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From Road Town to Shanghai: Situating the Caribbean in Global Capital Flows to China

Authors

  • William Vlcek


Research Highlights and Abstract

This article:

  • Assesses the role of Caribbean offshore financial centres (OFCs) in FDI flows to China.
  • Argues the OFC provides financial intermediation services beyond simply tax minimisation.
  • Demonstrates a similar use of the OFC in other developing economies.
  • Suggests the position of the OFC in global finance continues to evolve.

This article examines the prominent location of offshore financial centres (OFCs) among the leading origin and destination points for foreign direct investment (FDI) to China. The OFC (characterised as a tax haven) frequently has been ignored or assumed out of analyses on Chinese FDI as simply servicing tax minimisation practices. This article challenges that assumption and emphasises the financial intermediation role performed by the Caribbean OFC beyond practices of tax arbitrage. Through the use of an international business company (IBC) registered in an OFC these jurisdictions perform several functions for investors, to include providing access to foreign capital markets, reducing tax obligations across multiple jurisdictions and concealing potential politically-sensitive beneficial ownership of the investment. This assessment for the role of the OFC in circuits of global capital involving FDI to China demonstrates that China's relationship with the OFC is different from that experienced by Europe and North America.

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