Specific Features of Chinese Economic Expansion in Central America and the Caribbean

Barbados may also become a tasty morsel for China and not only because of popular tourist resorts. Country is actively selling its agricultural production namely sugar and is known as an offshore territory. Most of the Caribbean countries including Barbados are tax havens what attracts entrepreneurs. Chinese actively open restaurants and shops there. From 2005 to 2013 the amount of Chinese FDI to the region doubled, in 2013 Barbados received $5 million. Bernal R. The Growing Economic Presence of China in the Caribbean // The Caribbean Challenges after the Global crisis, 2011 In December 2015 China Ex-Im Bank granted $170M on Sam Lord's Castle Hotel rehabilitation China-Latin America Finance Database // The Dialogue, 2018. In 2017 countries made a visa waiver program which is aimed at attracting Chinese tourists. From March 2017 Chinese citizens don't need an entry visa to Barbados and may travel there with their domestic passports.

Speaking about Chinese interests in Bahamas tourism occupies the first place. The massive Baha Mar Bahama resort, valued at $2.4 billion, was built by the China Communications Construction Company. Ward J. Making Sense of China's Caribbean Policy // China Brief Volume17,2017 Another big project connected to tourist sphere is Nassau airport gateway. In 2011 China Ex-Im Bank granted $58M for fulfilling it. China-Latin America Finance Database//The Dialogue,2018 For improving Bahamas economy this bank also invested $41M to North Abaco project Ibid which would make the Bahamian Port easier to access and its capacity bigger. Both countries also discussed military cooperation and cultural exchanges.

Another recipient of Chinese FDI is Grenada. Countries established diplomatic relations in 1985 but later on Grenada switched its support to Taiwan. In 2005 diplomatic relations were resumed and from 2006 Grenada has enjoyed Chinese investments. In 2013 Chinese side made a present for Grenadian people - agricultural equipment in the amount of $1.5M. Grenada gets 1.5m in Agricultural Equipment form PRC // the Official Website of the Government of Grenada, 2013 Chinese also are building houses and infrastructure there. In 2016 The Grenada National Athletic Stadium sponsored by Chinese Government was opened to the public.

Chinese often provide financial help aimed at elimination of the consequences of natural disaster which occurred in Grenada quite often. Both sides also actively develop cooperation in education and cultural exchanges. Grenada minister for communications made the following comment upon bilateral cooperation in these spheres: “Mention must be made of the number of Grenadians that have been afforded the opportunity to pursue the graduate and post graduate studies in China through the Chinese Government Programme as well as the hundreds of Grenadians who have participated in short term training”. Grenada Re-Commits to one China Policy//the Official Website of the Government of Grenada, 2017 In December 2017 it was announced that China will help Grenada to write and adopt a blueprint for economic development. The blueprint supposes a “Chinese- style” development plan with multibillion financial help. If Grenadian authorities accept it, the small Caribbean nation will become one more pillar of Chinese presence in the region.

One more small Caribbean nation to support China is Dominica. It jointed “one China” camp in 2004 and since than already received more than 32 million dollars. Bernal R. The Growing Economic Presence of China in the Caribbean// The Caribbean Challenges after the Global crisis, 2011 For a small island these investments have made a big deal. A lot of infrastructural projects and cultural programs were held due to this money. However, local population doesn't like Chinese as their authorities do. They hint on secret character of the bilateral relations and lack of transparency. Douglas S. Veil of secrecy on China/Dominica relationship must be lifted//Dominica News Online, 2014

There is little difference in the bilateral relations between the PRC and the Antigua and Barbuda. The relationships between two nations were established in 1983 almost right after the country became independent. Country receives FDI regally as other neighboring states.

The rest countries of the region, namely: Honduras, Nicaragua, Belize, Guatemala, El Salvador, Puerto Rico, Dominican Republic, St. Vincent and the Grenadines, Saint Kitts and Nevis, Haiti and St. Lucia don't have official diplomatic relations with People's Republic of China. However, one cannot say that those countries are totally being ignored. Some of them receive Chinese FDI in much smaller scale; some of them are popular among independent Chinese entrepreneurs. Such countries like Honduras, Nicaragua and El Salvador are popular among Chinese companies. Others like Haiti, Belize, St. Lucia, Dominican Republic etc. have little to show in terms of Chinese investments which can be explained by their participation in the “Taiwan” camp.

