‘More smoke than fire’: China’s Pacific aid falls short of pledges

In 2017, the government of Papua New Guinea announced a long-awaited A$4.1 billion ($2.6 billion) upgrade of the country’s potholed highway network, to be funded by development loans from China.

Five years later, the project, which was to be carried out by the state-owned China Railway Group, has stalled as none of the planned 1,600 km of roads have been upgraded or replaced.

The project’s achievements reflect a decline in Chinese foreign aid to the Pacific region a decline over the past six years that contrasts with Beijing’s efforts to increase its influence in the region.

Alexandre Dayant, a Lowy Institute project manager that charts aid across the Pacific region, said China’s spending over the past decade has not always lived up to its promises.

“China is committed to massive infrastructure projects worth hundreds of millions of dollars. But there was a very big difference in what China committed to what it spent on the ground,” Dayant said. “There’s more smoke than fire.”

According to Lowy’s research, Chinese foreign aid spent in the Pacific region — made up of grants and concessionary loans to fund construction, infrastructure and other projects — fell from a peak of $334 million in 2016 to $188 million in 2020.

Beijing was confident Pursuing Security and Development Agreements in the Pacific this year. But Dayant said Lowy’s data suggested Chinese aid had continued to fall in 2021, arguing there was “less appetite” in the country than before to fund development abroad.

The 2020 total was the lowest year recorded for China since Lowy began tracking aid to the region in 2008. China does not publish its own aid data.

China’s foreign ministry declined to comment on the data showing a drop in aid spending in the region. A ministry spokesman said the country is “continually committed” to helping Pacific island nations enhance their “self-directed development” and build a closer “Sino-Pacific community” together.

The government of Papua New Guinea and the China Railway Group did not respond to requests for comment on the stalled road project.

Chinese Foreign Minister Wang Yi and Fijian Prime Minister Frank Bainimarama attend a joint press conference in Fiji

China remains a force in the Pacific and has focused its support on islands that have acquired diplomatic recognition from Taiwan © Leon Lo/AFP/Getty Images

Neelesh Gounder, a lecturer in economics at the University of the South Pacific in Fiji, said Chinese loans have been more accessible than those traditionally offered by the World Bank and the Asian Development Bank and this has brought countries in the region closer to Beijing.

However, he said there have been many problems implementing projects with local partners and many of the plans have stalled. “The implementation rates are so low on Chinese projects compared to Australian funded projects.”

Dayant said some Pacific countries have also “woken up” to the dangers of taking out huge Chinese loans for expensive projects they don’t need.

Some islands have been left with Chinese-funded “white elephants,” such as B. a underutilized $16 million convention center in Vanuatu this proved too costly for the country to properly maintain.

Charles Edel, the Australian head of the Center for Strategic and International Studies think tank, said China is still trying to use foreign aid to expand its presence and influence in the Pacific.

“Beijing was looking for strategically located properties that would allow it to project power outward and further influence the politics of the broader Indo-Pacific region.”

Edel cited reports of Chinese-owned companies planning to build deep-sea ports and airfields in Kiribati, Papua New Guinea, the Solomon Islands and other Pacific locations, projects that may have been funded with foreign aid.

The Lowy data showed that total aid to the region rose to $4.2 billion in 2020 from $3.1 billion a year earlier, as donors such as the Asian Development Bank sought to help Pacific nations To help manage the impact of the coronavirus pandemic on migration and tourism, two of the most important foundations of their economies.

The US nearly quadrupled the amount it spent on aid to the Pacific between 2016 and 2020 to $258 million, the data shows. The US has made new commitments this year, some promising $210 million to tackle climate change and maritime security over the next decade.

Australia has consistently been the largest source of development assistance to the Pacific over the past two decades, providing more than A$1.4 billion in 2020 alone. And Canberra has made improving relations with other Pacific nations its top priority since Anthony Albanese’s Labor government was elected in May.

In last month’s budget, Australia committed to increasing direct development assistance to the Pacific region by around A$900 million over the next four years. A further A$147 million will be invested in national security and communications projects, while the Australian Infrastructure Finance Facility – which provides loans and grants to Pacific projects – has been increased from A$3.5 billion to A$4 billion.

Dayant said the Australian government’s increased ambition, as well as the re-emergence of the US as a donor, had made Pacific infrastructure development a “more crowded place”.

Still, China remains a force in the region, despite renewed efforts by Australia and the US to regain influence.

Dayant said Beijing focused on the Solomon Islands and Kiribati after them shifted diplomatic recognition from Taiwan to China. The Solomon Islands received a total of $25 million in Chinese aid in 2019 and 2020, while Kiribati received $21 million in 2020 alone. Neither had previously been recipients of Chinese aid, according to Lowy data.

“China has not given up using foreign aid to cement important ties,” Dayant said.

Additional coverage by Maiqi Ding in Beijing

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