China’s Bilateral Trade and Investment Outlook with Cuba

The state go to of Miguel Díaz-Canel, First Secretary of the Central Committee of the Communist Occasion of Cuba and Cuban President, marks a brand new historic chapter in China-Cuba relations. As the 2 international locations plan the event of their cooperation in opposition to the background of the COVID-19 pandemic and international 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 growth. However, Cuba is an lively member of the Belt and Street Initiative. The 2 international locations share shut cooperation in infrastructure, know-how, science, tourism, and power.

The pragmatic cooperation between China and Cuba is attaining all-around growth. China is one in all Cuba’s major commerce companions and has actively contributed to the nation’s financial and social growth. Cuba was the primary nation in Latin America to ascertain diplomatic ties with China, and it has lengthy been within the lead amongst its neighbors in forging ties with China. The 2 sides are constantly advancing initiatives in essential sectors like infrastructure, know-how, agriculture, tourism, power, and biotechnology, highlighting the large potential of China-Cuba Belt and Street 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 growth, the revolutions carried on by each international locations 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 develop into Cuba’s largest buying and selling companion, 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 growth. However, Cuba is starting to ascertain itself as a dependable provider of rum, lobster, sugar, nickel, and tobacco for the Chinese language market.

Quite a few Chinese language corporations 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 analysis and therapy.

The position of Cuba within the Belt and Street Initiative

In 2018, China and Cuba signed a memorandum of understanding (MoU) to collectively advance the event of the Belt and Street 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 Street” and the creation of the “Digital Silk Street” maintain nice promise for the 2 international locations. 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 international locations’ efforts towards attaining sustainable growth. Particularly, power has lengthy represented the purpose of Cuba’s socioeconomic growth technique. By 2030, the nation plans to have 24 % of its electrical energy provide come from renewable sources. Inside the similar interval, China proposed to realize carbon neutrality.

In 2021, Cuba formally joined the “Belt and Street Vitality Partnership” (BREP), which promotes cooperation within the power sector that advantages each events, aids nations in fixing issues related to power growth, obtain widespread growth and prosperity, and makes constructive contributions to the creation of a world group with a “shared future for mankind.” Since then, the 2 international locations have signed a number of building and power offers, with the purpose 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 companion, and Cuba is China’s second-largest buying and selling companion within the Caribbean area. In 2021, the commerce quantity between China and Cuba reached US$1.02 billion, a year-on-year improve of seven.2 %, of which China’s exports to Cuba reached US$576 million, a year-on-year improve of 19.2 %. In Q1-Q3 2022, China’s import quantity from Cuba grew by 18.1 % year-on-year.

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).

In 2021, the highest exports of China to Cuba included electrical equipment and gear, 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), autos and equipment (US$48.7 million), pharmaceutical merchandise (US$28.8 million), and iron and metal (US$24.6 million).

China-Cuba bilateral funding and cooperation

In accordance with 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.

In January 2015, the state-backed China Communications Building Firm Restricted (CCCC) gained the contract to modernize the port of Santiago de Cuba, which is the principle maritime facility on the jap aspect 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.

Vitality and pure assets

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

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 corporations 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 lively 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 in search of to extend the share of renewable power in its share of power consumption, setting a goal of 24 % by 2030. China and Chinese language corporations will seemingly 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 Vitality Funding and UK-based Hive Vitality. The 62MW photo voltaic park, which relies 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 corporations, 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 growth with spectacular outcomes.

On November 22, 2004, the 2 international locations 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 periods 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 answerable for coordinating nationwide efforts within the biomedical sector) and NDRC was prolonged for one more 5 years. Of the 100 analysis and growth tasks that the corporate was engaged on on the time, 20 of them had been allotted to Chinese language counterparts.

Because 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 specific contributions within the fields of human well being and agriculture.

