Saturday, November 26, 2022

China’s Bilateral Commerce and Funding Outlook with Cuba

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The state go to of Miguel Díaz-Canel, First Secretary of the Central Committee of the Communist Social gathering of Cuba and Cuban President, marks a brand new historic chapter in China-Cuba relations. As the 2 nations plan the event of their cooperation towards the background of the COVID-19 pandemic and world uncertainties, we focus on the prevailing bilateral commerce and funding relations. China is amongst Cuba’s main commerce companions and is actively concerned in its improvement. Alternatively, Cuba is an energetic member of the Belt and Highway Initiative. The 2 nations share shut cooperation in infrastructure, know-how, science, tourism, and power.


The pragmatic cooperation between China and Cuba is attaining all-around improvement. China is one in all Cuba’s fundamental commerce companions and has actively contributed to the nation’s financial and social improvement. Cuba was the primary nation in Latin America to determine diplomatic ties with China, and it has lengthy been within the lead amongst its neighbors in forging ties with China. The 2 sides are persistently advancing initiatives in essential sectors like infrastructure, know-how, agriculture, tourism, power, and biotechnology, highlighting the big potential of China-Cuba Belt and Highway cooperation.

China-Cuba relations

On September 28, 2020, China and Cuba celebrated the sixtieth anniversary of their diplomatic relations, an occasion whose significance additionally applies to China’s relations with the remainder of Latin America and the Caribbean areas.

By way of historic improvement, the revolutions carried on by each nations over the previous century mirrored each other in a variety of contexts, together with international coverage, ideology, science, and know-how.

These days, China has grown to turn into Cuba’s largest buying and selling associate, a key supply of funding, and the first supplier of know-how for the execution of tasks prioritized for the nation’s financial and social improvement. Alternatively, Cuba is starting to determine itself as a dependable provider of rum, lobster, sugar, nickel, and tobacco for the Chinese language market.

Quite a few Chinese language firms are engaged on a number of tasks in Cuba, lots of that are associated to the event and modernization of the nation’s infrastructure, telecommunications, renewable power sources, the tourism trade, and different key areas.

Because the outbreak of COVID-19 in 2020, China and Cuba have actively carried out anti-epidemic cooperation. After the emergence of COVID-19 in Cuba, China helped Cuba with many batches of medical supplies and shared experiences in prognosis and remedy.

The position of Cuba within the Belt and Highway Initiative

In 2018, China and Cuba signed a memorandum of understanding (MoU) to collectively advance the event of the Belt and Highway Initiative (BRI). Three years later, on the finish of 2021, the chairman of China’s Nationwide Improvement and Reform Fee (NDRC) and Cuba’s deputy prime minister signed a plan to collectively promote the development of the BRI, making the cooperation’s course and key areas even clearer.

Specifically, the “Well being Silk Highway” and the creation of the “Digital Silk Highway” maintain nice promise for the 2 nations. These sectors of their bilateral cooperation span a variety of industries, together with electronics, textiles, power, agriculture, info, genetic engineering, drugs, and well being.

Inexperienced and digital transformation are two different essential fields of cooperation for China and Cuba, contemplating each nations’ efforts towards attaining sustainable improvement. Particularly, power has lengthy represented the objective of Cuba’s socioeconomic improvement technique. By 2030, the nation plans to have 24 p.c of its electrical energy provide come from renewable sources. Throughout the similar interval, China proposed to realize carbon neutrality.

In 2021, Cuba formally joined the “Belt and Highway Power Partnership” (BREP), which promotes cooperation within the power sector that advantages each events, aids nations in fixing issues related to power improvement, obtain frequent improvement and prosperity, and makes constructive contributions to the creation of a world neighborhood with a “shared future for mankind.” Since then, the 2 nations have signed a number of building and power offers, with the objective of producing momentum for continued cooperation between China and Latin America by using the complementary strengths of each events.

