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EDITORIAL - Prepare for policy change in China

Published:Thursday | November 22, 2012 | 12:00 AM

TOMORROW, PRIME Minister Portia Simpson Miller is to preside at the resumption of a project to complete a critical and long-overdue bit of public infrastructure: a modern highway between the island's north and south coasts.

There is symbolic significance to the timing of the affair. This week marked the 40th anniversary of formal diplomatic relations between Jamaica and China, and the new highway, conceived as part of the Highway 2000 projects, and started by the French firm Bouygues, is being developed and financed by the Chinese state-owned enterprise, China Harbour Engineering Company (CHEC).

CHEC is spending US$600 million on the project for a 50-year right to operate the highway as a toll road. The company is also negotiating with the Jamaican Government to expand the Kingston Trans-shipment Port to accommodate the mega-ships that will traverse the Panama Canal when the canal's redevelopment is complete.

While CHEC is the largest, with the most compelling projects, it is not the only Chinese state enterprise to have invested in Jamaica in recent years. A Chinese company, for instance, now owns the major chunk of the island's sugar industry.

The flow of Chinese capital to Jamaica in recent years - as direct investment and bilateral loans - is not an accident. It is the result, largely, of the appreciation by China's leaders of Jamaica's consistently principled foreign policy, launched at a difficult time for China. It has helped, too, that Jamaica is the natural political leader of the Caribbean Community (CARICOM) and is active and respected in many global institutions.

The mutual respect between Kingston and Beijing, and the benefits that flow therefrom, should continue into the medium term. It is, nonetheless, important that Jamaica follows closely the political and economic realignments taking place in China and adjust its diplomatic/ economic strategies accordingly.

Greater policy control

In the past week, the once-in-a-decade transfer of power began in China. Xi Jingping became the head of the Communist Party and putative president of the country. That change in leadership is coinciding with debate on how to shift China's economy from its dependence on exports for its growth to greater reliance on domestic demand, over which Beijing can have greater policy control.

While private/non-public sector firms account for 60 per cent of China's GDP, 70 per cent of its jobs and half of its taxes, they are, bluntly, discriminated against in access to credit and other forms of market intermediation. Chinese officials seem to agree that, in the context of the global environment, the existing situation is untenable.

In his speech at the opening of the party congress, outgoing president Hu Jintoa called for a "speeding up of the development of private financial institutions" and for "economic entities, under all forms of ownership (to) have equal access to factors of production ... (to) compete on a level playing field". That essential message was repeated in different forms by other leaders.

It will take some time before it is clear if these reforms are taking hold. But the path, for now, seems clear. In which case, the influence and power of China's state enterprises will diminish, as perhaps will be the capacity of the state to dictate where and how firms use their resources.

It is important for Jamaica to understand this potentially new dynamic and prepare for it.

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