The South Pacific is a region known for its stunning natural beauty and remote locality. While an image of sandy white beaches and coral reefs appears etched into the world’s collective consciousness, the South Pacific islands are less known for their economic prowess and infrastructure development. This is a factor that has led South Pacific nations to become large recipients of foreign aid.
Traditionally, the two largest aid givers in the region were Australia and New Zealand. With Australia focusing primarily on Melanesia, and New Zealand on Polynesia, the two nations were seen as regional powerhouses; and such was the regional domination of Australia over the South Pacific that former Prime Minister John Howard even referred to it as “our patch.”
But times are changing. A new nation has emerged to become the region’s fastest growing foreign aid benefactor; and the second largest aid giver behind Australia. China. Over the past 10 years, China has supercharged its presence in the region. It has participated in 218 aid projects at a total value of US$1.8 billion. China is now the lead foreign aid benefactor to Fiji, and is poised to supersede Australia as the largest supplier of foreign money in Tonga and Samoa.
Historically, Chinese aid in the region has been associated with its ‘recognition war’ with Taiwan. While the vast majority of nations across the world recognise mainland China as the ‘real’ China, the South Pacific islands are an exception. Many of the island states, such as Kiribati, Nauru and the Solomon Islands, maintain full diplomatic relations with Taiwan; and found themselves handsomely rewarded as a result.
To combat this, the Communist Party of mainland China took to a strategy of ‘check book diplomacy’ in the region, aiming to buy influence in the hope of persuading nations to switch their recognition from Taiwan to the mainland. The island states were largely aware of this tactic though, and many have played both sides off against each other.
In recent times however, the reasoning behind Chinese aid in the region has shifted. As mainland China has become far more prosperous and powerful than Taiwan, it appears less intent on perusing the recognition war as the centrepiece of its South Pacific policy. Chinese aid in the region is now focused on economic and strategic gain.
Central to China’s ambitions in the region, is the opening up of new markets for its goods and services; and two-way trade between China and the South Pacific is rapidly growing. In 2014,
two-way trade stood at US$4.5 billion, but by the following year had risen to US$7.5 billion.
Conditions are also worked into many aid contracts to ensure Chinese economic interests. For example, some projects are financed with the stipulation that the contractors and labour used must be Chinese. In a way, such aid projects can be seen as the Chinese government paying Chinese companies and Chinese workers, in order to secure economic advantage overseas, and new markets for Chinese goods. A very sound and self-serving business model indeed.
However, it is impossible to look at Chinese actions in the South Pacific without seeing a clear strategic dimension as well. As China looks to build a blue-water navy, it will need friendly ports to dock its fleet; and the South Pacific islands are in a highly strategic location for influence in the Pacific Ocean as a whole. It thus makes strategic sense for China to foster good relations in the region through its spendthrift approach to diplomacy.
There are further reasons to suggest that Chinese actions are not purely economic. During a 2014 state visit to Fiji, President Xi vowed to increase defence cooperation between the nations; a statement signalling clear strategic intent. Some Australian officials fear China is gaining a strategic advantage close to their sovereign borders.
Australian officials have also criticised the nature of Chinese aid in the region. Recently, Australia’s International Development Minister Concetta Fierravanti-Wells said China was constructing “useless buildings” and “roads to nowhere.” In a rush to gain economic and strategic favour, many argue that China is building ‘white elephants’, or unnecessary infrastructure.
It gets worse. Indeed, Chinese aid to the region often takes the forms of concessional loans; While these loans are on favourable terms, they still have to be paid back; and for South Pacific nations with limited economic capabilities, repayments are often hard to make. In 2011 Tonga already had external debt to China that was equal to a third of its GDP. Samoa and Vanuatu are also facing ‘debt distress’ as a result of Chinese concessional loans. These monetary shortfalls are made all the more unpalatable if the money was used to finance under-utilised infrastructure.
It’s not feasible to imagine China replacing Australia and New Zealand as the region’s dominant influence through economic means alone. These two nations, and the South Pacific islands, have a shared history and close geographical proximity; as well as cultural ties that provide a deeper and more lasting relationship than Chinese money can offer. Australia and New Zealand also contain significant immigrant populations from South Pacific nations, further adding to the cultural connection.
However, it appears that China now has a permanent presence in the South Pacific. The current regional powers of Australia and New Zealand will need to adapt and respond to secure their own interests in the region, as the South Pacific gains evermore economic and strategic significance to the rising Chinese superpower.
Oliver Friendship is an Australian journalist.