US embassy cable - 05NASSAU1601

S E C R E T SECTION 01 OF 06 NASSAU 001601 
 
SIPDIS 
 
STATE FOR EAP/CM KAYE LEE, WHA/PCP JEFF BISCHOFF, WHA/EPSC 
LAWRENCE GUMBINER, WHA/CAR BILL BENT 
 
E.O. 12958: DECL: 08/29/2025 
TAGS: ECON, PREL, ETRD, ETTC, EINV, ENRG, EAGR, EFIN, PHUM, EMIN, CH, BF, China, ESENV 
SUBJECT: CHINESE ACTIVITIES IN THE BAHAMAS 
 
REF: SECSTATE 138041 
 
Classified By: Charge d'Affaires Brent Hardt, Reasons 1.4(b) and (d) 
 
1.  (C) SUMMARY: The Chinese presence in The Bahamas has been 
steadily expanding since the two countries established 
diplomatic relations in 1997.  The PRC and the GCOB have 
exchanged high-level delegations to discuss the full range of 
international political issues, explore economic 
opportunities and develop cultural programs.  Prime Minister 
Perry Christie paid an official visit to Beijing in August 
2004, when the Chinese government promised $30 million to 
build a 15,000-seat national sports stadium in The Bahamas. 
Hong Kong-based shipping giant Hutchison Whampoa has 
substantial holdings on the island of Grand Bahama, including 
Freeport Container Port, and has reportedly invested $1 
billion in The Bahamas in the last ten years.  More 
investment is planned.  The Bahamian press gives generally 
positive coverage to China and interprets the growing 
China-Bahamas relationship as a sign of The Bahamas' growing 
international engagement.  END SUMMARY. 
 
 
Investment: China's Presence on Grand Bahama 
-------------------------------------------- 
 
2.  (C) According to the Foreign Ministry, current PRC 
investment in The Bahamas exceeds $1 billion.  Existing and 
planned investments focus heavily on the shipping industry in 
Grand Bahama, particularly the holdings of Hong Kong-based 
shipping giant Hutchison Whampoa.  The PRC's investment arm, 
China International Trust and Investment Corporation (CITIC), 
has made multiple visits to The Bahamas and plans to build a 
logistics center here to provide Chinese investors with 
financial and regulatory assistance. 
 
3.  (C) Key Chinese direct investments in The Bahamas, 
present and planned, include: 
 
-- Hutchison Whampoa's subsidiary Hutchison Port Holdings 
owns 50 percent of Freeport Harbour Company, the Freeport 
Container Port, the Grand Bahama International Airport 
Company, and the Lucayan Harbour Cruise Facilities, among 
other investments.  The other 50 percent of those enterprises 
is owned by the Grand Bahama Port Authority, the 
quasi-governmental entity that oversees the free trade zone. 
Hutchison launched its development and expansion in Freeport 
in 1994; the total value of its current holdings is estimated 
to exceed $1 billion.  Freeport is the closest offshore port 
to the east coast of the U.S. 
 
--A CITIC subsidiary, CITIC Technologies, Inc., has announced 
plans to build a distribution center in Freeport for its 
electronic goods. 
 
--The China Ocean Shipping Company (COSCO) is owned by the 
PRC and is one of the world's largest shipping companies. 
COSCO has proposed expanding the dry dock ship repair 
facilities in Freeport.  The GCOB and COSCO are in 
negotiations for the acquisition of the property for the 
dry-dock facility. 
 
--According to the Foreign Ministry, COSCO has at least three 
of its ships registered under the Bahamian flag, but has 
formed a ship leasing company and plans to locally register 
an additional 10 to 40 ships. 
 
--Chinese company Jin De Li (the Jindeli Group) is in 
discussion with the GCOB to establish a subsidiary in The 
Bahamas to build a souvenir and handicraft factory.  Company 
representatives have visited The Bahamas, and formal 
proposals are under consideration. 
 
