Chinese aid to the South Pacific is increasingly targeted toward the country's political allies in the region, an independent Australian thinktank reported this week. This is happening amid a declining appetite for Chinese credit, and as the US and China jostle for influence.
Chinese economic influence over the 14 Pacific island nations dependent on aid is dwindling because of better loan deals being offered by allies of the US – especially Australia, the Sydney-based Lowy Institute said in its annual analysis of aid to the region.
Focus on the strategic competition in the South Pacific has heightened since China signed a security pact with the Solomon Islands last year that raised the prospect of a Chinese naval foothold.
France, among other stakeholders in the region, is worried about China's influence in the region.
According to researcher Daryl Morini, in a brief for the Australian National University, anti-independence forces argue that independence from France "will inevitably result in New Caledonia being strategically dominated by China".
Diplomatic allegiances
China has increased aid to the Solomons and neighboring Kiribati since they switched diplomatic allegiances to Beijing from self-ruled Taiwan in 2019, the report said.
The United States has sought to counter Chinese influence in the region with additional diplomatic and economic engagement. President Joe Biden recently hosted Pacific Island leaders at the White House.
China’s overall aid to the island states in 2021 – the latest year for which the international policy thinktank has comprehensive data – was $241 million.
That year continued a downward trend in Chinese grants and loans to some of the world's most aid-dependent countries since its $384 million peak in 2016, the institute reported.
Today, we are releasing the 2023 edition of the @LowyInstitute Pacific Aid Map, the most comprehensive database of aid and development flows to the #Pacific ever assembled. Here are several of our key findings for this year’s edition 1/
— Alexandre Dayant (@AlexandreDayant) October 30, 2023
Check it out on https://t.co/z8G6DW5o2Z
The latest report revises previous Chinese annual contributions based on additional data but maintains the downward trend.
“It reflects a strategic shift to reduce risk, cement political ties and enhance capital returns,” the report said.
China’s $3.9 billion aid to the Pacific since 2008 was primarily directed to countries with official diplomatic ties to Beijing. These include Cook Islands, Fiji, Micronesia, Niue, Papua New Guinea and Samoa.
“Because China only provides ODF (official development finance) to a subset of Pacific countries, it can play an outsized role in these countries that belies its moderate role share of total regional financing,” the report said.
China was only the third-biggest aid contributor to Pacific after Australia, which provides 40 percent of aid, then the Asian Development Bank, the report said. China’s contribution since 2008 has been 9 percent.
The decline in Chinese aid has been driven mainly by a lack of Pacific government interest in Chinese loans that have left Pacific countries, including Tonga, heavily in debt. The US has warned that Chinese finance is a debt trap for poor countries that threatens their sovereignty.
“What is very clear is that the interest from Pacific governments in Chinese loans, specifically infrastructure loans, has declined,” Lowy researcher Riley Duke said. “It’s just being outcompeted.”
China held a third share of the infrastructure investment in the Pacific market two decades ago, but that proportion had since halved, the report said.
French concerns
France itself repeatedly warns against "hegemonism" in the region, with Macron pointing out in a 2021 speech in Papeete, the capital of French Polynesia, that "the small needed a big power" to protect them from the "incursions of the hegemon which come to take their fish, their technology and their economic resources". He did not mention China by name.
But according to the 650-page report by France's Defence Ministry, China does exert influence in the independence movement in New Caledonia, and Paris remains wary of China's growing interest in the Solomon Islands.
(with newswires)
