Cash Helped China Win Costa Rica’s Recognition

The Chinese government bought $300 million of Costa Rican bonds in an effort to get the country to switch its diplomatic recognition from Taiwan to the PRC. From the New York Times:

The deal shows that China is using its $1.8 trillion in foreign exchange reserves, the world’s largest such cache of foreign currency, to further its political goals, despite promises that it would not do so.

As China’s economic might has risen in recent years, so has concern about its international reach, particularly in the United States. China is thought to be the largest foreign holder of United States government-backed debt, and bankers estimate that $1 trillion of China’s total foreign exchange reserves are in American securities.

The terms of the agreement were meant to be kept secret, according to La Nación, a Costa Rican newspaper, but the government was forced by the constitutional court to publish the memorandum of understanding signed by both countries, as well as other documents. The court considered the information to be in the public’s interest.

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