When the Virgin Islands government decided in 2013 to open its office in Asia, it estimated that somewhere in the range of 40 to 60 percent of the territory’s financial services business originated from China and the rest of the Asia Pacific region.
Last year with the publishing of the London-based Capital Economics report, “Creating Value: the BVI’s Global Contribution,” we were able to concretise that figure to 41 percent specifically. Forty-one percent of the VI’s financial services business — or at least 25 cents out of every dollar of the 60-plus percent in revenues going into the VI’s Treasury to support schools, hospitals, roads, infrastructural development and government salaries, among other things — come from China and the rest of Asia.
According to the Capital Economics report, China alone (including Hong Kong and Macau) accounts for 35 percent of the global business coming to the VI. As a services-based economy, that makes China the VI’s most important trading partner and, to be absolutely clear, China is responsible for the most butter on our bread and roofs over our heads.
It makes sense to align economically with the country offering more opportunities to invigorate, diversify and grow the VI’s economy. Investing resources in strengthening the VI/China partnership is not only strategic, but also basic common sense. The benefits accrue to all: They trickle up, down and across the VI economy.
‘Growing economic pie’
With few exceptions, countries across the globe have been pivoting to China to get a slice of its growing economic pie. This is with good reason. China is the world’s second largest economy (and according to the International Monetary Fund, the largest when corrected for purchasing power parity) and has the largest share and growing of the globe’s wealthy consumers among its 1.42 billion people.
China in turn has been going global for the last 30 years and has been the driving force behind many large infrastructural projects across Asia, Africa, Europe and the Americas, including in some of our own Caribbean countries. Even the City of London has the China stamp on it.
China’s innovation, sophistication, technological advancement and astuteness of its business leaders is unparalleled by any country in the world. Not to mention that its top tiered cities, high speed railways and airports make its Western counterparts look like mere second and third runner-ups.
Belt and Road
According to a lead economist, China’s Belt and Road Initiative (BRI), which is now open to any country to participate, is and will continue to be the most important and impactful macro-economic undertaking in the world for at least the next ten years. Estimates are that funding for the BRI promises to be in the trillions of United States dollars and would require mobilising the world’s capital markets.
The BRI provides enormous opportunities to participate for a wide range of businesses, from small and medium-sized enterprises to multinational corporations. Investors everywhere are devising ways to incorporate the strategy into their development plans.
The BRI represents a great opportunity for the VI’s traditional business companies, which for three decades have proven successful for Chinese investors and corporations doing cross-border trade. According to reports by the United Nations Conference on Trade and Development, the VI was the second largest investor in China from 2006 to 2012 for inward foreign direct investment (FDI) and the fifth largest for outward FDI in 2012. Recent statistics from China indicate that the VI still remains in the top ten for both inward and outward China FDI flows. In simple terms, this means that when Chinese, state and private enterprises want to do business outside of China, they use VI companies. And when they want to partner with investors and bring business into China, they also use VI companies. Other investors going into China also use VI companies.
While the VI is in pole position, we cannot afford to rest on our laurels. With the increasing fierce competition and threats to VI business, it was critical for the premier to spend the last two weeks building confidence in the VI brand in our largest market as he travelled to five cities, pounding the pavement from early in the morning to late at night, making the VI’s case to government officials, entrepreneurs and investors in meetings, lunches and dinners and giving 12 speeches and remarks to collectively more than 1,000 business leaders. The theme of the mission in China and Asia was clear: We’ve been your partner for the last 30 years and we will continue to be your international partner as we move into the digital era.
‘Jurisdictional arbitrage’
Some are trying to create jurisdictional arbitrage because of the UK’s recent moves, but the VI will continue to put emphasis on its most important market while it still explores other emerging markets.
It’s not just the financial services business, but countries are also vying for the Chinese tourism market. China is now the largest tourism source market in the world and accounts for 21 percent of the world’s international tourism spending. According to the World Tourism Organisation, in 2012 China became the world’s top spender in international tourism and has remained so ever since. In 2016 the Chinese made 135 million trips overseas (including for cruises) and spent $261 billion on their holidays abroad. The VI is trying to tap in to this front too and has applied for Approved Destination Status to be able to market its tourism product in China. To further demonstrate its commitment, the VI government recently approved visa-free access for Chinese travellers to the VI for tourism and business purposes.
‘Great Innovation’
The United Kingdom itself has already ramped up its efforts and China presence, driving its Great Innovation campaign to secure its share of China’s great economic pie in investment, tourism and financial services. At last year’s Belt and Road Forum for International Cooperation, London and Hong Kong locked horns over which city should be the Belt and Road’s financial hub. Whether London or Hong Kong, the VI’s business companies are positioned to be the vehicles of choice for the BRI cross-border transactions. And like the UK, the VI will continue to shore up its efforts in China.
Why did the premier prioritise going to China and Asia over going to London? The answer is simple: He clearly knows on which side the VI’s bread is buttered.
Ms. Donovan is the director of BVI House Asia and the Asia Pacific regional representative. She has been based in Asia for the last four and a half years.