Diaspora and Trust

Front matter

DIASPORA AND TRUST

CUBA, MEXICO, AND THE RISE OF CHINA

Duke University Press Durham and London 2016

Introduction

Three booking agents and two assistants were on duty at 4:30 PM whena brick shattered the window of the China Viaje travel agency in Tijuana’s business district. At 6:00 PM all five were sitting in a row before their manager and two representatives of the Chinese Association of Tijuana. Pedro, the owner of the business, spoke to me in a surprisingly calm voice: “Now do you see? This is what I was telling you about: it’s been happening more and more to Chinese businesses. This has been a bad year. Is it because our employees are Chinese? When these things happen we try to hold our heads high and carry on without retaliating, and without drawing attention to ourselves. You're the anthropologist, so you tell me, what’s going on? Have we done something wrong?” (interview, October 16, 2008).

The incident at China Viaje was not isolated. In November, a month earlier, a Chinese supermarket three blocks away had been vandalized and robbed, and the owners of a local department store specializing in imported Chinese home appliances discovered the words “pinche Chinos” (damn Chinese) spray painted on its front window. When the mayor announced his support for the establishment of a Chinatown in downtown Tijuana, the opinion pages of local newspapers showed strong opposition: “How ridiculous, the damn Chinese have already inundated us with commercial piracy, and now they want to put a Chinatown in

Tijuana” (Salinas 2008). A similar comment appeared in relation to the newly established Chamber of Chinese Enterprises in the nearby city of Mexicali: “First they invade us [and] now they are getting organized to demand guarantees?? I hope the people of Sinaloa don't plan to do the same” (Minor 2010). Comments like these, and the hostile actions that accompany them, reveal profound insecurity about China’s cultural and economic impact in Mexico.

Eighteen hundred miles away a distressed group of Chinese descendants convened at a popular restaurant in Havana’s Cuchillo Lane, the heart of Latin America’s oldest Chinatown. Public hostility, inadequate legal protection, and official neglect were not among their concerns. On the contrary, they were worried about the growing attention and incessant commercial regulations they had attracted from the Cuban state. The goal of their meeting was to appraise, five years on, the 2006 dissolution of the district’s coordinating body, the Grupo Promotor de Barrio Chino (Promotion group of Chinatown) and the assumption of its administrative responsibilities by a government institution called the Office of the Historian of the City. Everything from foreign donations to proposals for cultural festivals and tourism development had since been assessed and regulated by the Office, signifying a total reorganization in the conduct of local business and politics.

Attending the meeting were Yrmina Eng Menéndez, Julio Hun Calzadilla, and Carlos Alay Jó, three founding members of the Grupo Promotor. Each had been instrumental in the revival of Havana’s Chinatown (hereafter Barrio Chino) in the 1990s and early 2000s, and each believed that the Office’s centrally devised plan for growth and development had weakened the district’s cultural and economic potentials. The irony of their predicament, they said, was plain to see: “The tourists come here to see the new gift shops, the restored restaurants, and streets with fashionable cafés. What they don't see is the human cost below the surface. Our social activities are not supported, our elderly residents are neglected, and our restaurants are paying higher taxes than ever.... The bureaucrats behind all this become suspicious whenever we try to do something really useful for our community” (interview, February 22, 2011).

In both Cuba and Mexico, Chinese immigrants and their descendants are confronted by a common problem: their commercial activities are believed to be strongly bound up in ethnic favoritism and therefore adverse to national interests. It is a recurring narrative that has resurfaced in both countries during times of economic hardship, most powerfully in the 1930s when the Great Depression provoked the forced closure of Chinese businesses in Cuba and the expulsion of some ten thousand Chinese people from Mexico. Today the narrative is fueled by China’s growing global influence and the role that overseas Chinese communities are thought to play in it.