China-Cuba bilateral trades

Lately, the bilateral commerce between China and Cuba has maintained good momentum. At current, China is Cuba’s largest buying and selling associate, and Cuba is China’s second-largest buying and selling associate within the Caribbean area. In 2021, the commerce quantity between China and Cuba reached US$1.02 billion, a year-on-year enhance of seven.2 p.c, of which China’s exports to Cuba reached US$576 million, a year-on-year enhance of 19.2 p.c. In Q1-Q3 2022, China’s import quantity from Cuba grew by 18.1 p.c year-on-year.

China-Cuba Bilateral Commerce 2017-2021 (billion US$)
 Yr Commerce in complete Export from mainland China to Cuba Import from Cuba to mainland China
2017 1.76 1.36 0.40
2018 1.56 1.08 0.48
2019 1.28 0.79 0.49
2020 0.95 0.48 0.47
2021 1.02 0.576 0.446
Supply: Nationwide Bureau of Statistics, China

In 2021, the highest exports from Cuba to China included ores, slag, and ash (US$153.1 million), nickels and articles thereof (US$151.8 million), sugars and sugar confectionery (US$89.1 million), fish, crustaceans, and mollusks (US$39.1 million), tobacco and manufactured tobacco substitutes (US$5.2 million).

Prime 5 Merchandise Exported from Cuba to China in 2021
Product class Quantity (million US$)
Ores, slag, and ash 153.1
Nickel and articles thereof 151.8
Sugars and sugar confectionery 89.1
Fish and crustaceans, mollusks, and different aquatic invertebrates 39.1
Tobacco and manufactured tobacco substitutes 5.2
Supply: ITC Commerce Map

In 2021, the highest exports of China to Cuba included electrical equipment and tools, sound recorders and reproducers, tv picture and reproducers, and different elements (US$133.3 million), equipment, mechanical home equipment, and nuclear reactors (US$103.6 million), automobiles and equipment (US$48.7 million), pharmaceutical merchandise (US$28.8 million), and iron and metal (US$24.6 million).

Prime 5 Merchandise Exported from China to Cuba in 2021
Product class Quantity (million US$)
Electrical equipment and tools and elements thereof; sound recorders and reproducers, tv picture and sound recorders and reproducers, and elements and equipment of such articles 133.3
Equipment, mechanical home equipment, nuclear reactors, boilers; elements thereof 103.6
Automobiles aside from railway or tramway rolling inventory, and elements and equipment thereof 48.7
Pharmaceutical merchandise 28.8
Iron or metal 24.6
Supply: ITC Commerce Map

China-Cuba bilateral funding and cooperation

Based on knowledge from China’s Ministry of Commerce (MOFCOM), Chinese language funding flows into Cuba reached US$11.4 million in 2020, whereas complete Chinese language direct funding inventory reached US$140 million.

That very same yr, Chinese language-invested enterprises signed 37 new underwriting tasks in Cuba with a complete new signed contract worth of US$314 million and a accomplished turnover of US$142 million. On the finish of 2020, there have been a complete of 383 Chinese language laborers working in Cuba.

Mainland China’s Underwriting Tasks in Cuba 2017-2021
Turnover of Chinese language underwriting tasks accomplished in Cuba (Million US$) China’s year-end excellent dispatched labor in Cuba for the underwriting tasks (particular person)
2017 258.5 175
2018 404.0 413
2019 320.0 667
2020 NA NA
2021 NA NA
Supply: Nationwide Bureau of Statistics, China

In January 2015, the state-backed China Communications Building Firm Restricted (CCCC) received the contract to modernize the port of Santiago de Cuba, which is the principle maritime facility on the jap facet of the island, and the nation’s second-largest port after Mariel close to Havana. This was the primary Cuban infrastructure undertaking underwritten by a Chinese language Firm. Chinese language authorities aided this multi-purpose wharf undertaking, with a complete contract worth of US$ 120 million. The development was accomplished in June 2019.

Power and pure assets

On account of its comparatively small measurement and restricted pure assets, Cuba is reliant on imports to satisfy its power wants. As such, it actively collaborated with different nations to assist meet its power wants, each by worldwide commerce and thru increasing power tasks at house.

