A week ago, Taiwan enjoyed formal diplomatic relations with 23 countries, largely concentrated in Africa, Latin America, and the Caribbean. As of November 15, that number is down to 22, thanks to a surprise announcement by Gambian President Yahya Jammeh that his country would cut its diplomatic ties to Taiwan. As J. Michael Cole wrote elsewhere on The Diplomat, it’s unclear whether The Gambia will officially establish diplomatic relations with China, and what that would mean for the “diplomatic truce” between China and Taiwan. However, even without any prompting from Beijing, it would still be easy for Gambia to conclude that partnering with China would pay off—literally.
The last country to break off diplomatic relations with Taiwan was Malawi, which officially recognized the People’s Republic of China (PRC) in 2008. Since then, China has provided financing for a number of high-profile projects in Malawi, including the construction of a new parliament building, the Lilongwe International Convention Center, the Karaonga-Chitipa Road, and the Malawi University of Science and Technology. In addition, bilateral trade is growing at a rapid clip. In 2012, bilateral trade totaled US$297 million, an 87.5 percent increase year-on-year.
Malawi’s Minister of Foreign Affairs and International Cooperation Ephraim Chiume recognized the financial underpinnings of the relationship in his remarks on the fifth anniversary of China and Malawi’s establishment of diplomatic ties. “The Republic of Malawi would like to thank the People’s Republic of China for being a great friend over the past five years, symbolized in the commitments China has made in the infrastructure development, agriculture and trade” said Chiume. With millions of dollars in gifts and loans pouring in, it’s not hard to see why Malawi cherishes China’s friendship.
A similar story took place in Costa Rica, which severed diplomatic ties with Taiwan in favor of the PRC in 2007. China financed Costa Rica’s National Stadium and patrol cars for Costa Rica’s police force, as well as providing US$900 million in credit for the expansion and remodeling of an oil refinery. On Xi Jinping’s recent visit, China pledged a further US$400 million loan for road construction and public transportation vehicles. Bilateral trade between Costa Rica and China reached US$6.17 billion in 2012.
Given these tangible benefits, it’s easy to see why The Gambia might decide, even without prompting from Beijing, to try to partner with the PRC. The example of neighboring Senegal, which nearly surrounds The Gambia, may also have inspired the decision. Since normalizing relations with the PRC in 2005, Senegal-China trade has grown by around 30 percent annually, reaching a total of US$845 million in 2012.
China benefits from these exchanges as well. The rapidly booming trade between China and its new diplomatic partners is usually driven by an extremely lopsided trade deficit in China’s favor. In the case of Malawi, for example, Chinese exports accounted for US$249 million in 2012, nearly 84 percent of the US$297 million in total trade that year. In other words, by opening diplomatic relations with countries like Costa Rica and Malawi, China gains a new market for its goods while simultaneously depriving Taiwan of one more diplomatic ally. Furthermore, Chinese construction companies can do big business in Africa and Latin America, sometimes while completing the very projects sponsored by the PRC.
In true Chinese fashion, its relations with Senegal, Costa Rica, Malawi, and perhaps someday The Gambia are “win-win.” The only loser is Taiwan, which cannot hope to compete with the scale of the Chinese government’s donations and loans. Taiwan only has 22 diplomatic partners left, and not all of those are firmly committed to the relationship. Zhang Zhexin, a Taiwan policy expert at the Shanghai Institutes for International Studies, recently told Reuters that as many as five of Taiwan’s diplomatic allies are interested in establishing ties with the PRC. Ironically, the Chinese government may be the only thing standing preventing a mass exodus of Taiwan’s partners.
The next diplomatic switch could take place in Sao Tome and Principe, where China recently announced plans to open a trade mission. In response, Taiwan Foreign Minister David Lin promised that Taiwan would review its assistance programs to Sao Tome “to see if any adjustment is necessary.” If it comes to a bidding war over the small African nation, there’s little doubt that Beijing will be the ultimate victor.