4.  (C) Portfolio investment.  Under Bahamian law, foreign 
entities may not own the securities listed on the small 
Bahamian stock market.  Post is unaware of any Chinese 
investments outside of productive sectors. 
 
5.  (C) Increase in Investment Support.  In addition to the 
planned Logistics Center, the PRC has given at least two 
small grants ($250,000) to the GCOB for various technical, 
agricultural, and handicraft projects at the request of the 
GCOB.  The PRC Ministry of Commerce maintains an "Economic 
and Commercial Counselor" for The Bahamas "to formulate and 
implement specific policies and reform plans of foreign trade 
and investment, and to work out and execute mid-term and 
long-term import & export planning and development 
strategies."  The Counselor's website is 
http://bf2.mofcom.gov.cn.  The PRC is also a member of the 
Caribbean Development Bank (CDB), subscribing 5.77% of CDB 
total ordinary capital.  The PRC has contributed $28 million 
to the Special Development Fund, which provides concessional 
loans to member countries. 
 
 
Chinese Assistance: Stadium Diplomacy 
------------------------------------- 
 
6.  (C) During an August 2004 state visit to Beijing by Prime 
Minister Christie, the PRC pledged $30 million to build a 
15,000-seat national sports stadium in Nassau.  A Chinese 
delegation visited Nassau in April 2005 to sign the final 
contracts and to present its design proposal.  Construction 
is expected to begin in early 2006. 
 
7.  (C) The Chinese Embassy, one of only four foreign 
embassies in Nassau, conveyed the PRC's cash donation of $1 
million to the Bahamian Government in 2004 to aid in the 
recovery from Hurricanes Frances and Jeanne. 
 
 
High-Level Political Exchanges 
------------------------------ 
 
8.  (C) There is consistent contact between Bahamian and 
Chinese Officials, who maintain active dialog on the full 
range of international issues.  Following is a list of 
bilateral meetings with known areas of discussion since 2003: 
 
-- In January 2003, Vice Premier Wu Yi visited The Bahamas as 
part of a 30 member trade and economic delegation, meeting 
with Governor General Dumont, PM Christie, and Deputy PM 
Pratt.  During the visit, the PRC presented the GCOB with a 
$250,000 grant for technical, agricultural and handicraft 
projects and thanked the GCOB for its support of the One 
China policy.  The GCOB said the talks involved international 
issues and the pursuit of additional PRC investment in The 
Bahamas, specifically noting discussions regarding "peace and 
security on the Korean peninsula."  During the visit, The 
Bahamas sought the PRC's support for its WTO accession. 
 
-- In April 2003, Vice-Minister of Communications Hong 
Shanxiang visited The Bahamas.  During the visit, the 
countries signed an ocean shipping agreement in which The 
Bahamas agreed to allow Chinese shipbuilders to join the 
Bahamas ship registry.  Bahamian officials refused to divulge 
additional information about the visits, saying only that 
discussions involved official Bahamian government business. 
 
-- In August 2003, FM Mitchell and Minister of Transportation 
Hanna-Martin traveled to Beijing.  The PRC pledged to support 
The Bahamas WTO accession and The Bahamas agreed to support 
the One China policy.  The PRC and the GCOB also signed a 
cultural cooperation agreement.  Minister Martin christened 
the first Chinese-built boat to join the Bahamas register 
under the ocean shipping agreement. 
 
-- During an October 2003 trip to the PRC, FM Mitchell 
reached agreement for a new Chinese embassy complex on prime 
ocean-front property east of downtown Nassau.  The new 
embassy, if constructed as planned, will be the most 
prominent and visible embassy in The Bahamas. 
 
--A PRC delegation led by Vice-Minister of Commerce Xiaoqi 
visited The Bahamas in April 2004 to discuss the possible 
exchange of PRC support for The Bahamas WTO accession in 
return for GCOB support for three WTO concessions for the 
PRC: transition products specific safeguard mechanisms, 
anti-dumping investigation method applied to non-economies, 
and social restrictive measures on textile trade. 
 