China and Cuba have collaborated on power tasks for a few years. As talked about earlier, Cuba formally joined the BREP in 2021.

Chinese language firms have been invested in Cuba’s power trade for a few years. Nice Wall Drilling, a subsidiary of China Nationwide Petroleum Corp (CNPC), has been energetic within the nation since 2005 and is a key contractor for the drilling of Cuba’s oil wells.

To safe its power safety, Cuba is now additionally searching for to extend the share of renewable power in its share of power consumption, setting a goal of 24 p.c by 2030. China and Chinese language firms will probably have a big position to play in Cuba’s power transition, with a number of renewable tasks already underway.

In 2019, building started on the Mariel Photo voltaic undertaking, a three way partnership photovoltaic power undertaking between Shanghai Electrical’s subsidiary SE Power Funding and UK-based Hive Power. The 62MW photo voltaic park, which is predicated within the Mariel Particular Improvement Zone (ZED Mariel), was reportedly efficiently linked to the grid for energy technology in 2021.

Regardless of its comparatively restricted pure assets, Cuba does have shops of minerals resembling nickel and chrome, that are in excessive demand in China. As such, China’s mineral and mining firms, resembling China Minmetals Corp, have lengthy had a presence within the island nation.

Biotechnology and prescribed drugs

Over the previous twenty years, the bilateral cooperation between China and Cuba within the areas of biotechnology and prescribed drugs has seen regular improvement with spectacular outcomes.

On November 22, 2004, the 2 nations signed an MoU to acknowledge the development of their cooperation on this sector. This MoU was renewed in 2009 and expanded throughout President Xi Jinping’s go to to Cuba in July 2014.

In 2019, the NDRC of China and the Council of State of Cuba collectively organized the tenth Joint Working Group on Biotechnology assembly in Havana. Working classes had been held within the fields of trade and biotechnology, science and know-how, regulatory affairs, agriculture, and well being. On that event, the MoU between BioCubaFarma (Cuba’s group accountable for coordinating nationwide efforts within the biomedical sector) and NDRC was prolonged for one more 5 years. Of the 100 analysis and improvement tasks that the corporate was engaged on on the time, 20 of them had been allotted to Chinese language counterparts.

On account of this cooperation, three joint ventures —Biotech Pharmaceutical Co., Ltd in Beijing, Changchun Heber Organic Expertise Co., Ltd in Jilin province, and Shandong Lukang Heber Co., Ltd in Shandong province— made explicit contributions within the fields of human well being and agriculture.

BioCubaFarma has to this point registered 4 merchandise in China:

  • Nimotuzumab, a humanized monoclonal antibody from Biotech Pharmaceutical for the remedy of nasopharyngeal most cancers and different tumors, which has helped greater than 50,000 Chinese language sufferers and is now pursuing approval for 2 extra tumor indications (head and neck and esophagus).
  • Human recombinant interferon alpha 2b for the remedy of Hepatitis B and C, from Changchun Heber Organic Expertise Co., Ltd.
  • Ateromixol (PPG) for hypercholesterolemia, from Hubei China- Cuba Biopharmaceutical Co., Ltd.
  • Aikexian, a biofertilizer from JV Shandong Lukang Heber Biotechnology Co., Ltd.

Within the New East Lake Excessive-tech Zone in Wuhan, there may be additionally a Cuba-China industrial advanced for the manufacturing of PPG and different pure items. Much like this, Cuba introduced the joint improvement of the first joint biotechnology park with China, to be inbuilt Fangchenggang, in China’s Guangxi province, led by the joint efforts of BioCubaFarma and Guangxi Fukang. The park is anticipated to turn into an experimental industrial hub in drug analysis and procurement for China and the entire ASEAN area.

Science and know-how

In sectors of mutual curiosity, Cuba and China have long-standing cooperative interactions. The 2 nations established a Joint Fee for Scientific and Technical Cooperation to judge and coordinate the compliance with cooperation applications because of the Settlement of the Scientific and Technical Cooperation between the Governments of the Republic of Cuba and the Folks’s Republic of China, signed in Beijing as early as 1989.

