China aid funding plummets as Pacific leaders ‘wake up’ to problems

China aid funding plummets as Pacific leaders ‘wake up’ to problems

October 30, 2022

China’s aid funding to the Pacific has plunged to its lowest level in at least 14 years, defying the common belief the emerging superpower is pouring money into the region to gain a strategic advantage over its Western rivals.

Australia remains by far the biggest provider of development grants and loans to Pacific nations, according to the Lowy Institute’s latest Pacific Aid Map, a detailed accounting of aid spending in the region.

Solomon Islands Prime Minister Manasseh Sogavare signed a wide-ranging security pact with China that alarmed Western leaders. Credit:AP

Australia spent $1.23 billion on Pacific aid in 2020, well ahead of the US on $375 million and New Zealand on $350 million.

China spent just $245 million on aid to the Pacific in 2020, its lowest level since the Lowy Institute began tracking development spending in the region in 2008.

China’s aid spending in the Pacific peaked in 2016 and has been falling ever since, even as the COVID-19 pandemic prompted a surge in assistance from other nations to the region.

Preliminary data show the decline in Chinese aid to the Pacific continued into 2021, a period marked by an intense “vaccine diplomacy” rivalry between the US and China in other parts of the Asia-Pacific.

The preliminary data shows Beijing invested just $145 million in Pacific aid last year compared to Australia’s $1.7 billion.

Pacific Aid Map program director Alexandre Dayant said China had a “supply and demand problem” when it came to development assistance in the Pacific.

“On the supply side, China’s economy is slowing down, so it appears there is less appetite for spending money abroad,” he said.

“We see the slowing down of the Belt and Road infrastructure initiative, with fewer projects committed around the world.”

On the demand side, he said Pacific leaders appeared to be “waking up” to the fact that Chinese aid projects could be of dubious quality and were often funded through loans that were difficult to repay.

Dayant said it was notable that China’s aid spending was concentrated on the Solomon Islands and Kiribati, the two most recent Pacific nations to switch diplomatic ties from Taiwan to China.

This showed China was still using aid to cement key relationships, he said.

Earlier this year, Solomon Islands Prime Minister Manasseh Sogavare signed a wide-ranging security pact with China that alarmed fellow Pacific and Western leaders.

Dayant said Pacific leaders had become increasingly skilled at playing the “China card” to secure more aid funding from other nations.

The Albanese government in last week’s budget announced it would provide an extra $900 million in development assistance to the Pacific over the next four years.

Total overseas aid to the Pacific, in the form of grants, loans and other financial assistance, grew from $3.3 billion in 2019 to $4.8 billion in 2020 according to the Lowy Institute.

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