China could overtake Australia as the biggest donor to Pacific nations, but only if Beijing follows through on its promises of aid and support that are currently billions of dollars short of being realized.
Despite pledging a similar amount of money to Australia, concerns remain over how many Chinese commitments actually translate into reality, and the type of loans extended by Beijing to poorer nations.
According to a new project from Australia’s Lowy Institute, a foreign policy think tank, China has pledged around $5.88 billion worth of aid to the Pacific since 2011, less than Australia’s $6.72 billion. During the same period, the US committed $1.36 billion in aid to the Pacific.
The Lowy project was supported by Australian Aid, a government agency.
While Canberra is still the biggest player in the region, ongoing major spending under Belt and Road – a colossal trade and investment project spanning 68 countries – could see Beijing leapfrog it. In Papua New Guinea alone, China has pledged billions of dollars to build roads and other projects, some of which is not reflected in the Lowy data because the deals are in their early stages.
Whether Beijing’s promises and highly publicized memorandums of understanding actually translate into anything on the ground is another matter however. During the 2011-2018 period, only around 21% of the money China pledged was actually spent, compared to 97% for Australia.
While China’s aid commitments would see it overtake Australia in the near future, Jonathan Pryke, director of Lowy’s Pacific Islands Program, was skeptical if actual spending would ever match Beijing’s promises.
“China is talking a big game in terms of its commitments to the region and that’s concentrated on one country, Papua New Guinea,” he said. “I’m not convinced China will (overtake) Australia. We have a much broader, much deeper degree of engagement than China has.”
Earlier this year, Australia’s Minister for International Development and the Pacific Concetta Fierravanti-Wells accused Beijing of constructing “useless buildings” and roads that “(don’t) go anywhere” while loading unsustainable debt onto poorer countries.
“It’s really important for investment to be productive that it actually has some economic dividend,” she said. “Burdensome debt can divert scarce public resources from more immediate needs such as health and education.”
Canberra concern
Some in Australia have expressed concern Canberra is losing out in influence to Beijing, as successive conservative governments have cut aid spending to the Pacific as China has upped its involvement.
“China has played an increasing role in the Pacific while (Coalition governments) have increasingly abandoned the region, relentlessly hacking at our aid funding and seeing an $11 billion cut to the development budget,” opposition Labor senator Penny Wong said in January. “Pacific island neighbors have felt the impact of these cuts.”
Pryke said that “if there’s an upside to Chinese engagement in the Pacific, other than bringing resources for development, it’s forcing Australians and New Zealanders to up their game.”
Australia has become increasingly gripped by concerns over Chinese influence in the country, and relations between Beijing and Canberra have deteriorated around the passage of an anti-foreign influence laws seen as targeting China.
A series of angry editorials and opinion pieces in Chinese state media when the laws were first introduced labeled them “disgraceful” and “absurd,” while Foreign Ministry spokesman Geng Shuang in February urged Australia to “abandon the cold-war mentality and ideological bias, stop making irresponsible remarks and work with China to promote the sound and steady development of China-Australia relations on the basis of mutual trust, equality and mutual benefit.”
In April, Australian Prime Minister Malcolm Turnbull expressed concern over unconfirmed reports that China planned to build a military base on the Pacific island nation of Vanuatu, some 2,500 kilometers (1,553 miles) from the Australian coast.
Vanuatu is one of several Pacific nations that, like PNG, have seen China increasingly outspending Australia in terms of assistance – or promising to, at least. Both China and Vanuatu denied in May that they’d ever been in talks over a military base.
While Canberra may be uneasy about a potential Chinese military presence near its borders, for its part, China has expressed concern over Australia’s involvement in the South China Sea, which Beijing regards as Chinese territory.
Canberra regards much of the sea as international waters and supports efforts to keep them open, but this has seen Chinese vessels challenging Australian warships in the past. Australia also recently invested in unmanned American spy drones to beef up patrols in areas including the South China Sea.
Beijing build up
Concerns over the amount of debt Beijing loads onto recipient countries have been raised outside of the Pacific.
A report last year found that China was poised to replace the US as the primary donor to the developing world, as Washington has pulled back from aid spending under President Donald Trump.
Over the period 2000-2014, China spent almost as much as the US, AidData executive director Brad Parks told CNN in October, “but the color of the money – even though they’re providing roughly comparable amounts – is very different.”
Much of the aid did not match OECD criteria for official development assistance – the type of spending most people think of with regard to overseas aid – and had “no detectable effect on economic growth,” AidData found.
Lowy’s Pryke said that Chinese projects are far larger and more headline-grabbing compared to other donors.
“The average size of an Australian aid project is a tenth of the size of a Chinese project. Whereas China has about 200 projects, Australia has over 4,000, so that gives you a sense of how spread out we are,” he said.
Given in the form of loans, such projects can create onerous commitments for developing nations, which may struggle to pay them back even as they see no tangible benefits.
In June, China’s Ambassador to Australia Cheng Jingye dismissed such concerns as “absurd.”
Speaking with regard to the Pacific, Cheng said “we have always been sensitive to any possible debt burden and any items that we have in cooperation with those countries, we are very careful about their ability to come back to the debt.”
The biggest concern for China hawks in Australia is that highly indebted projects in neighboring Pacific nations will go the way of Sri Lanka’s Hambantota port.
Late last year, Colombo handed over the port to Beijing on a 99-year lease to help service some of its massive debt to China, giving Beijing a major strategic foothold in the Indian Ocean as it expands its influence in the region.
