‘Playing the China card’ or a serious regional threat? Timor-Leste’s new deal with Beijing

Timor-Leste's prime minister Xanana Gusmão meets a Chinese rear admiral in Dili. The upgrading of relations with Beijing has rattled governments across the regions – including Indonesia and Australia. Photograph: Valentino Dariel Sousa/AFP/Getty Images

It lies just to the north of Australia, but the tiny and impoverished country of Timor-Leste is strengthening ties with China as it faces a looming fiscal crisis – a move that comes after decades of mistreatment by Canberra and raises difficult questions for its leaders.

Timor-Leste, which is situated 680km from Darwin and has massive and untapped undersea resources, surprised the region last week when it formally upgraded bilateral relations with China. A joint statement included plans to enhance military cooperation and explore developments of Timor-Leste’s oil and gas resources.