The Good and the Bad in China's Engagement in the Pacific

A boy sticks a Chinese flag into the ground. China is now the third-largest donor in the Pacific. Photo by: Ben / CC BY

China has steadily increased its aid to Pacific countries and is now the third-largest donor in the region, according to a new report published by an Australia-based think tank. The report adds that the Asian country’s aid to the Pacific is increasingly shifting focus away from diplomacy into a more interests-based approach.

There are both positive and negative trends in China’s development assistance record in the Pacific from 2005 to 2009, according to the report by Fergus Hanson, research fellow at the Lowy Institute for International Policy, and Mary Fifita of the SBS Australia.

The two experts observe that China’s recent truce with Taiwan helped eased its use of aid in the Pacific for diplomatic purposes, particularly to gain more influence than Taiwan in the region. China is beginning to largely consider the appropriateness and effectiveness of its aid approaches, as well as listen to Pacific countries’ request to allow more local workers and local products to be involved in Chinese aid programs, the report says.

Further, the report notes that China strongly follows through with much of its aid commitments, which in 2009 reached approximately $209.82 million for eight Pacific island countries, namely Cook Islands, the Federated States of Micronesia, Fiji, Niue, Papua New Guinea, Samoa, Tonga and Vanuatu. China only provides aid to these countries out of the 14 developing member nations of the Pacific Island Forum.

On a negative note, China has increased the percentage of the aid it provides as loans and consequently decreased the volume of its grants.  Of the total aid it provided in 2009, $183.15 million was given as loans while $26.67 million was provided as grants.

Hanson and Fifita explain that this setup could prove problematic to Pacific countries in the long run, given their limited ability to pay off loans. China does appear open to providing debt relief, the authors add.

The emerging donor country is also still largely secretive about the details of its aid programs in the Pacific and elsewhere although there are indications that it is gradually improving the transparency of its aid program, the report says.

Hanson and Fifita suggest four ways other major donors and Pacific countries can work together to encourage reforms in China’s engagement in the region.

- Australia, the United States and other major donors to the Pacific should continue engaging China in joint projects and in discussions on aid coordination and effectiveness. One possible area of cooperation is infrastructure, which Pacific countries need and China could provide at low cost. - Bilateral and multilateral donors should begin discussions on debt burdening and relief in the region. - The international community should put more pressure on China for it to improve the transparency of its aid program by elevating transparency concerns to multilateral venues such as the United Nations and the Group of 20. - Pacific countries should continue reporting all the aid they receive, including from China, and continue pressing the Asian donor to use more local laborers and materials.

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    Ivy Mungcal

    As former senior staff writer, Ivy Mungcal contributed to several Devex publications. Her focus is on breaking news, and in particular on global aid reform and trends in the United States, Europe, the Caribbean, and the Americas. Before joining Devex in 2009, Ivy produced specialized content for U.S. and U.K.-based business websites.