Honduras has maintained official relations with the Republic of China on Taiwan since 1965. However, for the last 5-6 years there had been lots of talks that Honduras may join “One China” Camp. Visits of some Honduran officials to the PRC gave rise for speculations on this topic. And those worries have a right to exist because from 2013 Sinohydro leaning on the loan of the Industrial and Commercial Bank of China is in charge of constructing big and high-capacity dams Patuca 3. We will discuss Chinese projects in Honduras in more details in Chapter 2 of present research.

Honduras is not the only one destination for Sinohydro. The company is in charge of building Chalillo Dam in Belize. Despite a rather cold welcome in Beijing country has been receiving small FDI's from the mainland - around half a million dollars for the period from 2005 to 2013. Bernal R. The Growing Economic Presence of China in the Caribbean // The Caribbean Challenges after the Global crisis, 2011

In contrast to Belize, which did not pay much interest in “making friends” with mainland China, Nicaragua was ready to jump over to Beijing. In 2012 the HKND Group Company from Hong Kong started to build Nicaragua Canal. That time one would likely to think that establishment of diplomatic relations is on the way. But that was not the case. Now this all looks more like a dream than a real thing. Construction suddenly stopped and the president of Nicaragua Daniel Ortega does not talk about “Chinese friends” anymore. In January 2017 Taiwanese president Tsai has visited Nicaragua as well as its neighbors El Salvador and Honduras to strengthen bilateral ties. She even was present on the inauguration of Daniel Ortega and that speaks for itself. Was it a loss for Beijing it is hard to say. To some extant Beijing itself may be guilty for postponing such a huge infrastructural project. But it had its own reasons to do so. We may only guess was it a crucial for establishing official diplomatic relations with the PRC or not.

Speaking about Guatemala, it shows no signs of intention to switch partners. In 2014 Guatemalan authorities mentioned that “China now threatens 47% of exports from Guatemala to the United States." Modernization of Guatemala - China Relationship//Central America Data, 2014 There are other cases that may prove that just now we cannot talk about Chinese-Guatemalan relations. For example, in 2017 it has requested Taiwanese government to lend $650 billion for building a highway to Atlantic Ocean. Prasad B. A Latin American Battle: China vs. Taiwan// the Diplomat, 2017

The same could be said about El Salvador. So far there has been no signs from both sides for changing the status of relationships. El Salvador is now under the five-year, $50 million cooperation agreement which it signed with Taiwan in 2014. Alper A. China, El Salvador ties unchanged despite Taiwan visit-El Salvador// Reuters, 2016

Among Caribbean nations the Dominican Republic, Haiti, St. Lucia and St. Vincent and the Grenadines do not feel interested in Beijing also but this feeling is not reciprocal. According to some sources Chinese has been proposing some projects to these countries Dominican Republic-China ties? Taiwan voices dire warning//Dominican Today, 2017. But it seems unlikely that something would be changed in the nearest future. One country - St. Lucia is standing out from this list because it was once a supporter of “one China” idea. It supported Taiwan first, then switched to the PRC for 10 years and then got back to the Republic of China. To its question: “Can we recognize both?” the answer was strict and severe - Absolutely not. For St. Lucia both partners look attractive, both lend money, both can invest and its looks like the state don't care much whom to support. Everything came down to the simple game - who gives more money wins.