The newest Joint Committee was held in 2019. Each events had the possibility to look again on accomplishments within the areas of mind analysis, biomedicine, and different cooperative endeavors. The assembly’s last minutes listed the important thing areas for future cooperation to foster and conduct in-depth discussions on points, resembling cooperation between scientific parks, personnel exchanges, and assist for collaborative analysis.

An excellent instance of this collaboration is the Mind Mapping Challenge, collectively carried out by Cuba, China, and Canada, which has been prolonged for one more three years because of its ground-breaking findings.

One other noteworthy accomplishment is the Joint Cuba-China Laboratory for Frontier Analysis in Translational Neuroethology on the College of Science and Digital Expertise of China (UESTC) in Chengdu, which conducts analysis on the early detection, intervention, and rehabilitation of quite a few neurodegenerative ailments and psychological problems.

Tourism

One other space of cooperation between Cuba and China is tourism. This can be a pure partnership. Tourism accounts for round 10 p.c of GDP, reaching a complete of US$12.16 billion in 2019, previous to the pandemic. In the meantime – previous to the pandemic – China was one of many world’s main sources of worldwide vacationers, with a complete of 155 million outbound vacationers in 2019.

China’s Journey.com Group, a number one Chinese language on-line journey company, additionally signed an MoU with the Cuban Ministry of Tourism in 2019, and in 2021 acquired the Cuban Consul Normal in Shanghai to discover alternatives to advertise Cuba as a vacationer vacation spot to Chinese language shoppers.

Because it presently stands, China’s COVID-19 curbs and quarantine necessities for inbound vacationers will proceed to stymie outbound tourism to any a part of the world, together with Cuba. Nevertheless, as soon as China does determine to carry restrictions – and it has been regularly doing so in latest months – we count on to see a wave of Chinese language vacationers who’re desirous to journey the world once more. Given the shut ties between the 2 nations and Cuba’s legacy as a vacationer vacation spot for Chinese language vacationers, the nation might be able to obtain them.

China-Cuba funding and commerce agreements

China and Cuba have signed two bilateral treaties to facilitate funding and enterprise trade between the 2 nations. These are a bilateral funding treaty (BIT) and a double taxation avoidance (DTA) treaty.

Bilateral funding treaty

The China-Cuba BIT, signed in 1995, ensures safety to buyers and their investments of each contracting nations within the different contracting nation. That is codified within the most-favored-nation (MFN) clause, which additionally ensures that buyers from the opposite contracting nation obtain the identical remedy as that prolonged to buyers from every occasion’s personal nation and buyers from a 3rd nation.

Buyers coated by the BIT embrace:

  • Residents of the PRC and Cuba; and
  • Firms legally established inside the territories of the PRC and Cuba.

In the meantime, investments coated by the BIT embrace:

  • Movable and immovable property and different property rights resembling mortgages and pledges;
  • Shares, shares, and different varieties of participation in firms;
  • Claims to cash or to every other efficiency with financial worth;
  • Copyrights, industrial property, know-how, and technological processes; and
  • Concession conferred by regulation together with concessions for exploration and exploitation of pure assets.

The BIT additionally ensures buyers from each nations the precise to switch income derived within the different contracting occasion’s territory again to their house nation. This contains the switch of income, dividends, pursuits, and different revenue, cash from partial liquidation of funding, payables pursuant to mortgage agreements associated to investments, and royalties.

The BIT contains articles on dispute mechanisms, together with litigation in a impartial worldwide tribunal.

Along with guaranteeing the safety of investments, the BIT additionally requires each nations to take measures to encourage and facilitate bilateral funding, which incorporates guaranteeing there are amenities for residents of the opposite occasion to acquire a visa to journey to and interact in enterprise within the different occasion’s nation.

Double taxation avoidance settlement

In 2001, China and Cuba signed a DTA to forestall buyers working within the different occasion’s nation from having to pay tax on income and revenue twice.

