Cuba and China: a communist understanding?

The Caribbean’s largest island and China have natural political ties. The fall of the Soviet block in the 90s, in addition to the US embargo, has lead to a business boom in between both countries, especially in the last decade. China is now Cuba’s second trade partner (after Venezuela) and its share is rising as traditional European and Mexican partners decline. The dragon is evermore becoming an alternative to the US and its allies.

Political ties have always been strong, as Cuba was the first Latin american nation to recognize China and establish diplomatic relations in 1960. However both countries started to interact and intertwine over a century before that. After England’s abolition of slavery in 1833, many southern Chinese labour workers migrated to Cuba, from 1850 to 1880, on 8 year contracts to work in the plantations. Although work conditions were deplorable (prompting the Chinese government to intervene), the Chinese community flourished giving birth to “el barrio Chino” in La Havana, Latin America’s largest Chinatown. By 1959 and Castro’s revolution, 50000 Chinese lived and worked there, mainly owning small businesses such as restaurants and shops. Castro’s mass nationalisation and expropriation naturally put an end to this way of life and pushed most of the Cuban Chinese to migrate abroad. Nowadays the Chinatown is very small and has very few links with China. International relations also went sour in the 70s when Cuba sided with the Soviets in its ideological confrontation with China. It is only after the collapse of the USSR that a new Sino-cuban relationship took off, the Cuban Chinese even benefiting from small-scale private rights (small restaurants and groceries).

Indeed, China has launched many bilateral deals in the past fifteen years in cultural, medical and technical fields and has taken on the Soviet’s legacy as Cuba’s main manufacturer. Bilateral trade has risen from $440 million in 2001 to $1,9 billion in 2010 (official Chinese figures), mainly due to Chinese exports. While China imports nickel, sugar, tabaco and biotechnology, Cuba mostly imports electronics and construction material. China has also repeatedly offered interest free loans and credit lines to Cuba as it opens its markets. These Chinese funds are in many cases used to buy Chinese products: in 2001, a $200 million loan was used to modernise telecommunication and $150 million to buy Chinese television sets. However the particularity of Sino-cuban trade is that it includes two communist state-controlled partners. This benefits Chinese goods directly as they are coordinated and distributed nation-wide by the Cuban government. For example China has recently exported many low consumption electronics (refrigerators, washing machines, televisions and air conditioners) which were directly put on the government and domestic markets with virtually no competition. In exchange of these official state channels for Chinese goods many joint ventures include Cuban based factories and technological transfer. The first was in 1997 with a bicycle factory using Chinese capital and expertise, followed by electric fan factories, slippers, etc. This gives China great control over its trade with Cuba, from the production to the distribution of goods and even funding.

China has also heavily invested in raw material, mainly nickel and oil. Cuba is one of the world’s important nickel producers and the metal, used in the production of stainless steel and other corrosion-resistant alloys, is its leading export. China on the other hand, which consumes 40% of the world production of nickel wishes to secure some of these reserves. In 2004, China decided to invest $500 million in a nickel processing facility of Las Camariocas which is jointly owned by Cubaníquel (51%) and Minmetals Corporation (49% and Chinese). Likewise, although Cuba is a net oil importer (notably from Venezuela), China has chosen to invest in Cuba’s oil infrastructure. Since 2008, China has been exploring offshore oil in the Pinar del Rio region with Sinopec and Cuba’s oil company CUPET. The Scarabeo 9 $750 million deep-sea drilling platform recently built in China for Saipem (subsidiary of Italian energy company ENI) is also operating in the same sector. CNPC, the other major Chinese oil company also runs explorations in the gulf of Mexico (Camarioca Norte 100 exploration well) and has launched a joint venture in 2011 with Cuven Petrol SA (Venezuelo-Cuban company) to invest in the Cienfuegos refinery. China’s investment is not, as in a most cases, a way to secure oil resources in Cuba, but an opportunity to establish itself as an alternative to Western powers and gain experience in offshore drilling and refining.

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In the past 10 years China has been modernising Cuba’s Soviet-era infrastructure, from transport to IT and communications. HuaWei and ZTE, two Chinese telecommunication equipment companies, are omnipresent in bringing up to date the Cuban internet infrastructure. HuaWei for example has been updating the very slow inland internet system and China  helped build Venezuela’s underwater ALBA broadband cable to Cuba in 2011. A number of deals were made in between both countries to modernise all types of  transport. From 2006 to 2008, 100 Chinese locomotives and 1000 Yutong buses were delivered. Indeed, after the end of the Soviet era, bus spare parts stopped being produced and Cuban bus mobility was reduced to 20-30%. Today though, bus transport has been restored and Cuban buses are sometimes even referred to as “Yutong” by the population.  In 2011, The China Harbor Engineering Company also started work on the Santiago port project. This is important for China as it thus gains the capacity to use Cuba as a pivot for its trade in Central and South America.

China has also invested in Cuba’s innovative medical field. In 2008, president Hu invested $70 million in health infrastructure to upgrade Cuban hospitals. Many joint ventures have also been created in Cuba or in China such as an ophthalmology hospital in Hefei. One major success in the domain is BPL (Biotech Pharmaceutical Co Ltd), established in 2000. The company is dedicated to monoclonal antibodies and vaccine research, and produced the first approved genetically engineered monoclonal antibody in 2007.  In 2011, Cuba’s MIC (Molecular Immunology Center) announced that the anti-lung cancer vaccine CimaVax EGF made by BPL would be conducting trials in China, thereby sealing the partnership between both countries in biotechnology.

Both countries have a different vision of communism. China has achieved growth while embracing open market and is now investing and imprinting Chinese-style market orientated reforms in Cuba (especially since Raul Castro has taken charge). Thus it has both a political and economical objective in Cuba: it is establishing itself as an alternative to the US (and showing this to the other Latin-american countries) and is securing an outpost in the Caribbean for trade. China-Cuba relationship is not based on socialist solidarity but on business.