To provide vivid understanding of the Chinese interests in the Central America and the Caribbean we propose the following tables:

Table 1

PRC's Possible Interests in Central American and Caribbean Region, by country

Table 2

PRC's Possible Interests in Central American Region, by country

Main source: the Global EDGE China: Trade Statistics//The Global Edge, 017 and the Observatory of Economic Complexity China: The Observatory of Economic Complexity 2017// Massachusetts Institute of Technology

Summing up all the results one may conclude that there are a wide range of interests which China may have in the region. It starts from agricultural production and ends up with tourism. But most of the interests have one common denominator - geographical location. Almost all those countries are important transportation hubs with an access to the see and all other spheres come mostly as a bonus but not the main reason. There can be no other reason why China so suddenly wanted to become friends with “Banana” republics. One also may see that diplomatic recognition did not play crucial role in trade: a lot of countries which support Taiwan trade with China, but it do matters in terms of FDI and Chinese state projects.

Interests of China being present in the region are understandable but why Central American and Caribbean countries are interested in cooperation with China? There could be several possible reasons motivating them. First of all, in the name of the PRC they may find a strong supporter in the international arena. China may help them providing support in forums and organizations. It creates special programs for the governments of developing states helping to strengthen competitive spheres of economics. Secondly, China could save them from rivals if there are any, help them to deal with conflicts both inner and external. The PRC also can provide financial help, give loans, train locals. All of it made advantages for the countries of this region obvious.

As one may see from the facts mentioned above, in terms of enticing new allies China has a huge scope of work ahead. From 20 independent states in this region only 10 countries support the PRC. In 2013-2014 we witnessed a rather big drive in Chinese wish to set aside in the region. Amount of FDI and projects in Central America and in the Caribbean countries rose up. Unfortunately, those intensions did not last long. Comparing the situation in the past with nowadays we may see that enthusiasm has decreased but it is still there. Many of those plans of 2010-2015 are not relevant anymore (Nicaragua Canal), others are still important and active up to now (Patuca 3) but all in all the region has little alternative to achieve economic growth without Chinese help.

It is clear why some countries of the region welcome the PRC but the reasons of China remained a kind of mystery. Logic says that ambitions of becoming more and more powerful are moving China but Chinese officials have other explanations. China's ambassador to Barbados Wei Qiang explained that China has no interest in competing with other world powers in the Caribbean. Rather, it sees the islands as fellow developing countries and potential partners. “The Caribbean countries form an important part of the developing countries world, so to speak. One pillar of China's foreign policy is to increase the unity with fellow developing countries. In that sense, the Caribbean is a fundamental part of that strategy. The warming relationship has benefited Chinese companies, but “these are small markets and small countries and we don't have huge amounts of trade in terms of volume. From the point of view of diversification of our foreign trade partners, we think all these markets are worth working on as far as we can”

Some countries which followed the pass of friendship with the PRC have already benefited from it and praise their “Big brother”. China tries to promote a good image not only through business and infrastructure. It made considerable help in building schools, stadiums, universities and hospitals both in Central America and in the Caribbean. Entering a new school an ordinary child would think that good people from the far way Asia helped a lot and they are heroes rather than bad persons. Thus, a good image will be penetrated from childhood.

But the conclusion China is a “blessing” is not the only one. Local people keep complaining about domination of Chinese goods, their quality, etc. but we must understand that locals not always could be objective as also Chinese proposals and estimated benefits are not always true. In order to avoid bias we should pay more attention to the real facts and records rather than words. We could not put blind trust in locals who don't have a reputation of diligent workers as so we cannot do so with Chinese who took upon itself some many projects all across the Latin America and part of them remained in limbo. Thus, we should not exaggerate the positions of both.

1.2 Diplomatic Struggle between People's Republic of China and Taiwan in the Central American and Caribbean Region

Taiwan and China exist separately for 69 years already. This is a long period of time which influenced on mentality and created certain stereotypes about each other. There are several opinions on the topic whether they still belong to the same culture or not. We believe they do, but the gap between them appeared not in 1949 with the arrival of Kuomintang party and its leader Chiang Kai-shek but much earlier - during the Japanese rule.