It is striking that similar preoccupations should emerge in Cuba and Mexico, countries at opposite ends of the spectrum in terms of economic openness and political ideology. A combination of downward coercion and upward nationalism continues to maintain the Cuban state’s firm grip on civic and economic administration. In contrast, three decades of privatization in Mexico have eliminated nearly all forms of state intervention. China’s growing impact has exposed problems with both approaches. In Cuba, nascent bilateral trade and investment agreements have provoked a grudging awareness that uncompromising state control is ill suited to post-Cold War economic rationalism. In Mexico, unrelenting Chinese commercial competition has fueled new accusations of inadequate industrial policies and insufficient state support for manufacturers.

China’s rise and the so-called Asian Century it heralds are forcing politicians, businesspeople, and researchers to debate and formulate fresh solutions to an old problem: what balance of state, market, and civic inputs can best harness the world’s shifting economic currents? While Cuban and Mexican policy makers approach this question from contrasting ideological systems, all of them recognize a need for forms of public-private cooperation that diverge from conventional development models. As both countries attempt to respond to the challenges and opportunities brought by China, there is a growing awareness that more mixed approaches are needed to diversify productivity and to leverage the capacities of resident Chinese communities.

Integration with China is prompting the governments of Cuba, Mexico, and most other countries to rethink the structure of their economies. The Cuban government’s 2011 Lineamientos de la politica económica y social del partido y la revolución (Economic and social policy guidelines of the party and revolution) articulates the need to connect large state-owned enterprises with emerging private businesses, just as China began to do in the 1980s. Chinese advisors have long recommended this course to their Cuban counterparts, who are in no position to disagree as their nation becomes increasingly reliant on Chinese trade, investment, and loans. In Mexico, the administration of President Enrique Pefia Nieto has acknowledged that long-established tax concessions and financial incentives for the most powerful and successful sectors must be balanced with greater access to loans, information, and logistical support for small and medium-size enterprises (SMEs). China has taught Mexico this lesson not by example but by force: as Mexican textiles, electronics, and even automobiles face growing Chinese competition in the U.S. market, empowering the nation’s acutely underresourced SMEs is not only desirable but critical.

In social engagement, too, China’s rise is pushing the Cuban and Mexican governments to explore less top-down approaches. Cuban politicians and administrators have largely overlooked their nation’s Chinese community for decades—some would say since the mid-nineteenth century. As Chinese diplomats and businesspeople forge new ties with Havana’s Chinese diaspora, particularly its enthusiastic descendant population, the Cuban government has had to accommodate local demands for resources or risk being bypassed. Mexico’s government has been slower to act, but it too is beginning to engage with its Chinese residents. It is doing so more out of necessity than by choice: engagement offers the best hope for containing unregulated trade in goods, services, and people.

How are we to make sense of this forced disposition of governments to engage more assertively with their economies and societies? This book attempts to do so through concepts like public-private cooperation, synergy, linkage, and social capital. The first two invoke vertical notions of state-society engagement, and the last two horizontal conceptions of community solidarity. The book argues that a convergence of these vertical and horizontal forces is necessary to unlock the opportunities for development and prosperity brought by China’s rise. The catalyst for this convergence, I argue, is trust.

Chapters 1 and 2 examine how pressure is growing on the Cuban and Mexican governments to reach out beyond national champions to SMEs, and in the process reap the political and economic dividends generated by independent cooperation at the grass roots. Chapters 3 and 4 show that government engagement with Chinese communities in Cuba and

Mexico is beginning to simultaneously leverage and engender purposeful solidarity within Chinese neighborhood associations. In all cases, vertical state-society synergies and horizontal community linkages are interacting in new ways to condition economic and social life, a process of convergence stimulated—and compelled—by China’s rise.

As China reaches out to international markets and diasporas, governments cannot hope to contain the resulting exchanges in official programs. Instead they must design more flexible development agendas that simultaneously accommodate global change, attract local participation, and build trust. The book explores how two nations with deeply contrasting economic and political orientations are responding to this challenge. It shows that their responses reflect different histories, cultures, and political structures but also a common convergence toward a more centrist balance of state, private, and civic power. This is not simply because the Chinese government is encouraging them along this path or because of their independent political evolution, but also because rebalancing these structural forces is a necessary response to China’s global expansion.

