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Release peace: the magazine

Release peace: the magazine

Analysis & Background Stories on International Affairs

What a small Pacific island nation tells us about the world's most important power struggle.

Article by: Dominika Urhová

First some background

It is the year 2006 and Fiji’s interim government is facing international isolation and abandonment. Fiji’s post-coup economic climate, crippled by sanctions and suspended aid flows, is in chaos. But the vacuum does not last for long. Instead of lashing out at the international community, Fiji turned to its old friend, China, to come to the rescue. It is not the first time China participated in aid provision to the Pacific region. Since the 1950s China has cooperated with the small yet geographically and politically crucial Pacific Island countries. With China becoming an economic giant, its engagement has grown enormously in scale and significance. In response, the traditional players in the region, especially Australia and New Zealand, are becoming concerned. So too are some Western media. But is that justified?

What is known about China’s engagement in the region?

First things first: the perceived reasons behind China’s journey in the Pacific. With its ever expanding economy comes a growing need for natural resources. Some Western pundits therefore conclude that China is simply seeking to secure resources in the Pacific. One commonly touted example for how China might go about this is its deal with Angola, in which China accepts oil deliveries as repayment for loans made to the government. A similar strategy could work in the Pacific, too, as the region, though lacking in oil, is rich in minerals and fisheries. A good theory, but it is not borne out by the evidence. The book “China in Oceania: Reshaping the Pacific?”, by Wesley-Smith & Porter presents one of the most comprehensive accounts of Chinese presence in the Pacific. It found that while China’s need to secure natural resources is growing exponentially, empirical evidence does not suggest that the focus of its involvement in the Pacific is the exploitation of the region’s natural resources. A study by Philippa Brant, a well-regarded researcher from Australia's Lowy Institute focusing on China’s foreign aid policy, likewise supports this conclusion. Quite interesting, isn't it?

This brings us to the second common fear in the West: The dark art of debt-trap diplomacy. You remember the infamous Hambantota Port deal in Sri Lanka? In this deal, China forgave a significant portion of Sri Lanka’s debt in exchange for control over the country’s second largest port, for a mind-blowing 99 years. The underlying strategy here is simple: by providing easy access to cheap loans, China supposedly induces financially vulnerable countries into a debt-trap and uses their inability to service their debt as leverage to gain economic concessions or political support. However, contrary to popular belief, researchers at Australia’s Lowy Institute have found that not only are traditional donors the dominant lenders in the majority of the Pacific but also that the rising levels of indebtedness experienced by countries such as Tonga, Vanuatu and Samoa are linked to the region’s vulnerability to climate change and external risks, rather than examples of China’s aggressive lending strategies. Therefore, while it is true that high levels of indebtedness are becoming a serious problem, it is wrong to assume that all countries that have debt-servicing problems receive most of their finances from China or that the recipient countries’ governments do not have an active role to play in determining the scale and frequency of loans.

So why is much of the news dominated by a heated debate about the implications of China’s involvement in the Pacific?

Australia, New Zealand and the United States consider the Pacific to be their traditional sphere of influence. And it is reasonable that influence goes hand in hand with responsibility. These traditional donors have expended considerable effort on promoting good governance, human rights, and combating corruption in the region. China, on the other hand, subscribes to a policy of non-interference in the domestic affairs of other countries. This can pose a challenge to the status quo in the Pacific. Remember the case of Fiji from the beginning? Chinese aid to the country basically took the bite out of the West’s punitive withdrawal. And that example may have exacerbated the fears of traditional donors about the status quo.

The example of increased Sino-Fijian cooperation in recent years goes to show that new financial opportunities are likely to enable Pacific Island countries to have more freedom in diversifying the sources of their foreign aid based on terms and conditions that best fit their individual interests. But while China’s engagement in the region has increased in recent decades, traditional donors are and will remain the main financiers in the Pacific for some time to come: According to the Pacific Aid Map, created by the Lowy Institute, throughout 2006-2020 China has committed a total of $8bn. In comparison, Australia's commitment alone totals $13 bn with the United States and New Zealand each committing $2bn throughout that period. The traditional donors have also introduced the 'Pacific Step-Up' (Australia), 'Pacific Reset' (New Zealand) and 'Pacific Pledge' (United States) policies to beef-up their support to the region. All this shows the effort of the traditional donors to maintain their status as primary providers of development assistance in the future.

The power of agency

We can for now conclude that Chinese aid will not become a clear-cut alternative to the West. And one of the main reasons is that most Pacific Island countries still view it as complementary to that of the traditional donors. The pivotal fact is that Pacific Island countries have their own agency and are willing and capable of making their own decisions. These countries have repeatedly shown their ability to steer Sino-Pacific cooperation in their own favour and so far they have been pretty smart about it. So while talking about China's intentions is important, one should not forget about the power of having the ownership of one's own development strategies, something the Pacific island countries proved they have.

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