An overview of the Chinese Renminbi in the Caribbean-Opportunities for Trade Aid and Investment presented by Dr. Stephan Maier, Economist, CDB on July 10, 2017 at a conference discussing the use of the Chinese Renminbi in the Caribbean held at the Hilton Barbados Resort.

1. Chinese Renminbi in the
Caribbean – Opportunities for
Trade, Aid and Investment
Dr. Stephan Maier, Economist, Caribbean
Development Bank
Hilton Hotel Barbados
10 July 2017

2. AGENDA
Background on China and the Caribbean
Potential benefits from use of RMB
Recent macro-economic developments
limiting use of RMB
2

3. A LITTLE
BIT OF
BACKGROUND
• Historically China has engaged
relatively little with the Region, but this
changed with the “Going out” policy in
1999
• The first Chinese official policy paper
on LAC in 2008 has brought
engagement to another level
3

4. GOODS
TRADE
ROSE
STRONGLY
• Trade increases
• Still, effects on
employment levels,
wage levels, income
distribution in BMCs
need monitoring
• Reduced income
inequality for Central
and Southern
American
commodities
exporters in 2000s
(IDB, 2017)
USD mn
CDB
BMCs
Exports
CDB
BMCs
Imports
2000 9 158
2014 168 1,563
Annual
change
22.9% 17.8%
Source: UN COMTRADE (2017)
4

5. FDI
LEVELS
STILL
MODEST
• FDIs rose tenfold
from 2005,
remaining still low
however
• Main sectors
targeted were
agriculture, tourism,
mining, energy
• Are Infrastructure,
ICT and renewable
energy the future?
USD mn 2005 2013
Guyana 6 225
Suriname 13 112
Cuba 34 111
Jamaica 0 80
Caribbean 81 605
Source: IDB (2016)
5

6. WHAT’S IN
STORE
FOR THE
FUTURE?
• Geopolitical picture: “US retreat, China
lead”. Example: US has abandoned TPP*
and China is pushing RCEP^
• Caribbean targets services sector growth:
tourism, ICT, financial services
• Tourism: Miami-Dade investor trip to
China, Jamaica at Shanghai trade show
6
* Trans-Pacific Partnership
^ Regional Comprehensive Economic Partnership

7. TRADE
FACILITATION
WITH RMB
• Chinese exporters could give
discounts of up to 3% (PBC survey)
• Small states are very open economies,
should benefit in goods and services
trade from RMB, if it becomes a
success
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8. ACCESS
TO
GLOBAL
FINANCIAL
SERVICES
• Number of CBR’s of
Chinese banks
increasing strongly
• Chinese banks
subject to same
AML/CFT standards
as Western banks
• Literature suggests
though they were
fined less by global
regulators
• Chinese payment
systems became
more efficient
No.
CBRs
China Europe
2009 65 123,056
2016 2,246 70,292
change +2,181 -52,764
Source: Accuity (2016)
8

9. RMB
SHARE IN
GLOBAL
PAYMENTS 5.8
6.2
6.6
7.0
7.4
0
2
4
6
8
10
Oct-10 Oct-12 Oct-14 Oct-16
RMB share (%) USD/RMB (rhs)
9

10. CHINESE
GDP
SLOWING,
CURRENT
ACCOUNT
LOWER
0
2
4
6
8
10
12
6
8
10
12
14
16
real GDP growth (%)
current account (% GDP, rhs)
10

11. CHINESE
RESERVES
FALL AMID
CAPITAL
OUTFLOWS
-200
-100
0
100
200
0
1,000
2,000
3,000
4,000
5,000
Jan-06 Jan-09 Jan-12 Jan-15
FX reserves (USD bn)
capital flows (USD bn, rhs)
11

12. LEVERAGING
IN THE
ECONOMY
CONTINUES
0
40
80
120
160
Dec-05 Dec-08 Dec-11 Dec-14
Corporate Debt Household Debt
Government Debt
percentage of GDP
12

13. INTERBANK
LENDING
RATES
RISE
STRONGLY
0
2
4
6
8
10
Jan-10 Jan-12 Jan-14 Jan-16
SHIBOR ON PBOC 2Y lending rate
13

14. CONCLUSION
• RMB could help to boost trade, tourism,
access to global financial services
• However, business environment and financial
architecture in our Region need improvement
to reap the benefits
• Systemic risks and liquidity risks inherent to
RMB need monitoring also
• Up to Caribbean business community to
decide whether RMB will play broader role
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