China Becoming The White Knight For Many Economies
Published: Sunday | March 16, 20141 Comment
James McNish GUEST COLUMNIST
As our economy makes its way out of economic recession, it continues to encounter economic headwinds such as a high debt-to-GDP ratio, a paucity of economic opportunities and low productivity.
Since the International Monetary Fund deal, we have successfully passed all tests, of which the minister of finance and his team must be commended. It appears that the economy is heading in the right direction, a positive sign.
Our objective is to get the economy from low-gear to medium-gear momentum. To do so, the imperative, based on pro-investment strategies, is to aggressively woo international investors to our shores, triggering a fresh wave of investment.
Currently, China’s economy is the fastest-growing economy, and circa 2030 will be the largest economy, its inexorable rise to the top. China’s latest trade figures show it probably has overtaken the United States as the world’s largest trader. According to information culled, China has billions of dollars to invest globally, with the primary beneficiaries being USA and Australia.
Of importance, Jamaica should position itself to have China as an indispensable and worthy partner through increased business investments as we seek to improve the economy.
Recently, The Bahamas received investment worth US$3.5b from Chinese investors, estimated at 40 per cent of its GDP, in the form of a new hotel with 2,200 rooms. Three banks, a fire station and a police station, viewed as obstacles in the footprints, were relocated to new facilities. Even the prime minister’s office, once located at the entrance to Baha Mar, has been removed and is now ensconced in a nearby leased building.
West Bay Street, which ran right through the middle of the project, was rerouted and a new half-moon-shaped boulevard called Baha Mar was carved out to serve the resort. The Bahamas Government claims that it is transformation because its economy is heavily dependent on tourism. Interestingly, I wonder how Jamaica would respond to this type of investment under those conditions.
China evidently is becoming the white knight for many economies of the world. Globally, it has invested heavily in the US, with the most recent investment by Beijing-based Goldleaf Jewelry paying US$665 million for a 95 per cent share of Texas-based ERG Resources.
Chinese billionaire Li Ka-Shing has acquired the Israel-rooted company for about US$1 billion, and is now the most active foreign investor in Israel. Billions of pounds have been pumped into the United Kingdom towards the development of the Manchester airport, London railway system, and real estate market.
In Africa, investment is huge, with the latest one valuing US$2.1 billion in Egypt, and likewise, Brazil has received its fair share of investment.
On the issue of tourism, in 2012, the Chinese have overtaken Americans and Germans as the world’s top international tourism spenders, taking 83 million foreign trips and spending US$102B. By early 2015, according to the United Nations World Tourism Organization, Chinese globetrotters, the burgeoning middle class, will take more than 100 million overseas trips. By 2020, the figure will almost double to an incredible 200 million, making ‘Chinese tourism’ the most lucrative tourist market.
Certainly, this phenomenon has the potential of augmenting tourist arrival and providing myriad business opportunities among our small and medium-size businesses. Additionally, it would also reduce the dependence on European and North American tourist traffic. A suggestion is that our policymakers need to formulate strategies to capitalise on this trend.
China has changed dramatically over the last five years, turning from a rule-taker to a rule-maker, said Geoff Dyer, journalist of the Financial Times. Moreover, he stated, “I don’t think China is doing anything that’s different from what other big rising countries have done in the past.”
Currently, Chinese consider themselves not only replicative entrepreneurs, setting up small businesses much like other small businesses, but also as innovative entrepreneurs who upset and disrupt the existing way of doing things, making it the game-changer of the world.
China’s citizens are now focusing their attention abroad, sniffing out business opportunities, because of tight policy measures by their Government aimed at cooling off the country’s overheated real-estate market.
Fuzzy thinking among some Jamaicans has harvested a myopic discernment of Chinese, fuelling a melange of xenophobia and anxiety, although both countries have a strong relationship over the years.
Undeniably, the trajectory is that most investments will be coming from the East, China, rather than from the West, USA. Economic growth and business activities are necessary conditions for job creation, development and prosperity. We need to understand what stimulates Chinese investors.
Of concern, anticipated to become the catalyst for economic growth, the proposed logistics hub, a US$1.5b investment, estimated 10 per cent of GDP has been mired in endless kerfuffle rather than a move towards conclusion. Doing business in a world characterised by cultural diversity, competence in cultural intelligence is a sine qua non to attract global investors, being geocentric rather than ethnocentric in attitude.
Across the world, the indispensability of China as a worthy partner is increasingly becoming a reality because of its deep pockets and its search globally for economic opportunities.
Can Jamaica afford not to have China as an indispensable and worthy partner?
James McNish is a lecturer at the University of Technology. Email feedback to firstname.lastname@example.org and email@example.com.