-- In August 2004, PM Christie, FM Mitchell and a delegation 
of cabinet members and other officials visited the PRC and 
met with President Hu Jintao, Premier Wen Jiabao, Foreign 
Minister Li Zhoaxing, Chinese National People's Committee 
Chair Wu Bangguo and business officials.  Wen Jaibao 
expressed his appreciation to the GCOB for adhering to the 
One China policy.  The PRC also agreed to support the GCOB in 
WTO negotiations in return for the GCOB's support of WTO 
concessions for the PRC.  The visit resulted in promises to 
build a $30 million stadium in The Bahamas, and promises of 
investment by CITIC, COSCO and Jin De Li.  During the visit, 
the GCOB agreed to close its consulate in Hong Kong and open 
an embassy in Beijing, and promised to hold "unswervingly" to 
the One China policy.  The PRC and the GCOB signed three 
agreements to promote economic and cultural cooperation: the 
stadium agreement, an agreement broadening maritime 
cooperation and an agreement on technical cooperation. 
 
-- In February 2005, the PRC hosted the China-Caribbean 
Economic & Trade Cooperation forum in Kingston.  At the 
forum, the GCOB signed a "Guiding Framework for Trade 
Cooperation" and a Memorandum of Understanding designating 
The Bahamas as an approved destination for Chinese tourists. 
 
 
Attitudes toward Chinese Presence 
--------------------------------- 
 
9.  (C) The GCOB's attitudes are extremely positive towards 
the PRC.  As one example, Foreign Minister Mitchell said that 
expanding ties with China would help "urge The Bahamas away 
from chronic dependence on the former colonial powers and 
bring her into an interdependent relationship with new and 
emerging powers."  Similarly, PM Christie has stated that, 
"China's development will make the world more balanced."  The 
official GCOB website says that the GCOB "cherishes" its 
relationship with the PRC. 
 
10.  (C) The Bahamian population is broadly favorable toward 
increased cultural ties between the PRC and The Bahamas. 
Newspaper articles, scholarship competitions and other PRC 
efforts have been well received.  Specific cultural and 
public outreach programs include athletic exchanges, dance 
and choir group visits, and the award of scholarships to 
Bahamian students.  At the time of Prime Minister Christie's 
August 2004 visit to China, a Nassau newspaper ran a series 
of articles on the history and culture of China and held an 
essay competition sponsored by the Chinese Embassy on the 
topic "What a Small Country Like the Bahamas Can Learn From 
China." 
 
 
Military-to-Military Contacts and Security Concerns 
--------------------------------------------- ------ 
 
11.  (S) There is no known military contact or assistance 
between the PRC and the small Royal Bahamas Defense Force, 
but a military presence is possible upon completion of the 
large new PRC embassy and potential increase in embassy 
staffing.  Other security concerns include possible 
intelligence activities based in Freeport as the PRC 
establishes a foothold approximately 55 miles from Florida. 
CITIC and Ka-Shing's planned expansion on Grand Bahama, 
combined with involvement in high-tech communications 
equipment, create concern regarding monitoring of US military 
training by Chinese intelligence from The Bahamas. 
Additional security concerns arise from illegal migration 
and/or trafficking of Chinese nationals through The Bahamas. 
Illegal migration is currently under investigation by U.S. 
Immigration and Customs Enforcement. 
 
 
Taiwan 
------ 
 
12.  (C) The Bahamas adheres to the One China policy and has 
drawn down its contacts with Taiwan since recognizing the PRC 
in 1997.  At the same time, Bahamian officials also publicly 
emphasize that The Bahamas does not support the use of force 
against Taiwan. 
 