Being an island Taiwan already has a predisposition to be isolated from the rest of the world. Before the migration of Chinese settlers who traveled mostly from the nearest Fujian and Zhejiang provinces the island was populated by local tribes. After the first Sino-Japanese war (1894-1895) the island was handed over to Japan and became its province Formosa. This influenced a lot on Taiwanese culture and economic development. Despite the fact that Japanese were harsh with their colonies they built plants and infrastructure there trying to develop captured lands. Taiwan was no exception. Till the time Kuomintang came to the island local population was well-educated especially in comparison with mainlanders. The island had developed infrastructure, railroads and plants. In 1949 Chiang Kai-shek came to the island with the rest of his supporters barely without any money. They had some treasures from Beijing Summer Palace but that definitely would not be enough for ruling the state. Leaning on American Aid, which at first was provided in big scales, they created a new state which later on became one of Asian tigers.

Meanwhile, Communists in China built their state based on completely opposite ideas. The distance between them became even bigger. Taipei did not recognize Beijing and Beijing considered Taiwan one of its provinces. However, political difficulties never stopped usual people from communications and doing business with each other. So far both sides has not reached a common agreement. Relationships between them are still strained: sometimes the situation becomes better, sometimes worth. Recently it was announced that Taiwanese government restricted to increase the number of flights to the island because of Chinese New Year and a lot of passengers stuck in Mainland with no opportunity to celebrate this important event with their families.

Apart from bilateral hassles both sides are “fighting” on the international arena trying to find allies abroad. Till 1971 Taiwan was a representative of China in the United Nations. Later on this place was occupied by the PRC. When the resistance between two states only started Taiwan gained more support from the world audience than the PRC did. In 1969 71 country supported the ROC against 48 recognizing the PRC. But for 50 years situation changed to the opposite. In 2017 only 20 states recognized Taiwan against 175 countries support the PRC.

From the first sight, it seems that international recognition is not an essential factor for prosperity and normal life. For example a lot of western countries did not recognize USSR till 1970-s and it did not influence the state much. But the things are a bit different when we speak about small states. In their case recognition became a manipulator, a tool for controlling them. For the PRC recognition was preferable but not crucial. The same with USSR a lot of countries did not recognize it for decades but for Taiwan it was and is very important. This importance can be explained by the fear of forced integration with China. If no one would recognize Taiwan, Mainland China may attempt to annex the island and there would be no public response and outcry, no one would protect it. But China cannot do it now because otherwise Taiwanese allies could make protests and raise attention to the issue. Thus, the more allies the ROC will have the better it will be for keeping independence. The similar logic is pushing the PRC for gaining allies - the more supporters China would get the less countries could recognize Taiwan. And if there would be no countries to recognize the island, it will mean a huge victory for the PRC.

Both states are fighting for every single country's support; they are trying to recruit as much allies as possible. And would it be a small or a big state is not crucial. Taiwan has already lost 51 allies for the last 50 years and now it is trying hard to keep the last 20 close to it. However, these attempts are not always successful because in 2017 it has lost Panama which is a big issue in this diplomatic struggle.

Speaking about Central American and the Caribbean region, Taiwan has a lot of supporters there. One may even say that this region supports it the most. But we may assume that this situation will be slowly changing. We may compare the region under discussion with Africa. Taiwan used to have some supporters there but now only two of them left: Burkina Faso and Swaziland. Answering the question why do African countries switched to the PRC one may say that it has nothing to do with loyalty or wish to help - it is all about the money. Both the PRC and Taiwan provide policy of so-called “check- book” diplomacy. They provide a lot of financial help, credits and investment to those who choses their “camp”. Thus the one who gives more money wins. It is an obvious fact that Taiwan could not fight with the PRC on equal terms - even their geographical size is not comparable not to speak about human and natural resources. But still Taiwan does not give up and fight.

Small and poor countries benefit a lot from this battle. They can ask for money both sides and just wait for who will respond earlier. But the other question-are those allies reliable and loyal? The answer may be found in African statistic. Political scientist from Western Kentucky University Timothy S. Rich wrote about the topic: This instability is apparent when seeing how many countries have switched recognition multiple times. The most extreme examples, Senegal and Central African Republic, have switched five times since both originally forging diplomatic ties with the ROC in 1962. Ten other countries--Benin, Burkina Faso, Chad, the Gambia, Lesotho, Liberia, Nauru, Nicaragua, Niger, and St. Lucia--switched diplomatic recognition more than once, eight of them at least once in the last fifteen years. Rich T. Status for Sale: Taiwan and the Competition for Diplomatic Recognition// Issues & Studies 45, no. 4,2009 P.170 Thus, support from these countries does not necessarily mean commitment. They are not interesting in resolving the issue of two Chinas, they are not interested why this battle started - all they need financial bonuses for themselves.

