China constrained as much as controlling in the South Pacific

China’s engagement with the states of the South Pacific Ocean has accelerated in recent years. But while policymakers and academics increasingly talk about China’s growing influence, Beijing actually operates in the region under a number of constraints.

Since 2011, China has provided US$1.26 billion to the Pacific island countries, ranking it the second-largest donor in the region after Australia. Aid spending is expected to grow as the Chinese leadership enthusiastically promotes China–Pacific island cooperation under the framework of the Belt and Road Initiative (BRI).

Bilateral trade between China and the Pacific islands has also boomed. The trade volume reached US$8.2 billion in 2017, nearly a 10-fold increase from US$834 million in 2005. China’s imports increased from US$414 million in 2005 to US$3.48 billion in 2017. The number of annual Chinese tourists to the Pacific region also jumped from 3969 in 2008 to 143,398 in 2017.

China has been a catalyst for ‘new Pacific diplomacy’, a term that refers to the more active and diversified diplomacy that has been conducted by the Pacific island states in the past decade. Chinese President Xi Jinping paid his first state visit to the region when he landed in Fiji in November 2014. Pacific leaders such as Papua New Guinean (PNG) Prime Minister Peter O’Neill, Fijian Prime Minister Frank Bainimarama and Samoan Prime Minister Tuilaepa Malielegaoi have also visited China in recent years.

Fiji is a typical example of the Pacific islands’ increasing engagement with China. After the military rebellion in December 2006, Fiji’s traditional partners imposed political and economic sanctions and suspended Fiji’s membership to both the Pacific Islands Forum (PIF) and the Commonwealth. China filled the void by providing considerable diplomatic, trade and financial support, reaffirming Fiji’s ‘Look North’ policy to deepen cooperation with Asian powers. China also provided financial support to Fiji when it convened the Pacific Islands Development Forum in 2013, a new regional mechanism perceived by some as a challenge to the PIF.

Beijing’s presence is also felt even in Taiwan’s diplomatic counterparts in the region. China is the Solomon Islands’ largest trading partner, absorbing nearly two-thirds of its total exports, mainly lumber, in 2017. Closer economic links could affect diplomatic relationships. For instance, the Solomon Islands’ opposition has announced its intention to review relations with Taiwan.

China is the second-largest source of imports to the Marshall Islands, a US-associated state, accounting for more than one-fifth of its total imports in 2017. Palau, another US-associated island country, is China’s largest tourist destination among the small Pacific island countries. But recently, Chinese tourist numbers have decreased from 64,900 in 2016 to 57,866 in 2017. This may be due to Beijing’s intervention amid diplomatic competition between China and Taiwan.

China’s influence in the Pacific region faces significant constraints that limit China’s capacity to challenge — let alone replace — traditional powers. China’s low transparency levels in its engagements with the Pacific are one major issue. For example, the lack of data on Chinese aid to the region has created tension and bred speculation over China’s actual aid volumes and real motivations.

Australia and New Zealand have developed

 strong links to a wide range of actors in the

 Pacific countries, such as political parties

 (ruling and opposition), churches, non-governmental

 organisations, women’s groups and local communities

Although China has committed impressive amounts on paper to Pacific island countries during bilateral high-level visits and multilateral summits, actual disbursements remain a mystery. China’s insufficient communication in project construction has also led to tensions, particularly over labour use and environmental impact, both very sensitive issues in the region

China’s government-to-government approach also limits its outreach to the general public and civil society in the Pacific. Australia and New Zealand have developed strong links to a wide range of actors in the Pacific countries, such as political parties (ruling and opposition), churches, non-governmental organisations, women’s groups and local communities. China’s approach restricts its influence among these groups.

This is exacerbated by growing resentment of the Chinese business community’s overwhelming dominance of the island countries’ retail sectors. They are often seen as illegal migrants who bribe officials and sell inferior quality products, even though these particular issues usually stem from weaknesses in state institutions and high corruption levels. Chinese businesses are usually targets during social unrest, as seen in the riots in the Solomon Islands (April 2006) and Tonga (November 2006).

A recent concern with Chinese policy in the Pacific is debt. Concessional loans represent more than half of Chinese aid, relative to grants and interest-free loans. After a 5–7 year grace period, Pacific island countries are required to start repaying Chinese concessional loans. Concerns are growing across the Pacific over the risk of indebtedness and the potential for debt-for-equity swaps, such as in the infamous case of Sri Lanka.

These concerns have been waved aside by the Chinese Foreign Ministry as ‘irresponsible speculation’. Tonga is currently in the limelight, as they now owe between half and two-thirds of their total debt to China alone. Beijing temporarily shelved the issue by granting Tonga another five-year grace period in November 2018, but how Beijing ultimately deals with this issue remains unresolved.

China’s real influence in the Pacific has faced exaggeration by policymakers, the media and academia who fail to see all these tensions. Tensions will persist until the Pacific island countries figure out how to collectively engage with China, which they should given the opportunities available to them through the BRI. A good start would be to consider establishing common and regional criteria to regulate investment, as Dame Meg Taylor, Secretary General of Pacific Islands Forum, suggested.

China’s emergence as a superpower with deep pockets provides Pacific leaders with new financing options and more leverage against traditional regional powers, if done right.

Dr Denghua Zhang is a Research Fellow in the College of Asia and the Pacific at the Australian National University