Will Honduras Recognize the PRC?

The new president-elect of Honduras, Xiomara Castro, pledged during her campaign to shift diplomatic recognition from Taipei to Beijing, which would inevitably be followed by major Chinese offers of aid and development money. However, less than two weeks after her historic victory, and a day after neighboring Nicaragua switched its diplomatic recognition to the People's Republic of China (PRC), Gerardo Torres, a spokesman for Castro’s transition team, told Reuters, “The new government will maintain relations with Taiwan. President-elect Xiomara Castro has been clear, these ties will be maintained. Nobody in the party wants to enter government distancing ourselves from the United States.”

The United States has been outspoken in encouraging Taiwan’s remaining diplomatic partners – currently numbering 14 – to keep the relationship intact. Legislation passed in March 2020 even holds out the possibility of reducing U.S. aid to countries that make the switch.

While the ostensible reason for reversing course on Castro’s campaign pledge to recognize Beijing is to prevent damaging relations with the United States, it is also natural to consider what other factors may be influencing Castro’s decision on this major policy question.

Honduras has said it is keeping options open and that the new administration will study the matter. One such case study is right next door, in El Salvador, which established diplomatic relations with the PRC in 2018.

The Story from El Salvador

China made a tempting offer: As a “thank you” note to El Salvador for switching diplomatic recognition from Taiwan to China, Beijing offered the Central American country a $500 million gift basket full of investment incentives, on “unconditional terms,” according to President Nayib Bukele. Projects include a national library, a sports stadium, water treatment facilities, and a major tourism development project on the coast.

Bukele, defending his acceptance of China’s largesse, said in early December 2021 that the United States, in contrast to China, requires “absolute submission or bust.”

As Dr. Evan Ellis of the Center for Strategic and International Studies (CSIS) details, El Salvador expected that their recognition of the PRC would bring a bounty of export orders for Salvadoran companies to the Asian giant. Instead, exactly the reverse occurred. Exports from China to El Salvador nearly doubled, and continue to rise. Just one year after forging diplomatic relations, China’s exports to El Salvador were 33 times greater in value than Salvadoran exports to China. Recognition of China brought competition from Chinese companies, who have more than won the day so far.

In telecommunications, Huawei and other Chinese companies dominate the landscape. Meanwhile, Chinese investors are reported to be buying up land along the coast. Trade zones and a multimodal hub filled with Chinese manufacturing and logistics companies, excluding others, have also been under discussion between Chinese and Salvadoran officials.

According to Ellis, the dark side of China's money is also being felt in El Salvador, something which Honduras’ new government may consider in their deliberations. Ellis notes that investors representing the Chinese state as well as individuals “have also been active in courting Salvadoran mayors and local officials, who have become particularly vulnerable to such influence due to Covid-19’s detrimental effect on Salvadoran municipalities.”

Corruption is always the sludge that diverts and blocks the pipelines of aid and development money from its intended targets. Historically and traditionally, many Chinese investors have little problem participating in that process.

Perhaps the most disturbing project in which China has become involved since El Salvador opened its doors to Beijing is a port project in La Unión that bears an “eerie similarity” to Hambantota port project in Sri Lanka, according to Ellis. The practical need for both ports was tenuous, since similar ports exist nearby. Unable to maintain its loan payments, Sri Lanka ultimately leased the port to China. It remains to be seen whether revenues sufficient to pay the debt will materialize in El Salvador, and if not, what will happen to the port then.

So dire was the potential risk of doing a port project with China, one that could be eventually used for military purposes, that then-Prime Minister Abe Shinzo of Japan warned El Salvador's Bukele about China’s possible intentions, as well as the dangers of entering a debt trap.

Overall, the evidence suggests that a switch in diplomatic recognition from Taiwan to China “brings with it a rapid advance in the PRC's commercial position and influence in the economy, government, and society,” according to Ellis.

However, one outcome from El Salvador’s diplomatic switch to Beijing may pique Honduras’ interest as it considers its position toward China. El Salvador's move ultimately sparked greater interest from the United States, which brought forth offers of development money. One such project includes an LNG-fired power plant with a price tag of $1 billion, led by a U.S.-based privately-held global developer of sustainable energy solutions, Invenergy.

Self-Reliance and the Chinese Double Standard

Poverty is vulnerability, and although not all of the nations that China targets with its Belt and Road Initiative (BRI) projects are necessarily poor, many are in earlier stages of economic and infrastructure development than China. For these countries, the investment that China markets to prospective partners is most enticing, and often irresistible.

It is notable, however, that, until the 2008 earthquake that killed more than 80,000 in Sichuan province, China itself was wary of outside aid, even under the most challenging of circumstances. On July 28, 1976, a massive earthquake decimated the city and surrounding area of Tangshan in Hebei province, near both Beijing and Tianjin. Official figures put the number of fatalities at 240,000 people, although some estimates have gone as high as 855,000. Tangshan experienced nearly complete devastation; the first shock had hit right under the city.  Offers of humanitarian aid flooded in from around the world, yet China turned them all down.

The reasoning behind China's refusal of aid was more fully elaborated upon in the Communist Party's People's Daily newspaper, in August of the same year. The New York Times reported that the article stated,  “Earthquakes, like all other natural calamities are a bad thing, but, in specific conditions, they can be turned into a good thing. They teach the value of selfreliance [sic] and hard struggle.”

The most egregious characteristic of China’s foreign investment, aid, and loans today is that they therefore represent a relationship on principles that China under similar circumstances would not, indeed did not, accept for itself. China accepted relatively low levels of “development assistance,” but always insisted on controlling the process, the personnel, and the projects involved.

China's Eight Principles for Economic Aid

During a state visit to Ghana in 1964, China's first premier, the still-revered Zhou Enlai, laid out the “Eight Principles for Economic Aid and Technical Assistance to Other Countries” that guided China's foreign economic assistance at that time.

The first principle places emphasis on “mutual benefit,” elaborating on that concept by stating, “It never regards such aid as a kind of unilateral alms but as something mutual.” That’s an important distinction: China’s foreign aid is not meant to be charity, and it must include some level of reciprocal advantage.

This philosophy is still in place today. In 2017, Andreas Fuchs and Marina Rudyak of Heidelberg University wrote that China places an “explicit emphasis on ‘mutual benefit’ in the pursuance of its goals” when it gives foreign aid.

The next seven principles include respect for sovereignty, extending time limits for loan payments “in order to lighten the burden” on recipients, and ensuring that the purpose of the Chinese government “is not to make the recipient countries dependent on China but to help them embark step by step on the road of self-reliance and independent economic development.”

In all, the Eight Principles read like a utopian plan for world development, and one can make an argument that for Zhou Enlai at least, these were sincerely held ideals. But one can also argue that those principles today have taken a back seat to an aggressive, avaricious plan to dominate large swaths of the world economically and politically.

Honduras will need to keep all these factors in mind as its considers its China policy. The country should be supported in its efforts by responsible development partners who can help Honduras to develop with dignity and pride.