China: Why is the trend turning to the East?

China: Why is the trend turning to the East?

Hainan China Skyline. Hainan China Skyline.

SINT MAARTEN/COMMENTARY - With a multi-million dollar Chinese investment at our doorsteps, the trend today and for the recent past years for many countries is to look to the East towards Asia.  China’s role has been rising in a sustainable manner all around the world including Latin America and the Caribbean over a period of decades.  This has presented enormous opportunities for countries where it concerns investment funding, products and services.

Five attractive features that the Chinese market offers according to ConnectAmericas are: Huge population and workforce; China is the most populated country in the world and is home to approximately 1.4 billion inhabitants. This means that roughly 1 out of every 5 individuals in the world live in this dynamic economy. Also, its workforce amounts to 806.5 million and is the main driver of its economic growth.

Secondly, Economic leadership: China’s share of Gross Domestic Product (GDP) in relation to global output went from 2.5% in 1980 to 17.2% in 2015.  Thirdly, Importance of international trade: International trade is embedded in the DNA of the Chinese economy, representing 47% of its GDP. It is the largest exporter of merchandise and the second largest importer.

Fourth, a rising middle class: As of 2015 China has the largest middle class in the world, exceeding that of the United States. The wealth of China’s middle class has increased six fold (600%) in this century, compared to the 115% increase in the rest of the world and the 280% increase in India.

And fifth, an increase in consumption: In absolute terms, China’s capacity grew faster than in other countries. Between 2000 and 2010 it went from 650 billion dollars to 1.4 trillion dollars. The rise in household income and the increase in discretionary spending are other contributing factors boosting consumer spending, making China an attractive market.

The 1st China Puerto Rico Investment Forum was held early March and San Juan.  Chinese investors at the forum were told to put their money in Puerto Rico because “it is in the U.S. map…it is an unofficial 51st state,” Chief Executive Officer of Pharmaceutical Company PuraCap, Dahai Guo said.

The company operating out of Puerto Rico says Chinese investors would benefit from all of the protections of U.S. laws as they bring products to the American market.  PuraCap is aiming to make the first ever Puerto Rico-made drug imported to China this year.  The company makes numerous tablets and capsules as well as liquid medicines such as Vicks.

During the China-Puerto Rico Investment Forum, Chinese investor Yuan Bin Cen who owns and operates ECO Green Recycle, a tire recycling factory in Puerto Rico, spoke about his successes and is opening a second factory on the island. At the forum investors had questions not only about business opportunities but also about costs, incentives and the opportunity of being able to launch their products in the U.S. market.

This week at the Cayman Alternative Investment Summit, a survey of more than 200 delegates showed that 44 per cent of industry professionals consider the new U.S. Republican Administration in place under the leadership of President Donald Trump, the biggest potential global risk in 2017. 

Other top risks include cybersecurity (25 per cent), European election results (13 per cent), and Brexit-Great Britain leaving the European Union (four per cent).

At the Cayman Summit, Chris Duggan from Dart Enterprises, director of the Cayman Alternative Investment Summit, was reported to have said that, “This next year will be unlike anything the alternative investment industry has ever faced,” adding, “With rapid technological changes and major geopolitical shifts around every corner, the industry must show that it can chart a path through what promises to be choppy waters.”

Other identified challenges in terms of the disruptive potential of technology, nearly a third of the Cayman Summit attendees anticipate that artificial intelligence will have the most significant impact this year. Other popular choices included robotics/automation (19 percent), block chain (18 percent), cybersecurity (16 percent), self-driving cars (10 percent) and wearable tech (5 percent).

With so much uncertainty, country Sint Maarten must embrace opportunities that present themselves that offer long-term sustainable economic security. 

Many islands in the Caribbean export products to China such as medical, surgical/veterinary instruments and appliances; parts for telephone sets; non-roasted coffee; woven cotton fabrics; orthopedic devices, plastic articles; fresh fish; shaped wood; essential oils; synthetic knitted undergarments; methanol, printed materials, and electric conductors.  Besides the aforementioned, you also have financial and international business services and Chinese tourist which is still in its infancy.

The US-China Economic and Security Review Commission said China's ties with the Caribbean had strengthened over the decade. "[They] are likely to continue to expand under President Xi Jinping, who has emphasized relations with the region more than his predecessors. Beijing likely views the Caribbean as strategically important by virtue of its proximity to the US and major maritime trade routes and infrastructure, such as the Panama Canal and the region's ports," it said.

China is among the world’s top source markets where tourism is concerned. China, with double-digit growth in expenditure every year since 2004, continues to lead global outbound travel, benefiting Asian destinations such as Japan and Thailand, as well as the United States and various European destinations.  In 2015, Chinese outbound tourist visits reached 120 million.  Chinese tourists, now in top position, have spent $182 billion, USA $122 billion, Germany $94 billion, UK $61 billion and Russia just under $50 billion.

Sint Maarten looking East would benefit the long-term sustainable economic interests of the country.

Roddy Heyliger

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