BioCubaFarma has to date registered 4 merchandise in China:

• Nimotuzumab, a humanized monoclonal antibody from Biotech Pharmaceutical for the therapy 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 therapy 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’s additionally a Cuba-China industrial advanced for the manufacturing of PPG and different pure items. Just like this, Cuba introduced the joint growth of the primary joint biotechnology park with China, to be in-built Fangchenggang, in China’s Guangxi province, led by the joint efforts of BioCubaFarma and Guangxi Fukang. The park is anticipated to develop 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 international locations 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 latest 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 help for collaborative analysis.

A superb instance of this collaboration is the Mind Mapping Mission, 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. It is a pure partnership. Tourism accounts for round 10 % 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 obtained the Cuban Consul Common in Shanghai to discover alternatives to advertise Cuba as a vacationer vacation spot to Chinese language customers.

Because it at present 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 progressively doing so in latest months – we anticipate to see a wave of Chinese language vacationers who’re desperate to journey the world once more. Given the shut ties between the 2 international locations and Cuba’s legacy as a vacationer vacation spot for Chinese language vacationers, the nation will likely be able to obtain them.

China-Cuba funding and commerce agreements

China and Cuba have signed two bilateral treaties to facilitate funding and enterprise alternate between the 2 international locations. 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 traders and their investments of each contracting international locations within the different contracting nation. That is codified within the most-favored-nation (MFN) clause, which additionally ensures that traders from the opposite contracting nation obtain the identical therapy as that prolonged to traders from every celebration’s personal nation and traders from a 3rd nation.

Buyers lined by the BIT embody:

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

In the meantime, investments lined by the BIT embody:

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

The BIT additionally ensures traders from each international locations the fitting to switch income derived within the different contracting celebration’s territory again to their residence nation. This contains the switch of income, dividends, pursuits, and different earnings, 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 international locations to take measures to encourage and facilitate bilateral funding, which incorporates guaranteeing there are amenities for residents of the opposite celebration to acquire a visa to journey to and interact in enterprise within the different celebration’s nation.

Double taxation avoidance settlement

In 2001, China and Cuba signed a DTA to stop traders working within the different celebration’s nation from having to pay tax on income and earnings twice.

The DTA covers the next taxes in China:

• Particular person earnings tax (IIT)
• Revenue tax of international enterprises and foreign-invested enterprises

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

Overseas corporations with a everlasting institution in Cuba are taxed at a price of 35 %, whereas these and not using a everlasting institution are taxed at 4 %. Cuba imposes a progressive IIT price of 15 to 50 %.

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

Below the DTA, enterprise income are solely taxed within the nation through 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 can be 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 international locations:

• A spot of administration
• A department
• An workplace
• A manufacturing unit
• 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 companies, together with consultancy companies, by an enterprise of a Contracting State by workers or different engaged personnel within the different Contracting State, offered that such actions proceed for a similar undertaking or a linked undertaking for a interval or intervals aggregating greater than 12 months inside any 24-month interval.

The DTA additionally ensures that an organization’s income derived from worldwide transport or plane are taxed solely within the firm’s residence nation. Which means a Chinese language firm’s income from worldwide transport won’t be taxed in Cuba, and vice versa. This additionally applies to income from the participation in a pool, a joint enterprise, or a world working company.

Multilateral treaties

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

• The Settlement on Commerce-Associated Points 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 therapy for IP rights safety for all member international locations 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 limiting commerce with different members, resembling native content material necessities (necessities for an organization to make use of locally-produced items or native companies with a view to function out there).
• Common Settlement on Commerce in Companies (GATS), which ensures MFN standing to service suppliers of any WTO member (besides governmental companies resembling social safety schemes, public well being, schooling, and companies associated to air transport).

Conclusion and future prospects

China and Cuba have deep routes that may be traced many many years again to the 2 international locations’ shared historical past and beliefs as communist international locations. Over the previous few many years, 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 international locations even have a synergistic relationship in numerous fields. As an example, Cuba’s world-leading healthcare trade may be of appreciable assist to China because it seeks to enhance its capabilities and help a quickly ageing inhabitants. In the meantime, China’s appreciable experience and assets in infrastructure growth can enhance Cuba’s financial growth and enhance alternatives for Cuba’s residents.

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