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China is Jamaica's fifth largest trading partner
The Chinese asked to provide financing on a US$300 million railway project
Al Edwards
Friday, July 21, 2006
China has become Jamaica's fifth largest trading partner and is looking to extend its trading relations with the Caribbean country. So said the First Secretary, Economics and Trade at the Chinese Embassy, Wenbin Wang, who was the guest speaker at this week's Private Sector Organisation of Jamaica (PSOJ) Trade Policy Committee Meeting.
"At this point in time, China's primary import from Jamaica is bauxite, but we are looking to diversify the range. China is encouraging investments in Jamaica particularly in the agriculture sector, and we are asking business people interested in entering trade relations with China to come forward."
Mr Wang noted that Jamaicans are increasingly interested in doing business with China, but that their interests would be better served if their orders came in bigger quantities and that trade was conducted directly with China. Trade between China and Jamaica currently stands at US$340 million, with Jamaican exports accounting for US$230 million.
China has become the world's fourth largest economy and now trades in large volumes. It is more inclined to do business with populations of tens of millions rather than in low single-digit millions. At this point in its economic development, it just doesn't make sense to pursue this route.
Mr Wang was of the opinion that Jamaica should concentrate on what it is good at and should not dissipate its energies and resources by trying to be good at everything. In other words, the country should pick winners and stick with those.
In November 2004, President Hu Jintao pledged that China would invest more than US$100 billion in Latin America and the Caribbean over the next decade.
US$300 million railway project for Jamaica
It wasn't so long ago that the Indian company, RITES, expressed an interest in reviving Jamaica's railway network, which last saw service back in 1989. Now the Chinese have expressed an interest in a project which they see as coming in at around US$300 million.
Last year, the vice-president of China's CAMC Engineering, Wang Yuhang, visited the island to discuss the rehabilitation of the railway system.
Wang said that a Chinese technical team had already provided a study to the Jamaican Government and that the project was a viable one.
He said that the Jamaican Government was looking to China to provide a low-interest loan to finance the project, with the Asian country expected to put up 15 per cent of the total cost.
He said that the Jamaican authorities had expressed an interest in having the Chinese participate in the operational side of the rehabilitated railway system, but that his countrymen were somewhat reluctant to do so.
China to produce low-income homes for Jamaicans
Another area of collaboration Wang pointed to is the construction of low-income homes. This is a sector that the Chinese regard as of high importance and to which they can make a valuable contribution.
Again, China would provide the financing with the Jamaican Government being the guarantor.
" This will see employees putting up 2 per cent of the cost, with employers contributing considerably more, and the majority of the funding coming from low-interest rate loans provided by China.
"The Jamaican Government will source and come up with the land for this housing development and will also take care of water, sewage, etc. This will be a Government-to- Government endeavour with minimal private sector participation. The Jamaican Government is very excited about this prospect."
Ominously for the local financial sector is the prospect of Chinese financing at low-interest rates for affordable housing.
Energy
China has displayed a voracious appetite for energy products in order to facilitate its rapid economic development. The country is undergoing an industrial revolution of sorts and is looking beyond its borders for its energy needs.
Jamaica is transitioning from a sugar industry into a sugar cane industry, with the production of ethanol and bagasse likely to be additional revenue streams. With petrol prices in the US$80 a barrel range, cheaper alternatives are becoming imperative for developing countries. Jamaica is struggling with exporting sugar to European countries at advantageous prices, and with the ACP's preferences being stripped away, new markets have to be found. Can Jamaica now begin to look eastward?
"Sure, ethanol production is something that would interest us, but I don't see that as being a major priority area right now because the infrastructure to facilitate it (fuel stations, motor vehicles, industrial plants) is not yet in place. Nevertheless, the supply of fuel products is something we cannot afford to ignore," said Wang.
Revaluing the yuan
The United States has incessantly called on China to revalue the yuan in order to protect the US home market from the rush of Chinese imports. This has not phased the Chinese, who take a more measured approach on the subject.
The US media, led by Lou Dobbs and some more conservative lawmakers, responding to concerns on the part of manufacturers and trade unions, maintain that cheap Chinese exports - made even cheaper by a yuan whose exchange rate they say is too low in relation to the dollar - give Chinese firms unfair advantage over American companies. This, they say, is a major factor in the US trade deficit and current account deficit.
China has kept the yuan pegged to the US dollar to encourage exports and to keep inflation in check.
Wang made it clear that this drumbeat is coming primarily from both the United States and British media, but that the Chinese media does not get its point across.
"Yes, we do have a huge trade surplus with the United States and our textiles are making inroads over there. What a lot of people don't realise is that we have to buy raw materials from many South East Asian countries where we have a sizeable trade deficit, but yet the world only gets to hear one side of the story."
Impressive economic performance
Over the last 30 years since Deng Xiaoping opened up the Chinese economy, the country has averaged annual growth rates of over 9 per cent, bringing its GDP from US$147.3 billion to US$1.80 trillion. Its trade volume has increased from just US$20.6 billion to US$1.20 trillion.
China's foreign exchange reserves now stand at US$800 billion and it has attracted US$600 billion in foreign direct investment.
Nevertheless, its income per capita is just US$1,500, half that of Jamaica's, with 26 million Chinese living below the poverty line. China's development is expected to raise the living standards of most of the Chinese population.
China is Jamaica's fifth largest trading partner