Speaking about countries of Central America and the Caribbean, historically the only country supporting the PRC in this region was Cuba. But slowly this situation changed and now half of the countries located there recognizes Beijing. There are 10 states which support the ROC. Those are Belize, El Salvador, Guatemala, Honduras, Nicaragua, Dominican Republic, Haiti, Saint Kitts and Nevis, Saint Lucia and Saint Vincent and the Grenadines. Since the beginning of this century Costa Rica, Dominica and Panama have left Taiwanese camp. In terms of quantity both sides reached parity in the battle. But are the positions equal in terms of quality?

So far none of the countries recognizing Taiwan expressed clear wish to change sides. They receive regular aid and till now satisfied with that. With aid packages equaling a fifth of the Haitian government's annual budget, it should come as no surprise then when a Haitian cabinet minister stated that Taiwan does not “give us any reason to look after continental China” Rich T. Status for Sale: Taiwan and the Competition for Diplomatic Recognition// Issues & Studies 45, no. 4,2009 P.172 In order to put some clarity into the problem and explain why countries of the region still support Taiwan we propose the following table.

Table 3

Taiwanese projects in Central America and Caribbean region

The table is compiled upon the main source - Projects in Central America and Caribbean Projects in Central America and Caribbean//Taiwan International Cooperation and Development Fund

Table 4

PRC projects in Central America and Caribbean in countries with no official diplomatic ties

Judging by the table 3 and 4 we may see that amount of financial help and investments to those 10 countries which remained committed to Taiwan is not equal which is understandable because official organizations and governmental banks from the PRC should not invest in countries which recognize Taiwan. However, if the PRC government sees a potential (Dominican Republic case mentioned in the table 4), it will make an exception. Private investments and projects also exist. Unfortunately it is hard to obtain reliable data on how much money companies from Mainland China spend to these countries. But one still can make conclusions based on projects descriptions and issues connected to the PRC discussed in press.

Speaking about Taiwanese help to its allies one can call it enormous. It is trying hard to save the rest countries in its camp. Taiwan makes donations of electronic equipment, teaches local staff and brings doctors. Best students from these countries receive grants for further education both in their homeland and in Taiwan.

The region is seismically active and suffers from earthquakes and hurricanes. Both Taiwan and China actively provide financial help to ruined areas. However, the case with the former president of El Salvador Francisco Flores who pocketed a big sum of money from this donation proves us that in condition of weak political institutions money not always reaches the target.

Taiwanese help is provided through several channels both official and non-official. Official aid is provided by the Government, embassies, banks and funds. A big role in Taiwanese overseas issues plays International Cooperation and Development Fund. It annually finances hundreds of projects in the Caribbean and Central American region. From its foundation in 1996 it finished more than 10 projects in every ally country in the region and is currently caring about 25 other projects. The spheres where ICDF provide assistance is varied but mostly they are connected with life-saving industries, food production, water supply, electricity and infrastructure. A lot of projects aimed at development of agriculture. Taiwanese government tries to make a free space in the Taiwanese market for production from friendly countries; it tries to make these products competitive in the local and international markets and improve their quality.

Statistics on Chinese aid to those countries which recognize Taiwan is misty and hard to obtain. A lot of sources contradict to each other. One of the most popular topics to discuss in this sphere are possible bribes, secret visits of officials to Beijing, domination of Chinese migrants and their business - mostly restaurants or food shops. Huge projects like Patuca 3 or Nicaragua Canal are widely covered by press but still contain a lot of mystery and uncertainties.

