China shows Costa Rica the money

In October 2007, visiting president of Costa Rica Oscar Arias, left, met with Chinese President Hu Jintao to lure investment and promote exports after Costa Rica switched diplomatic recognition from Taipei to Beijing in June.

TEXT OF STORY

KAI RYSSDAL: While Wall Street frets over the strength of its collective balance sheet, China is sitting on almost $2 trillion in foreign reserves -- $1.8 trillion, if a couple of decimal points at that amount of money bother you.

Beijing invests all over the world. It used to buy a whole lot of bonds issued by Fannie Mae and Freddie Mac, actually. But a report in today's Financial Times says China has been looking for more than just a financial return on some of those deals.

From the Americas Desk at WLRN, Marketplace's Dan Grech reports.


DAN GRECH: The FT reported secret documents show China bought $300 million in government bonds from Costa Rica. In return, Costa Rica severed its ties to Taiwan and allied itself with China.

LARRY BIRNS: These are bribes.

Larry Birns directs the Council on Hemispheric Affairs.

China considers Taiwan a renegade province and it wants to isolate the island politically.

BIRNS: There are no miracles and no accidents, and the reason why China has done so well in getting rid of Taiwan as a competitive adversary has been, undoubtedly, through handsome payments.

Birns says China's secret political payouts should worry the U.S., especially if those payouts give China a first shot at the world's scarce resources.

BIRNS: The Chinese will go to any means to put itself on the starting line, if not a few inches ahead of everyone else. This is the big league for China and they're willing to play the game all the way.

Bill Ratliff is a fellow at the Hoover Institution. He says China has been restrained thus far in its dollar diplomacy.

BILL RATLIFF: Probably the main reason they have not done more is not because they didn't have the money, obviously, but because it doesn't look very good that they've just been out buying people's votes.

Taiwan itself is no stranger to bribery. In the Caribbean, it's helped fund bridges, airports, even a new stadium in Barbados for the Cricket World Cup.

I'm Dan Grech for Marketplace.

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