grenada, Guyana, and Suriname and Trinidad with seminars on issues such as tourism, agriculture and fisheries.

During the opening ceremony, China’s Vice Premier, Wang Qishan, said that the Chinese government intends further deepening China-Caribbean co-operation in areas including finance and investment, capacity building, environmental protection, renewable energy, culture, education, health, trade, tourism as well as agriculture and fisheries.

To help achieve this, the China Development Bank will establish a one billion dollar fund for business loans to finance infrastructure development and will donate US$1m to the Caribbean Development Fund. China also intends offering training courses for up to 2,500 Caribbean students and 30 postgraduates to study in China, will help build an early warning monitoring network for earthquakes and tsunamis, and provide training for disaster reduction and prevention.

“China will continue to support Caribbean countries’ efforts in developing their economies, improving people’s livelihood, promoting the Caribbean regional integration process and playing an active role in international affairs,” Mr Wang said.

According to the Chinese government, China-Caribbean cooperation has moved forward rapidly over the last six years with bilateral trade, increasing by an annual average of 24 percent, to reach US$7.2bn in 2010.

Taken together these two quite separate developments make clear just how China’s role in the world is changing.

In the Caribbean, China has become of major significance and is now involved in the economic development of every Caribbean nation that formally recognises Beijing and in some cases such as the Dominican Republic, that do not.

What is clear is that the relationship is moving on to a new stage. Space does not permit much detail but three Caribbean examples in addition to what was announced in Trinidad, suffice. The first is the interest being shown by China in infrastructure in overseas territories such as Cayman and the BVI; the second is the agreement in principal for China to provide a US$1.1m military aid package for the Jamaica Defence Force; and the third is a visit in August to Beijing by Jose Ramon Balaguer, a special envoy for Cuba’s President, Raul Castro, involving exchanges on a party to party basis on national approaches to building socialism and on deeper economic co-operation

So far, US reaction has been muted to China’s increased involvement in the Caribbean, although it is clear from US diplomatic cables posted by Wikileaks that it is a matter to be monitored. It is also apparent that some in Congress who have not recognised the way that the world has changed regard China as a growing threat across the hemisphere.

In contrast, for the most part, Europe and other nations with an historic relationship with the Caribbean are trying to better understand China’s thinking and where there are opportunities for co-operation in the region and other parts of the developing world.

Chinese direct investment offshore is in the process of undergoing exponential growth with its nation’s businesses poised, some reports suggest, to spend more than US$1,000bn in accumulating assets around the world by 2020. It is also likely that the Chinese renminbi could become a reserve currency.

What is clear is that those Caribbean nations in an improving dialogue with Beijing will be among the beneficiaries of long term Chinese support.

David Jessop is the Director of the Caribbean Council and can be contacted at [email protected]. Previous columns can be found at www.caribbean-council.org.