ECONOMIC RELATIONS WITH CHINA: LIKE A BICYCLE

After Venezuela, China is Cuba’s second largest trading partner: their bilateral trade reached $1.39 billion in 2014, one-third of which consisted of Cuban exports. China is also Mexico’s second largest trading partner (after the United States): trade reached $72.24 billion in 2014, but only $5.98 billion of this flowed in Mexico’s favor (United Nations Commodity Trade Statistics Database 2015). Neither Cuba nor Mexico exports large quantities of natural resources to China, making them exceptions in Latin America—a region whose rich endowment of commodities has seen trade with China grow from $10 billion in 2000 to over $250 billion in 2014. The flow of mineral, energy, and agricultural products westward across the Pacific is reciprocated by an eastward flood of toys, clothes, home appliances, and industrial equipment from the factories of southern China. Cuba and Mexico do not share their neighbors’ concerns about resource dependency on China, but both are witnessing an unprecedented influx of Chinese consumer goods, with the full range of reactions this brings. Cubas relationship with China is now more harmonious than Mexico's, but it has not always been. In 1960 Cuba’s new revolutionary government became the first in the Americas to officially recognize the People’s Republic of China. However, against Mao Zedong’s wishes, Fidel Castro soon drew closer to the Soviet Union, whose leadership of international communism was disputed by China. Despite their contrasting relationships with the Soviet Union, Cuba and China never broke diplomatic ties with each other. When the Soviet Union collapsed in 1989-90, China replaced it as Cuba's main foreign ally, enabling the Castro government to keep its struggling economy afloat. Asking its citizens for renewed austerity and self-sacrifice to overcome the warlike conditions of the so-called Special Period in Time of Peace, Cuba might well have imploded without Chinese support. Sustained by Chinese President Jiang Zemin's determination to "save Cuba's revolutionary project; the two countries commenced what a Chinese government newspaper called a "period of completely new and steady development" (Peoples Daily 1996).

The Chinese government has taken interest in the discovery of oil off Cuba’s north coast. As well as securing exploration rights, the Huanqiu Contracting and Engineering Corporation (owned by the Chinese state and a subsidiary of the oil giant China National Petroleum Corporation) is the lead financier of a $5.5 billion refinery in Cienfuegos. Furthermore, Chinese trade credits and unsecured loans have helped Cuban gross domestic product to rebound, according to the World Bank (2015b), from $32 billion in 2004 to $234 billion in 2014 (measured as purchasing power). This financial support has enabled Cuba to buy Chinese buses and trains to help alleviate the island's transportation crisis, as well as consumer goods ranging from clothing to home appliances and computers.

As is the case in other Latin American nations, China's impact is pervasive in the daily lives of ordinary Cubans. However, unlike in Mexico, Brazil, Argentina, and many other countries, in Cuba China's growing influence has not given rise to public hostility toward Chinese products and people. China poses no threat to Cuba's domestic industries, and furthermore, the Cuban government goes to great lengths to emphasize China’s standing as a historical friend and ally. Televised documentaries and mainstream literature often invoke Beijing's loyalty in the wake of the Soviet meltdown.

Despite the apparent resonance of their political philosophies, China and Cuba no longer look to socialist solidarity as the prime mover oftheir relationship. Pragmatism is replacing ideology, in the process redefining the basis for trust between the two nations and reconfiguring the structure of the Cuban economy. China’s prior experience with reform and opening—professed by a constant stream of advisors from Beijing—provides Cuban leaders with insights into the making of a market economy. As chapter 1 shows, the countries’ newfound common interest in market socialism is producing impressive results, but as yet neither China nor Cuba trusts nonstate actors to exchange goods, services, and ideas.