Analyzing Taiwanese support country by country one may say that Taiwan is an essential partner for these countries. However, some of them are thinking over switching the allies. This was the case with Saint Lucia in 2007 when new elected authorities recognize the PRC instead of the ROC and the recent case with Panama which quickly refuse from long-standing relations with Taiwan. The logical question there would be why some countries remain loyal to Taipei while others change their support to Beijing? The answer is dictated by the country's interests. All countries under discussion are small states. Being a small state it is very important to make your policy well-thought and clear. We may suppose that in terms of short-term interests it is much more profitable to remain with Taipei. Both sides are paying money but Taiwan seems to be more generous than Mainland China. From this perspective bird in the hand is worth two in the bush. But form the long-term perspective supporting the PRC is more beneficial. China is an extremely important actor of international relations who can support its allies in case of conflicts and protect their rights in the international arena. But here another problem may arise - Beijing could be very happy to meet a new ally at first but can forget about it later. So far there were no widely known cases of such tendentious and everyone who left Taiwan in favor of Beijing did not compline but there is no guarantee that such situation could not arise in future. Thus the most urgent question on the topic as a whole is “Who is likely to be the next country to establish diplomatic ties with Beijing?” To answer this question one would need to analyze the current situation which takes place in the region.

We may divide all 10 countries which remained loyal to Taipei in three categories: states which strictly refuse Beijing and reaffirm their position recently, those which are loyal but were caught in some moves towards other side and those which still have diplomatic relations with Taiwan but their relations could not be called cloudless.

Table 5

Taiwanese diplomatic allies in Central America and Caribbean region on their possibility to change their position in favor of Beijing

The first group namely Haiti, Saint Vincent and the Grenadines, Saint Kitts and Nevis, Guatemala and Belize did not show any signs of wish to switch ally neither in the past nor in the future. All of them are happy with the things as they are.

Another group represents countries which are still loyal to Taipei but have committed some actions in the past and present which may question their loyalty. Those are El Salvador, Nicaragua and Saint Lucia. The last two countries have already “betrayed” Taipei in favor of Beijing: Nicaragua in 1985 and St. Lucia in 1997 which makes it possible that situation could repeat any moment.

The last group unites two countries: Honduras and Dominican Republic. The first country is a home for two big Chinese projects Patuca 3 and Aqua Zarca financed by Chinese banks and headed by Sinohydro. Rumors about Honduras joining Beijing in this diplomatic battle is being warn up by the visits of businessmen and officials from Honduras to the PRC and vice-versa.

The case with Dominican Republic is similar to Honduras and the wish to change partners became clearer recent days. Concern about whether the Dominican Republic will sever formal diplomatic ties with Taiwan arose after Dominican Republic Foreign Minister Miguel Vargas published a photo of him shaking hands with his Chinese counterpart during the 2017 United Nations General Assembly. Teng P. Taiwan keeps an eye on relations with Dominican Republic: Foreign Minister // Taiwan News, 2017 Another fact that may point on possible redeployment is that when Taiwanese Foreign Minister Li Ta-Wei visited the state in July 2017 neither president nor Minister of Foreign Affairs of the Dominican Republic met with him. Famous Dominican politician fueled the problem: “I think we should thank Taiwan for the old friendly relationship, but the country cannot live while turning its back to the reality that the Taiwanese themselves have been admitting." Dominican Republic politician urges diplomatic ties with China, not Taiwan // Agencia EFE, 2017

Taiwan and China organized different bodies and committees to cooperate with their Central American and Caribbean states. First state opened Taiwan External Trade Development council which regularly holds meetings and forums in Central America and Caribbean. Another body -Taiwan International Cooperation and Development Fund is in charge of more than 100 projects in this region. Under its framework Taiwan Youth Overseas Service, Taiwan ICDF Overseas Volunteers Program, Overseas Professional Mandarin Teaching Project and many other projects function. As for the PRC, it actively participates in CELAC-China forum and initiates other meetings such trade fairs, business meetings to encourage Chinese entrepreneurs to start business in the region.

One may see that both the ROC and the PRC provide their check-book diplomacy in a similar way and main tool there is money. But both rivals use them in a bit different way. Beijing targets more infrastructure, energy supply, mineral resources extraction. As for Taiwan, it focuses more on social welfare and agriculture. Both countries do not scorn to bribe locals and their intentions are very serious.