 
Trade and Environment 
--------------------- 
 
13.  (C) Bahamian Imports from China.  According to the PRC 
General Administration of Customs and UN Commodity Trade 
Statistics (UN Comtrade), the Bahamas is the PRC's second 
largest trading partner in the English-speaking Caribbean. 
Bahamian imports of PRC goods totaled $62.86 million in 2002, 
$121.71 million in 2003 and $98.68 million in 2004. The chief 
imports are vessels, clothing, hats, shoes, toys and light 
industry products, with vessels typically more than 70 
percent of total imports.  Imports from Hong Kong were an 
additional $2.86 million in 2002, $1.86 million in 2003 and 
$1.8 million in 2004.  Imported items from Hong Kong include 
pearls, textiles, toys and plastics. 
 
--------------------------------------------- --- 
     Bahamian Imports from China by Year 
                 2002-2004 
--------------------------------------------- --- 
 
2002  Ships, boats      $49,107,720 78.1% 
      Mineral fuels, oils     $5,377,899  8.6% 
      Iron or steel     $3,301,632  5.3% 
      Other textiles    $1,315,319  2.5% 
      Machinery/appliances    $829,312          1.6% 
      Other       $2,930,310  5.5% 
      2002 TOTAL           $52,862,192    100.0% 
 
2003  Ships, boats      $78,589,760 64.6% 
      Mineral fuels, oils     $31,027,524 25.5% 
      Iron or steel     $6,929,573  5.7% 
      Other textiles    $1,413,126  1.2% 
      Apparel     $482,126          0.4% 
      Other commodities $3,275,460  2.7% 
      2003 TOTAL  $121,717,888      100.0% 
 
2004  Ships, boats      $71,603,283 72.6% 
      Iron or steel     $8,210,881  8.3% 
      Apparel           $6,430,706  6.5% 
      Mineral fuels, oils     $5,974,167  6.1% 
      Other textiles    $1,915,557  1.9% 
      Other commodities       $4,547,919  4.6% 
      2004 TOTAL           $98,682,513    100.0% 
 
--------------------------------------------- ---- 
 
14.  (C) Bahamian Exports to China.  UN Comtrade reports 
Bahamian exports to the PRC of $58,157 in 2002, $781,236 in 
2003 and $694,838 in 2004.  While exports are almost entirely 
in nickel, iron and steel, The Bahamas does not have the 
natural resources to satisfy the PRC's demand for energy, 
timber, steel, cement or other key industrial inputs. 
Exports to Hong Kong were insignificant. 
 
15.  (C) Low Potential Environmental Degradation Due to Low 
Volume.  There is no known environmental degradation as a 
result of Bahamian exports to the PRC.  Post is unaware of 
any Chinese efforts to address any environmental concerns. 
 
16.  (C) Post is unaware of any effort to create a 
preferential trade arrangement. 
 
 
The Bahamas Seeks Self-Interest and Non-U.S. Partner 
--------------------------------------------- ------- 
 
17.  (C) COMMENT: The China-Bahamas relationship fits within 
the broader regional pattern of expanding Chinese activity 
and success in its effort to supplant previous ties with 
Taiwan in much of the Caribbean.  However, the substantial 
Chinese shipping and port presence gives The Bahamas 
relationship an added strategic and economic importance. 
Planned expansion of the PRC embassy, the new national 
stadium and additional investment on Grand Bahama will help 
continue to strengthen the relationship.  The GCOB will 
continue to seek access to Chinese foreign currency reserves, 
lay a foundation for future Chinese tourism, and attempt to 
diversify an economy almost completely dependent upon the 
U.S.  Despite claims to the contrary, PRC goals in The 
Bahamas are unlikely to be primarily economic -- the Bahamian 
market is too small and the natural resources too few. 
Closer ties to The Bahamas will provide the PRC a dominant 
shipping and cargo foothold close to the U.S., and potential 
international support in a region of growing Chinese 
influence.  END COMMENT. 
HARDT