Unlike Cuba's relationship with China, Mexico's has suffered from a lack of political engagement and economic complementarity. The impact of Chinese exports on Mexico has been severe, displacing Mexican producers of clothing, toys, shoes, and other manufactured products at home and in the U.S. market. Mexican manufacturers argue that for every two products they export, ten enter the country from China, and that consequently, between 900,000 and one million workers have lost their jobs (El Mural 2011).

Chinese officials insist that to remedy the chronic bilateral imbalance, Mexico should permit Chinese investment in the oil sector. Peña Nieto's energy sector reforms may advance this prospect, but Chevron, Exxon, and other established multinationals have been waiting at the front of the line for contracts ever since President Lazaro Cardenas expelled them during his 1938 oil nationalization program. With oil unlikely to bring balance to Sino-Mexican trade relations, Presidents Pefia Nieto and Xi Jinping have turned instead to tequila, pork, and tourism. Here too, though, the search for complementarity will be an uphill journey. Even if the Chinese government reduces agricultural tariffs, encourages its citizens to visit the Mayan pyramids, and awards safety approval to Mexican foods and drinks, Mexican firms are in a poor position to grasp resulting opportunities.

With little access to loans, tax breaks, overseas promotion, and government start-up grants, most Mexican companies are struggling to compete in their own market, let alone in China. Their predicament reflects the legacy of an outdated industrial policy, introduced by President Miguel de la Madrid in response to Mexico’s 1981 oil crisis and the (consequently) unsustainable spending of his predecessor. Joining the international wave of state retrenchments and privatizations of the 1980s, Mexico internalized the economic ideology championed by U.S. president Ronald Reagan and UK prime minister Margaret Thatcher. Ever since then, government assistance in Mexico has focused on a narrow set of leading private firms in sectors such as automobiles, banking, and media. Represented by powerful industry associations, these enterprises secure tax concessions and the lion’s share of government funding for research and expansion (Schneider 2002).

Chinese competition has hit Mexico hardest in the manufacturing sector, which has lobbied against the relaxation of tariffs on Chinese imports and for greater government protection from the so-called China threat. Conscious that the sector accounts for 20 percent of Mexico’s $1.1 trillion gross domestic product, politicians eager for votes have heard the manufacturers’ call and have kept tariffs on most Chinese items at 35 percent. But in a nation beset by inadequate law enforcement and organized crime, high import duties have bred illegal countermeasures. Falsification of documents, collusion between Chinese exporters and the informal sector of the Mexican economy, and bribery of customs officials are commonplace, undermining public trust in the state’s ability to govern. A more effective industrial policy would rely less on import tariffs, broaden the tax base, and extend the funding and concessions enjoyed by big business to smaller, more dynamic enterprises. Chapter 2 shows that such an adjustment is tentatively beginning, and that its full implementation over time would build trust and cooperation where they are needed most: horizontally between Mexican businesses and citizens, vertically between state and society, and broadly between Mexico and China.

For Cuba and Mexico, China's economic impact reaches beyond trade and investment to the heart of industrial relations. Large enterprises— whether state owned or private— cannot by themselves effectively design and implement national responses to twenty-first-century globalization. The monolithic state-owned enterprises behind Cuba's agriculture and energy sectors, for instance, are not efficient and competitive enough to meet domestic demand, let alone profit from China's hunger for food and oil. Similarly, the small group of elite private firms at the helm of Mexico's automobile sector faces unprecedented challenges as Chinese car makers establish factories in Latin America and set their sights on the U.S. market.

Small businesses have an increasingly important role to play in Cuba and Mexico, but they will require support if they are to generate jobs, confidence, and stability. Both governments recognize this dynamic and are experimenting with policies to widen access to permits, finance, and markets. The reforms outlined in the Cuban government’s Lineamientos encourage self-employment in sectors ranging from tourism to education, particularly if independent providers can efficiently supply larger state-owned enterprises (Repüblica de Cuba 2011). Meanwhile, Mexico's reforms seek, among other things, to lower the cost of electricity, telecommunications, and finance for small businesses. These initiatives respond as much to domestic pressures as they do to global circumstances, including the erosion of citizens' trust in the capacity of their nations' public and private sectors to create economic opportunities.

