CHINA'S POLITICAL INVESTMENT IN EC PAYS DIVIDENDS

C O N F I D E N T I A L BRIDGETOWN 000332

SIPDIS

E.O. 12958: DECL: 05/22/2018
TAGS: PGOV PREL CPAS CVIS EINV OFDP PINR SNAR CH XL
SUBJECT: CHINA'S POLITICAL INVESTMENT IN EC PAYS DIVIDENDS

Classified By: Classified By: Deputy Chief of Mission Brent D. Hardt, f
or reasons 1.4 (b) and (d).

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Summary
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1. (C) PM David Thompson's May 7-9 visit to Beijing
highlights China's increasing engagement in the Eastern
Caribbean to improve economic and business ties and increase
aid. The visit, which generated new economic and business
ties and increased aid, was seen as successful by
commentators, who focused primarily on the optics of the
visit and choose to overlook political or human rights
issues. The MFA used the occasion reiterate its position in
support of the One-China Policy. China is clearly investing
heavily in the region )- or at least in its political elite
)- and so far, the investment seems to be paying off. End
summary.

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Visit Generates New Aid and Embassy
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2. (C) Prime Minister Thompson's May 7-9 visit to China was
well received by the media, with days of headlines on his
meetings and visits, including his audience with Chinese
Premier Wen Jiabao and his visit to the Great Wall of China.
Newspaper headlines highlighted the strengthened ties between
the burgeoning Asian power and Barbados. For his part, PM
Thompson was able to secure promises of roughly 4 million
dollars in new aid projects and soft loans over the existing
monies already pledged by China. The media focused
exclusively on increasing economic and cultural ties, instead
of more uncomfortable issues like human rights or Tibet. One
prominent editorial writer who accompanied the PM on his trip
wrote an article explaining that after his visit to China, he
felt the country should be considered a democracy, like any
other democracy, just with a different system. Another
commentator, who had visited China, said he saw no evidence
of human rights problems worse than that in the U.S. or
Canada.

3 (C) During a meeting with Premier Wen Jiabao, Thompson
announced that former Barbadian Prime Minister Sir Lloyd
Erskine Sandiford will be the country's first resident
ambassador in China. The PM commented that Barbados, as a
small island nation, will continue to follow through on its
development strategy with the help of like-minded allies such
as China. MFA contacts explained to us later that the
logistics of the new embassy are still being worked out,
however, the ministry hopes to see the new ambassador take up
his post by early 2009 at the latest. FM Sinckler, who
accompanied the PM, told us privately during the signing of
the condolence book for China's earthquake victims that the
GOB was reviewing plans initiated by the previous government
to open a trade and investment office in Hong Kong, noting
they might simply install an agent there for cost reasons.

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One China Policy
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4. (C) The PM's visit so soon after his successful election
bid was necessary in order to squelch the rumors from the
election campaign that, if elected, the DLP would switch
recognition to Taiwan, regional political commentator and
pollster Peter Wickham told us, echoing a sentiment we have
heard from several contacts. The major take away for the
Chinese side was Barbados, concurrence that CARICOM should
adhere to the One-China Policy, Wickham added. &The
Barbadian government believes that CARICOM should have one
policy with regard to China and Taiwan and we will urge our
all our CARICOM partners to recognize the People's Republic
of China,8 MFA Senior Foreign Service Officer Simone Rudder
explained.

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Investment or Tax Shelter?
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5. (C) Chinese investment opportunities in Barbados are more
likely to center on the establishment of holding companies,
rather than direct investments, Barbados Employers
Confederation Executive Director Harry Husbands told us in a
recent meeting following the PM's trip. This strategy has
been successful in attracting billions of dollars in
investment from Canada and the US. FM Sinckler told us
separately that, since the strength of the Barbadian economy
is in the service sector and as a regional hub for large
firms seeking to do business in North and South America, a
key target area for Chinese investment is corporate
headquarters for holding companies controlling large Chinese
companies listed on foreign exchanges, which are registered
in Barbados for tax and foreign investment purposes. (Note:
Many of the large Chinese technology companies listed on U.S.
stock exchanges such as the NASDAQ are headquartered in the
Cayman Islands.)

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Confucian Institute Coming Soon?
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6. (C) The Chinese government has agreed to fund a youth
technical education center in one of the more rural districts
of Barbados. Discussions are currently ongoing concerning
the staffing of the facility, which may include Chinese
instructors. China has recently agreed to open a Confucian
Institute in Barbados, which would cover the entire Eastern
Caribbean region, Chinese Embassy Charge D'affairs Li Qian
explained. (Note: Confucian Institutes are Chinese
government-funded centers seeking to increase Mandarin
language and Chinese culture studies around the world.) Both
sides are hoping to significantly increase cultural and
educational exchanges. Increased educational exchanges and
training opportunities for Barbadian students are a high
priority of the new government, the MFA's Rudder explained.
China has offered to help in this regard and is seen as a
strong potential partner for the future.

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Chinese Money, Caribbean Elections
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7. (C) Concerns over recognition and the tightly contested
elections in the Eastern Caribbean in recent years have led
the Chinese government to provide direct election funding to
major candidates in regional elections, Wickham told us. In
the last election the Chinese gave money to both of the major
parties in Barbados, in order to assure continued
recognition, he added. Embassy contacts on other islands
have made similar assertions in the past, however, Wickham
maintains that the trend is worsening and Chinese money along
with other sources of outside money could become a more
serious threat to democracy in the region.

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COMMENT
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The PM's trip is just the latest example of China's increased
engagement in the Caribbean and in Barbados in particular.
Earlier this year, China donated a store of non-lethal
military equipment to the BDF, including generators, field
medical equipment, and riot gear. China has embassies in
Barbados, Dominica, and Antigua, and has two O-6 rank
military officers permanently assigned to both Antigua and
Barbados )- ostensibly to teach music and self-defense. The
Chinese navy will conduct a multi-ship goodwill tour that
will include multiple stops in the Caribbean, though not in
the Eastern Caribbean. On the rhetorical side, Thompson's
visit (and, many say, elections in Taiwan) have led for many
calls in the region for a consistent CARICOM One China policy
) currently, St. Kitts, St. Lucia, and St. Vincent all
recognize Taiwan. While persistence and a liberal
application of Yuan seem to be paying off, it is also true
that a unified regional policy -- as called for at this
month's Caribbean foreign ministers meeting in Antigua --
would lead to diminished competition and thus less lavish aid
to the countries of the Eastern Caribbean.
OURISMAN