If we try to predict who can win this battle most would suggest that the PRC will be a winner: most countries of Latin American region already support it, it has friendly relations with all world superpowers, it is powerful, influential, rich and generous with its allies. All of these factors made it hard to compete with this state. But Taiwan also has some advantages: it came to the region earlier; it provides huge economic help and asks little in return and some countries may simply fear Beijing would flood their market with cheap goods and ruin their economy if they recognize it. Thus both countries are attractive for the small developing states of this region and this battle is very profitable for them - the longer Taipei and Beijing fight, the more and more they give.

The fact that states of the region are not interested in resolving the question is understandable. But one sees no wish to stop the battle from the ROC and the PRC either. They don't make any sharp moves; sometimes try to act secretly. The aim of Beijing in this battle is slowly but persistently, one by one to remove countries from Taiwan. Taiwan in its turn perceives the goal to save as many allies as possible and gain new one. Taiwanese authorities must gather support from local politicians regardless their political course. It has been a problem for Taiwan in the past - new party comes to power and change its loyalty towards Beijing (St. Lucia case)

We may assume that in short-term perspective both sides of the conflict have equal positions. But in future Taiwan may lose some countries. We suppose this diplomatic battle would not be finished in recent 10 years because both sides are intended to fight till the end.

The question of dual recognition is also very relevant in discussions about diplomatic confrontation. The PRC officials have a very precise and clear answer for it which is “dual recognition is absolutely impossible”. At first Taiwan also shared the same opinion but later it slowly and gradually shifted from it. Because in condition when allies turn against it(Panama 2017, Costa Rica 2007) which means that less countries recognize it as a representative of both Chinas, it will be much more easier to promote idea of two independent states. Judging by the strict Beijing refusal one may guess that double recognition would not be possible in the nearest future. The PRC will never give a way to it.

The parity in the battle would not last long. Now it is already 10 against 10 and according to the last tendencies two other countries may join the other camp. All in all, any loss and win in this diplomatic battle would mean a lot for both parties. From the first glance both countries did not have much in return from it but it is not true. The whole battle is a matter of principle and extremely important for both players. The price of defeat is a loss of independence.

1.3 China as Possible Model for Developing Countries in Central America and the Caribbean

At the beginning of 20^th century hardly anyone could imagine that Asian countries could compete with Western one head-to-head. But learning on the mistakes and victories of the West, Asian states manage to find their own way of development. The East which used to be oriented on traditions became a bright example of “rag to richest stories” and proved it has talent and ambitions.

In this part of our research we would try to think over is it possible to apply Asian-style developmental model to the countries of Central America and Caribbean. We would analyze several theories which could predict destiny of the states under discussion and explain their attraction to the PRC.

The first country which may be interesting for our research is Japan. It was the first Asian country which tried to follow the path and repeat western success. From the end of 19^th century Japan was interested in German model of development. It made a rather rapid transition towards industrial economy applying western technologies and patterns. To 1925 Japan already achieved remarkable results. But it has lost a lot because of militarized intentions. After the defeat in the Second World War it faced new challenges of poverty and blame. In 1946 it suffered from big inflation and unemployment. Thanks to USA financial help and efficient leadership Japan manage to recover very quickly. Successful Land Reform made a base for efficient development of industry and production of goods. “Dodge line” stopped inflation; new constitution promoted democratization; big conglomerates - zaibatsu and keiretsu made their contributions in future economic miracle.

A big role in Japanese success played competent leadership and strong motivation. Japanese government divided its measures in two groups: industrial rationalization policy and industrial structure policy. Kasahara S.The Asian Developmental State and the Flying Geese Paradigm//UN Conference on Trade and Development, Discussion Paper.-2013 First group included regulations towards optimization of concrete spheres aimed at making them more efficient. The second one determined which sectors should be developed and which should not.