In both countries the need for economic diversification, and proposals for achieving it, are documented in government statements, independent position papers, and academic literature. However, the pathway from publication to policy is less certain. Chapter 1 shows that the pace of Cuba's economic liberalization has been slowed by its expansive informal sector, which will continue to grow in the absence of functional wholesale supply chains. Chapter 2 points out that Mexican reforms that would augment opportunities for small businesses face competition from powerful lobby groups such as the Consejo Coordinador Empresarial (Council for Business Coordination) and the Consejo Mexicano de Hombres de Negocios (Mexican Council of Businessmen). These domestic dynamics highlight a broad challenge facing both countries: to see through policies that stimulate local initiatives in ways that build trust rather than erode it.

The chapters that follow show that government support should not be overbearing, even when it is needed to pull through the bad times, but neither should it fade away into complacency in the good times. As the economist Robert Reich once wrote, "economies are like bicycles. The faster they move, the better they maintain their balance unaided” (1982, 852). Cuba has found that economic bicycles do not accelerate under a domineering rider, while Mexico has found that when the road goes uphill bicycles cannot ride themselves.

HARNESSING OVERSEAS CHINESE NETWORKS

As global economic dynamism shifts to Asia, comprehensive responses require government engagement not only with businesses but also with people, especially those with professional and personal knowledge of China. To this end, the worldwide Chinese diaspora is a powerful but often overlooked human asset. Its associations, small enterprises, and cultural activities are the human face of China, and when appropriately supported, they have begun to play a critical role in the formation of bilateral trust.

For overseas Chinese actors, brokering trust across borders means balancing allegiances among their homelands, host countries, and local communities. David Palumbo-Liu writes that this “political strategizing” animates diasporic identities at least as much as nostalgia for home does (2007, 283). As the book’s case studies demonstrate, widespread perceptions that Chinese expatriates and descendants are eternally loyal to the Chinese motherland fail to appreciate their disposition to pursue the new opportunities for internal and external collaboration generated by China’s rise. Chinese authorities are partly responsible for perpetuating exaggerated notions of nationalist loyalty among overseas Chinese communities, describing them since imperial times as huaqiao (^e ffr). This term, writes Wang Gungwu, “was never used to depict the usual reasons for leaving home, such as to make a living, to trade, to seek one’s fortune, or to migrate in search for a better place to settle. Instead, it captured a sense of doing what had to be done, fulfilling duty.... But one thing is clear. Assimilated or not, the Chinese overseas did change. They have been variously adaptable, and they have demonstrated that the idea that ‘once a Chinese, always a Chinese’ is simply not true” (2000, 39 and 47).

Chinese migrant workers have been building bridges to Latin America since the sixteenth-century voyages of the Manila Galleons, which for over two centuries brokered trade between the Chinese and Spanish empires (see chapter 4). By the mid-nineteenth century Chinese migration to Latin America had begun in earnest, underpinning Philip Kuhn's observation that “emigration has been inseparable from China’s modern history... neither Chinese history lacking emigration nor emigration lacking the history of China is a self-sufficient field of study” (2008, 5).

To establish a foothold in Latin American economies, Chinese immigrants endured and sometimes overcame repressive work regimes and discriminatory commercial regulations. But their hard-won progress, writes Evelyn Hu-Dehart, provoked harsh responses: “The eventual success of Chinese in converting themselves into small urban business proprietors and the influx of free Asian immigrants to Latin America in ensuing decades were accompanied everywhere by anti-Asian agitation and mob action, as well as more organized state campaigns and persecution. In emulation of the U.S. Exclusion Act, Latin American governments in the early twentieth century enacted laws to severely limit further Asian, especially Chinese, immigration” (2007, 51). Discriminatory laws influenced Chinese patterns of trans-Pacific immigration, settlement, and commerce, but as Adam McKeown has argued, the impact of such laws was conditioned by specific contexts of place, time, and hierarchy (2001, 26-27). Social forces were as important as legal codes, evident in the formation of solidarity networks to navigate and circumscribe official rules. Membership in mutual aid associations provided protection from discrimination, pathways to employment, and finance for small business development. But the same associations also deepened the segregation of their members from broader civic and social landscapes, perpetuating a vicious circle of external hostility and internal protection. Every rotation of this circle broadened the perception that resident Chinese groups were closed and self-serving (Chang 1973; Hira 2007, 64—66; Oxfeld 1993).

