In June of last year, at his meeting with Caribbean heads of government in Trinidad, Chinese President Xi Jinping announced US$3 billion in concessional financing for countries in the Caricom region.

Trinidad and Tobago, Jamaica, Suriname, Montserrat, Guyana, Barbados, The Bahamas, Grenada, Dominica, and Antigua and Barbuda were eligible as countries that support the ‘one China’ policy. Half of the US$3 billion was to be for infrastructure projects, with another US$1.5 billion for other kinds of development projects in the region.

The collapse in global oil prices has meant that the region’s chief source of concessional financing, PetroCaribe, is likely to be on its way out. Trinidad also, now heading for an early election, no longer looks flush with funds. When coupled with the return of volatility to global markets, there may be a need for a larger level of Chinese funding than originally foreseen.

At the Community of Latin American and Caribbean States (CELAC) China Forum in Beijing last week, Bahamas Prime Minister Perry Christie, speaking on behalf of Caricom, proposed that China’s US$3 billion should be used for “budget support, as well as debt restructuring and refinancing”. The idea of both Brady bonds and Marshall plans for the region have also been floated in the past year, with the assumption being that the most likely benefactor was China.

Jamaica, with a debt-to-GDP ratio of nearly 140 per cent of GDP, and still relatively high interest costs of 7.5 per cent of GDP, or just under one-third of revenues, would seem a good candidate for refinancing. Instruments backed by either China’s own credit rating, or collateralised by a small portion of China’s massive hoard of US treasuries, as occurred with Brady bonds, could usefully lower Jamaica’s interest costs further. The current visit to Jamaica of Mr Zhang Baowen, the vice chairman of the Standing Committee of the 12th National People’s Congress (NPC) of the People’s Republic of China, therefore seems timely.

However, the entire proposed concessional US$3 billion is only a fraction of Jamaica’s total debt. One creative approach would be for China to back the issue of GDP-linked bonds by Jamaica, to be swapped for higher interest cost debt, meaning that if the Jamaican economy grew faster, China would receive a higher return. This would make China an investor in our faster growth, and Jamaica their partner, rather than a mere supplicant for aid.

China’s own history has much to teach the region, representing a 46-year period of continuous sustained economic reform beginning in 1978. The World Bank played a key advisory role for much of the period, but as in Europe during the Marshall Plan, the amount of aid or concessional financing China received would have been minuscule relative to domestically generated resources. A key component was export-led growth based on getting prices right, starting cautiously with experiments in their Special Economic Zones.

Perhaps the best use for a portion of the non-infrastructure-related $1.5 billion would be for the financing of joint ventures, with local partners, for innovative Chinese companies willing to match cheap funding with their own equity (and hopefully some from a local partner) to set up as exporters from the region. Now that would be a truly innovative development policy worthy of a rising China.