China has become a ′major donor′ in the Pacific Islands region | Asia| An in-depth look at news from across the continent | DW | 03.03.2015
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China has become a 'major donor' in the Pacific Islands region

China is on track to overtake Japan as the third largest donor to Pacific Island nations. In some countries, Chinese aid amounts are already rivaling that of traditional partners, as analyst Philippa Brant tells DW.

Beijing's foreign aid program in the Pacific Islands region has been growing over the past years. But there are misperceptions about its actual size, reach, focus, and purpose, which, in part, stem from the lack of information about Chinese aid activities. But new data published by the Lowy Institute on March 2, reveal that since 2006 China has provided $1.4 billion in foreign aid to eight Pacific Island countries - the Cook Islands, Federated States of Micronesia (FSM), Fiji, Niue, Papua New Guinea (PNG), Samoa, Tonga, and Vanuatu.

China has also held two main regional meetings (2006 and 2013) in which it announced a range of aid measures to strengthen economic development and diplomatic engagement with the region. Beijing also provides support to key regional organizations, particularly the Pacific Islands Forum Secretariat. In addition to its bilateral aid program and support for regional organizations, China also provides scholarships for Pacific Islands students and significant human resources training for government officials, according to the Sydney-based institute.

To illustrate this development, China aid researcher Dr Philippa Brant put together data from over 500 sources, including budgets, tender documents and government statements to come up with an interactive map which gives a detailed picture of China's aid to eight Pacific Island countries.

In a DW interview, Dr Brant talks about China's aims in the region, the risks involved in these financial commitments and which countries have profited most from Chinese aid thus far.

DW: How has China assisted Pacific Island nations over the past years?

Dr Philippa Brant: China's large and growing aid program is strongly felt in Pacific Island countries. Since 2006, China has provided $1.4 billion in foreign aid to the 8 Pacific island countries that it has diplomatic relations with, plus Timor-Leste. China is on track to overtake Japan to become the third largest donor in the region. However, Australia still dominates. Between 2006 and 2013, Australia provided more than six times the amount of aid than China ($6.8 billion compared with $1.1 billion).

China provides aid in the form of grants and concessional loans. Concessional loans have become a dominant feature of China's aid to the Pacific since 2006, accounting for almost 80 percent of the total aid provided. Many of these loans have been used to build infrastructure, such as roads and hospitals.

Which countries have profited most from Chinese aid?

Papua New Guinea and Fiji have received the most aid from China since 2006. This makes sense, as they are the two largest economies in the region. However, China has also provided substantial support to smaller countries, like Vanuatu and Samoa.

Why are these nations turning to China for support and how badly is Chinese aid needed in this region?

Many countries in the Pacific Islands region have significant development challenges, ranging from healthcare to infrastructure to climate change. Although countries receive substantial assistance from traditional partners like Australia and New Zealand, there has been a need for further assistance, particularly in the infrastructure sector.

Pacific Island countries have liked to highlight China's support, though in reality, they regard it as complementary to traditional donor assistance, rather than as an alternative.

How does China profit from providing this aid to these countries?

China, like all countries, provides aid for a number of reasons: economic, diplomatic, and political. In the Pacific Islands region, China is hoping that its assistance will help demonstrate that it is a responsible power that supports other developing countries.

Fiji Land und Leute

Fiji is one of the countries that have received the most aid from China since 2006

In the past, its aid has been used to win diplomatic support vis-à-vis Taiwan. It's also part of its 'go global' policy, providing Chinese companies with an opportunity to increase economic ties with Pacific Island countries.

What are the risks involved in these financial commitments both for China and the Pacific Island nations?

The main concern with Chinese aid in the Pacific at the moment is the high level of debt that some countries are now in, having taken on large Chinese loans. For example, Tonga's external debt sits at 44 percent of GDP. Concessional loans from China account for 65 percent of this debt stock. Although Tonga was able to get payments deferred for 5 years, there are concerns about its ability to repay and what the longer-term implications of this will be.#links

How much do you expect China's aid commitment to develop in the coming years?

At the second China-Pacific Island Countries Economic Development and Cooperation Forum, held in Guangzhou in 2013, China pledged $1 billion in concessional loans (plus another $1 billion in commercial loans from China Development Bank).

Although not all Pacific Island countries will be in a position to take on more loans, countries like Papua New Guinea, Fiji, and Vanuatu are already negotiating new Chinese loan-funded projects. So we should expect to see China's aid continue to increase in the next few years.

Dr Philippa Brant is a Research Associate working with the Research Director of the Australia-based Lowy Institute. Her research interests include Chinese aid, development in the Asia-Pacific region, and China as a global actor.

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