Twenty-first-century anxieties about China’s growing global influence, intensified by the competitive apprehension of domestic manufacturers, have brought new pressures to bear on overseas Chinese communities. Ethnic associations continue to fill protective functions for their members, including providing alternative pathways for economic advancement, defense against discrimination, and mechanisms for bypassing regulations that are perceived to be inappropriate or unfair. Where external pressure has fomented in-group solidarity and loyalty over time, fairness is conceived not only in terms of individual advancement but also as the promotion of collective cultural and economic security (Hu- DeHart 2010; Velazquez Morales 2001). Family ties and ethnic allegiances have furnished network members with benefits such as start-up capital, market access, a flexible labor force, a loyal customer base, and informal advice about opportunities (A. Smart 1993; A. Smart and Hsu 2004; Y. Yan 2009).

While Chinese networks have sustained collective notions of exchange, loyalty, identity, and fairness, their informality and ethnic partiality have led them into conflict with host country laws and public values. Internal affinities among Chinese people and their descendants in Indonesia and Malaysia, for instance, provoked riots against them in the late 1960s and continue to complicate the multicultural agenda in both countries (Yahuda 1985, 222-23). Recent studies show that perceptions of ethnic favoritism have also generated hostility toward Chinese immigrants across Africa and parts of Latin America. Governments, businesses, and societies in both regions have struggled to incorporate Chinese immigrant groups into domestic structures of governance and commercial compliance.

The following chapters show that entrenched ideologies, in support of state socialism or market liberalism, have impeded government engagement with Chinese communities. Centralized regulations in Cuba are unable to accommodate the grassroots priorities and productive capacities of Chinese ethnic associations and neighborhood leaders. Meanwhile, the hypersensitivity of Mexican politicians and businesspeople to the opinions of voters and customers has prevented them from openly collaborating with resident Chinese entrepreneurs to leverage their unique potentials. Both states’ vertical linkages are too narrow to harness the capacities of the Chinese diaspora.

In Cuba, the revolution of 1959 led to the nationalization of Chinese businesses, the emigration of Chinese entrepreneurs to the United States, and mandatory recognition of the People’s Republic of China by Chinese ethnic associations. Twelve associations and their coordinating body, the Casino Chung Wah, survived these pressures and in the early 2000s were reinvigorated by the induction of over 2,500 enthusiastic second-, third-, and fourth-generation descendants. Biologically and socially integrated with Cubans of European and African origin, the island’s Chinese descendants have gradually climbed through the ranks of the associations and initiated a range of dynamic initiatives. These include hosting international conferences on Chinese cultural influences in Cuba, converting the associations’ canteens into thriving restaurants with investments from the state and foreign sources, and increasingly conducting commercial exchange with partners in mainland China. As the number of visiting Chinese diplomats and businesspeople grows, the Cuban state’s traditional strategies for inserting itself as an intermediary between local actors, foreign nongovernmental organizations, and visiting delegations cannot keep pace. Instead, as chapter 3 demonstrates, government officials are increasingly forced to deal with Chinese associations on their own terms, which include demands for recognition and resources.