The DTA covers the next taxes in China:

  • Particular person revenue tax (IIT)
  • Earnings tax of international enterprises and foreign-invested enterprises

In the meantime, the Cuban taxes coated by the treaty are:

Overseas firms with a everlasting institution in Cuba are taxed at a charge of 35 p.c, whereas these with no everlasting institution are taxed at 4 p.c. Cuba imposes a progressive IIT charge of 15 to 50 p.c.

To grasp China’s tax regime, see our nation portal right here.

Beneath the DTA, enterprise income are solely taxed within the nation during which the corporate has a “everlasting institution”, besides in instances the place the corporate has a everlasting institution and conducts enterprise within the different nation as properly. On this case, solely the income which are attributable to every nation’s everlasting institution are taxed by the related nation.

An organization has a “everlasting institution” if it has any of the next in one of many contracting nations:

  • A spot of administration
  • A department
  • An workplace
  • A manufacturing facility
  • A workshop
  • A mine, an oil or gasoline properly, a quarry, or every other place of extraction of pure assets

It additionally contains:

  • A constructing website, a building, meeting, or set up undertaking, or supervisory actions in connection therewith, however solely the place such website, undertaking, or actions proceed for a interval of greater than twelve months.
  • The furnishing of providers, together with consultancy providers, by an enterprise of a Contracting State by workers or different engaged personnel within the different Contracting State, supplied that such actions proceed for a similar undertaking or a linked undertaking for a interval or durations aggregating greater than 12 months inside any 24-month interval.

The DTA additionally ensures that an organization’s income derived from worldwide delivery or plane are taxed solely within the firm’s house nation. Meaning a Chinese language firm’s income from worldwide delivery is not going to be taxed in Cuba, and vice versa. This additionally applies to income from the participation in a pool, a joint enterprise, or a global working company.

Multilateral treaties

China and Cuba are each WTO members, which by extension means they’re each events to a spread of multilateral agreements on commerce and funding. These treaties embrace:

  • The Settlement on Commerce-Associated Elements of Mental Property Rights (TRIPS), requires WTO members to increase mental property (IP) rights to the IP homeowners in any member state or area. It features a most-favored-nation (MFN) clause, guaranteeing equal remedy for IP rights safety for all member nations and areas, and provides dispute decision and compensation mechanisms.
  • Settlement on Commerce-Associated Funding Measures (TRIMs), which prohibits members from implementing funding measures which have the impact of proscribing commerce with different members, resembling native content material necessities (necessities for a corporation to make use of locally-produced items or native providers with a view to function available in the market).
  • Normal Settlement on Commerce in Providers (GATS), which ensures MFN standing to service suppliers of any WTO member (besides governmental providers resembling social safety schemes, public well being, training, and providers associated to air transport).

Conclusion and future prospects

China and Cuba have deep routes that may be traced many a long time again to the 2 nations’ shared historical past and beliefs as communist nations. Over the previous few a long time, as China has risen as a worldwide financial energy, the connection has continued to deepen, with many new areas of cooperation being explored and developed.

The 2 nations even have a synergistic relationship in varied fields. For example, Cuba’s world-leading healthcare trade may be of appreciable assist to China because it seeks to enhance its capabilities and assist a quickly ageing inhabitants. In the meantime, China’s appreciable experience and assets in infrastructure improvement can enhance Cuba’s financial improvement and enhance alternatives for Cuba’s residents.

With the high-level go to of the Cuba chief to China, new momentum might be injected into China-Cuba bilateral relations, and extra cooperation is anticipated between the 2 nations.


About Us

China Briefing is written and produced by Dezan Shira & Associates. The observe assists international buyers into China and has executed so since 1992 by workplaces in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the agency for help in China at china@dezshira.com.

Dezan Shira & Associates has workplaces in VietnamIndonesiaSingaporeUnited StatesGermanyItalyIndia, and Russia, along with our commerce analysis amenities alongside the Belt & Highway Initiative. We even have associate corporations aiding international buyers in The PhilippinesMalaysiaThailandBangladesh.



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