Sunday 10 Oct 2021 | 03:43 | SYDNEY
Sunday 10 Oct 2021 | 03:43 | SYDNEY

China: Stumbling through the Pacific


Fergus Hanson


22 July 2009 11:54

A Policy Brief I launched today provides the latest estimate of China’s aid program to the Pacific. It confirms China’s status as a new major donor to the region, but raises questions about whether it has a long-term strategy guiding its approach to aid, beyond the diplomatic tussle with Taiwan.

China’s pledged aid to the Pacific in 2008 was US$206 million. That includes US$53 million in grants and US$153 million in soft loans. That means China is giving aid at similar levels to major donors like New Zealand, Japan and the European Community.

But there are four reasons that suggest China’s approach is mired in short-termism rather than long-term vision.

First, its aid is unpredictable. Trend data suggests its aid fluctuates dramatically between years. In Micronesia for example, new pledges in 2008 were worth just 28% of those pledged the previous year.

Second, the infrastructure it builds fails to consider ongoing maintenance costs, tends to load small Pacific states with enormous debts and offers few flow-on benefits to the local economy. Samoa for example, now has a  US$13 million swimming pool complex that would be beyond the means of many larger states to maintain. The Cook Islands — population 21,000 — has borrowed almost US$10 million for sporting facilities. All of these projects are built by Chinese contractors using mostly Chinese materials and labour, reducing flow-on benefits to domestic economies.

Third, China’s secretive approach to aid giving — it regards the details of its aid program as a state secret — breeds suspicion among recipients as well as donors. The report finds that China does not disclose to recipients the actual costs of the projects it builds, leading to the suspicion China might be overstating the value of these projects to force Pacific countries to take out larger loans than necessary. Whatever the merits of this argument, this needlessly secretive approach clearly undermines China’s reputation and image. 

Finally, China has decided to over-engage the interim regime in Fiji, by reserving its largest aid pledges in the Pacific for the dictatorship there. This is despite the fact the interim Government lacks broad support, that Bainimarama’s credibility has been undermined through his failure to pursue his promises, and that his leadership is not a guaranteed long-term proposition if past Fiji coups are any guide. That suggests a fairly risky approach by China to position itself in Fiji over the longer term.

The cause of all this is the long-running diplomatic battle with Taiwan. The recent truce offers China the chance to re-focus its aid program in the Pacific on longer-term development outcomes that better serve Chinese and regional interests.

It should take the time and devote the brainpower to review its approach. Its current 'strategy' is undermining its long term interests and damaging its reputation, which is unfortunate when you consider the opportunities China's engagement offers the region in the form of new markets, low-cost infrastructure and lessons from its own successful development.

Photo by Flickr user temp13rec, used under a Creative Commons license.