In Mexico, macroeconomic tensions with China have not stopped enterprising Chinese community leaders from reaching out both to their motherland and to the Mexican state. In the northern state of Baja California, they have worked with the city governments of Tijuana and Mexicali to create trade networks that are beginning to produce concrete benefits. In contrast to the situation in Cuba, the number of first-generation Chinese immigrants in Mexico has grown rapidly since the mid-twentieth century, but owing to the undocumented status of many of them, Mexican scholars have little faith in official statistics. While the census of 2010 reports 6,655 Chinese-born people residing in Mexico, the Chinese embassy in Mexico counts three thousand as well as twenty thousand Mexicans of Chinese origin—with the majority of both groups employed in the food industry, trade, and to a lesser extent, bureaucratic professional services. The Overseas Chinese Affairs Office in Beijing calculates only half the number of naturalized Chinese people in Mexico, living primarily in the northern border cities of Tijuana and Mexicali, the urban metropolis of Mexico City, and the southern state of Chiapas. Unofficial counts from Tijuana and Mexicali indicate that these two cities alone are respectively home to 25,000 and 35,000 Chinese immigrants and their descendants, many of whom arrived since 2000 and are not legally registered. Whether in Mexico City or on the northern border, Chinese people speak of a division between old and new arrivals, the former descending from the Cantonese-speaking immigrants of the nineteenth and twentieth centuries, with corresponding ties to the Chinese National People’s Party (the Kuomintang, or KMT), and the latter hailing from the Mandarin-speaking urban centers of eastern China.

China’s growing influence in Mexico has subdued some of the differences between old and new arrivals and aggravated others. Since 2000 the Chinese government has offered commercial partnerships and orchestrated prestigious visits from senior officials to persuade Mexico’s Chinese associations to renounce recognition of the KMT and adopt Mandarin as their official operating language. However, the recent wave of Chinese immigrants, most of whom are Mandarin-speaking young people with little interest in traditional ethnic associations, remains disengaged from the older Cantonese-speaking communities and from Mexican society in general. These recent immigrants have generally focused on commercial activities, such as importing and retailing low-cost Chinese consumer goods, and have consequently drawn their predecessors’ scorn.

A string of conservative Mexican governments has been reluctant to engage with the nation’s Chinese diaspora. Chapter 4 shows that the need to integrate Chinese commercial activities into an enabling and clearly governed environment is becoming more urgent. The bilateral trade deficit, the expansion of the black market, and the growing tide of negative attitudes toward China are all good reasons for more assertive leadership from above. An even more poignant call to action is the illegal exploitation of Chinese workers in Mexican factories, a practice that Chinese associations have done little to stop and have sometimes supported.

The poor track record of Cuban and Mexican officials in working with Chinese communities is conditioned by contrasting ideological orientations, the Cubans favoring top-down control and the Mexicans almost complete neglect. As Chinese communities deepen their ties to the mainland, however, both governments are assessing the merits of closer engagement with the Chinese diaspora. This growing disposition to engage is motivated in part by fears that unregulated commercial exchanges could increase in step with deepening interpersonal ties, but it is also driven by hopes of leveraging local capacities to strengthen relations with China. Fueling these fears and hopes is a growing appreciation of the threats and opportunities posed by guanxi, social capital, and trust.

GUANXI, SOCIAL CAPITAL, AND TRUST. PERSONAL FAVORS OR PUBLIC GOODS?

The term “guanxi” (X #, meaning relationship or connection) encompasses a wide range of formal and informal exchange practices that are pursued for both affective and instrumental reasons. Traditions of reciprocity vary widely in meaning and purpose, but in most cases the "relationship must be presented as primary and the exchange, useful as it may be, treated as only secondary" (A. Smart 1993, 399). In the gradual construction of guanxi, each transaction should be treated as a step in a series of interactions designed to deepen the relationship and foment certainty, especially when formal legal and financial institutions are weak

(M. Yang 1994). In such contexts, guanxi has fostered the confidence necessary for foreign investment, informal loans, community mutual aid, and business partnerships (Hsu 2005; Keister 2002; J. Smart and A. Smart 2009; Velazquez Morales 2001). Unlike many Western conceptions of gifting, in which instrumental considerations taint supposedly pure emotional ties, Chinese Confucianism envisions the formation of affective relationships through the exchange of useful goods and helpful actions (Carrier 1999; Lo and Otis 2003).