From mid-1950 till early 1970 Japan was under its “High Growth Era”. This economic drive was dictated by several elements:

· Government and private corporations worked in partnership and agreed to develop certain sectors (electronics, automobiles, shipbuilding etc.);

· Major banks actively lend money to Zaibatsu and Keiretsu;

· Government tried to free up capital to invest in profitable and attractive sectors;

· Emphasis was made on quality, job security and innovations;

· Massive consumer demand, promotion of high income redistribution;

· Large private investments. Shaposhnikov S. Entrepreneurship and Business in Asia- Japan, Lecture 3, 2016 P.49

As a result of all these measures by 1970s Japan became a third largest economy in the world. It sounds incredible but from weak WWII loser it became an example of success, a leading expert in innovations and a paragon of new technologies. Japan became a model for other East Asian Countries which showed other Asian states a way to the top.

Famous Japanese economist Kaname Akamatsu dedicated his life to study of Japanese economic development and created a “Flying Geese” concept which explains how developing countries can catch up with developed one. According to it at first, country develops production of one item (following the sequence of M-P-E where M is import, P - production and E export), then it diversifies production and tries to move from simple to more advanced products and finally it relocates the production to the less developed countries. To put it in other words “One economy, like the first goose in a V-shaped formation, can lead other economies toward industrialization, passing older technologies down to the followers as its own incomes rise and it moves into newer technologies.” The Flying Geese Model//The New York Times, 2010 Despite the fact that Akamatsu created his model in 1930 he managed to predict future of some Asian countries which partly followed his ideas. After his death his theory was completed with new ideas which also focused on gradual development of domestic industries, import substitution and export promotion.

When one takes a look at Geese cluster, he clearly sees the first one which guides the other. In case of Asia, it was Japan but who could occupy this place if we apply this theory to the Central America and Caribbean region? So far there has been no clear leader there. All countries plus or minus are in the same conditions. One may assume that Mexico, if everything will be going well, can be a leader but we consider this country a special case which has less to do with small agriculture-dominated countries of the Central America. One more assumption is to see Panama as a “chief of a tribe” based on the fact that it owns Panama Canal which is the world important water-way. But so far besides it, this state does not have any other reasons to become a guide for the rest that's why this assumption is seemed more like a myth.

The same problem we see in the Caribbean - economic conditions are pretty the same but we see no unity neither in politics nor in cooperation. States are odd with no sign for possible leader. The famous slogan “United we stand, divided we fall” matches the situation perfectly. If countries cooperate with each other more actively, together they would become a much more powerful union.

Judging by economic indicators we may assume that Dominican Republic has pretty good chances to become “the first geese” in the cluster. But would other countries accept it? We doubt that. For example Cuba represents totally different political and economic structure and hardly ever agrees on “bloody capitalist” guiding the region.

In this situation we may propose one more daring guess - if there is no leader from this region maybe one may propose a candidate from the outside world? Like China, for example. Of course a leading goose from other region does not fit the original concept but times are changing and maybe this assumption is relevant. Following this thought one may say that China could pass its method and technologies to the rest of the cluster to promote their development. Thus this model could be applied to the new developing regions helping them to catch up with the rest of the world.

Another point in this discussion will be “Can Japanese economic miracle be repeated somewhere outside of Asia”? There could be no single answer to this question. If one looks at it optimistically, he or she will probably say “Why not? Let' provide Central American and Caribbean countries financial help, tell them how to organize regulations and spending and the deal is done. But actually things are not as simple as they may seem to be. First of all, it is important to mention that the amount of financial aim provided to Japan was huge and USA will never do the same with the counties under discussion. Japan caught “the place and the moment”. End of the Second World War and the beginning of the Cold War - it was a good starting point. There could be no another situation like that. Secondly, Japan already has a base for future development: it used to have a good advanced industry before the war; it has a big bunch of educated work force; it has “culture of labor” and strong motivation to recover. Thus if one would like to start something similar with Japanese model of development he or she should start from the very base - developing dedication to work, wish to make your life better, commitment to quality and safety, motivation for self-improvement. So far workers living in these developing countries could not represent at list some of these features. The situation now is - if ...