Like persistent bug bites on an elephant’s hard skin, Chinese investments overseas have been marked by failures. Without a doubt, the impact of the huge capital movements lingers. Soon, China can add the primacy of the world’s largest exporter of productive investments to its status as the greatest receiver. Economic convenience is notable: Beijing has the reserves and appetite for raw materials and technology; businesses and governments need liquidity and they sell—frequently without societal restrictions—to the highest bidder, which is China. The mechanism is simultaneously advantageous, perverse, dangerous, and unidirectional. A recent article in the New York Times provides an excellent summary:
Together with the flux of cash toward foreign countries, displeasure toward Chinese encumbrance is growing. There are numerous widespread cases independent of geographic location or commodity specialization. The construction of a highway entrusted to a Beijing company was blocked; In Zambia, a coal mine was closed after local workers’ protests lead to the death of a Chinese manager; In Myanmar, construction of a dam was halted that should have provided hydroelectric power for the Chinese province of Yunnan—likely with concomitant environmental devastation. The latest case—obviously for now—is the end of work on an immense resort in the Bahamas. A vacation center was under construction near the capital, Nassau, with thousands of rooms, golf courses, and gambling halls. The China State Construction company sensed a promising deal: work was suspended because the original developers had been hit by the 2008 financial crisis. With financing from the Exim Bank (also controlled by Beijing), they supplanted the work in progress, greatly accelerating its pace. Prospects were excellent because the Caribbean archipelago practically lives on tourism (and financial intermediation), offering the islands’ beauty and entertainment at reduced prices. On completion, the Baha Mar project would have had a value equal to 12% of the Bahamas’ GDP. Furthermore, it would have created 5,000 jobs, an important number for a population of 350,000. Now, the Chinese investors’ local partner has declared bankruptcy accusing the Chinese of delays, breach of contract, and materially ceasing construction.
The dispute projects a shadow on China State Construction, which was already banned from IMF tenders in 2009 due to corruption. The shadow cone is even more extended for China. Its expansionist policies toward Latin America and the Caribbean could suffer a slow-down. Economic convenience is not in question as much as the modality of business. Beijing is frequently accused of confusing greatness with arrogance, and pragmatism with flippancy. At times its opacity is also transmitted to the Caribbean and its fog obscures the islands’ sun, forcing it to bring the books to court.