China’s Growing Presence in the Pacific, and Local Reactions

T.note n. 52 (RISE series #13)

The rise of China has become a prominent phenomenon in international relations. In recent years, Beijing has made enormous efforts to boost its influence overseas. The Pacific region, consisting of 14 sovereign island states and a few island territories, is no exception. Since 2006, China’s presence in the region has become more visible. In addition to the increasing number of high-level visits, Chinese aid projects and commercial investment have also grown rapidly. Papua New Guinea (PNG) is the largest and most populous country in the Pacific. It is also China’s principal diplomatic and economic partner in the region.

The Chinese government has placed greater emphasis on the Pacific region in the past decade. In April 2006, China’s premier, Wen Jiabao, visited Fiji, the first visit by a Chinese premier in history, and inaugurated the China–Pacific Island Countries Economic Development and Cooperation Forum. The most significant measure pledged by Wen was US$643.1 million (RMB 3 billion) in concessional loans. The second Forum conference was held in Guangzhou in November 2013, when Beijing committed another US$1 billion in concessional loans to the Pacific over the next four years. A year later, Xi Jinping paid his first official visit to the region in the capacity of Chinese president and announced the elevation of the China–Pacific partnership to a strategic relationship of mutual respect and common development. He promised to grant 2,000 scholarships and 5,000 short-term training opportunities to Pacific Island countries over the next five years, and also invited them to participate in China’s Belt and Road Initiative.

In addition to Fiji, PNG is China’s most important partner in the Pacific region. Politically, the two sides have maintained frequent high-level visits. Since they entered into diplomatic relations in October 1976, the PNG government has maintained its support for the “One China” policy, despite a diplomatic drama in 1999 when Prime Minister Bill Skate’s government signed an agreement in early July to establish diplomatic relations with Taiwan in exchange for US$2.35 billion in grants and loans, although the document was repudiated when Bill Skate resigned two weeks later. Economically, PNG was China’s second-largest export market and largest source of imports in the Pacific region in 2016, amounting to nearly US$670 million and US$1,661 million respectively. PNG is also a main recipient of Chinese foreign aid to the region. Large-scale Chinese concessional loan projects are conducted in PNG, including the NCDC (National Capital District Commission) road upgrade in Port Moresby, an integrated government information system and the University of Goroka dormitory construction (phases 2-4). China also donated 133 Foton vehicles to support the 2017 national election in PNG. It has also helped the PNG government to prepare for the upcoming APEC summit to be hosted in Port Moresby in mid-November 2018, including assisting in the construction of a modern convention centre as the summit venue, which is China’s largest single grant aid project in the region.

Nonetheless, there are mixed reactions in PNG to China’s growing presence in the country and the region. Overall, the PNG government has taken a positive attitude to China’s rise and has been particularly keen to piggyback on China’s economic growth. Among the 14 Pacific independent states, PNG is the only state in trade surplus with China, partly because it started to export liquefied natural gas to the Chinese market in late 2014. More than a dozen Chinese state-owned enterprises have set up branches in PNG to seek commercial opportunities and some have focused on the extractive industry. The US$1.4 billion Ramu Nickel Mine in PNG’s Madang Province is China’s largest single investment project in the region. The PNG government has shown strong interest in boosting its economic development and upgrading its infrastructure with the support of Chinese funds. For instance, despite the twists and turns in project preparation, Prime Minister Peter O’Neill cut the ribbon to start the Pacific marine industrial zone project in November 2015. With the support of this project, funded with US$95 million of China’s concessional loans, the PNG government aims to turn the city of Madang into the new tuna capital of the world.

Prime Minister O’Neill visited China in July 2016. In their joint press release, the two governments pledged to achieve win–win cooperation by synergizing China’s 13th Five-Year National Development Plan and the Belt and Road Initiative with PNG’s Development Strategic Plan 2010–2030. The two countries also agreed to conduct a feasibility study on the establishment of a bilateral free trade agreement. Closer economic partnership has strengthened the PNG government’s support for China on global and regional issues such as the reform of the UN Security Council and China’s territorial disputes with some ASEAN states in the South China Sea. China’s economic success and development model have had an impact on the PNG government. To some extent, China has become a new option for PNG when it seeks external opportunities for economic and development cooperation. It has become a bargaining chip for the island country in acquiring more aid and benefits from traditional donors.

China’s growing aid, including scholarships and short-term training, has been welcomed. Take Chinese government scholarships as an example: a total of around 300 PNG students had studied in Chinese universities under these scholarships since 2016, and 35 students benefited from this program in 2016 alone. Based on a recent survey (conducted between July and August 2017) of Pacific recipients of Chinese scholarships, most of whom were from PNG, Pacific students have a positive view of the Chinese scholarship program overall. Some 87.5% of the students believed the Chinese scholarship programs would benefit their future career.

On the other hand, some PNG officials, scholars and civil society groups have reservations about China’s rise in PNG and the Pacific region at large. Concerns revolve around issues such as rising indebtedness associated with China’s rapidly growing concessional loan facilities, inadequate employment of Pacific workers in China’s aid projects, the use of at least 50% of Chinese materials in these projects, lack of coordination between China and other donors and the low quality of some aid projects. For example, as the Australian Broadcasting Corporation reported in February 2017, the cost of servicing and repaying PNG’s debts to China has risen more than tenfold in the past five years. In addition, the rapid expansion of Chinese small business into the island countries, coupled with local political complexity, has made them a target in occasional riots in Pacific Island countries such as PNG, Tonga and the Solomon Islands.

Looking to the near future, it is expected that Beijing will continue to increase its diplomatic and economic inputs into the Pacific region. This will undoubtedly strengthen China’s influence in the Pacific Island countries, although to what extent could be debated. At the same time, however, the aforementioned concerns will persist and even grow, which will demand more attention from the governments of both sides. More transparency and coordination and the involvement of more stakeholders in China–Pacific relations might help to reduce these concerns.

Denghua Zhang is a recent PhD graduate at the Department of Pacific Affairs, Coral Bell School of Asia Pacific Affairs at the Australian National University.

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