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

Photo: Chinese Embassy in PNG/Twitter

Beijing’s development spending has fallen despite efforts to build influence in the region.

In 2017, Papua New Guinea’s government announced a long-awaited AUD$4.1bn (US$2.6bn) upgrade of the nation’s potholed highway network that would be funded by development loans from China.

Five years on, the project, which was to be undertaken by the state-owned China Railway Group, has stalled, with none of the planned 1,600km of roads improved or replaced.

The project’s fortunes reflect a fall in Chinese development aid to the Pacific region over the past six years, a decline that contrasts with Beijing’s efforts to increase its influence in the area.

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

“China 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 development aid spent in the Pacific region — made up of grants and concessional loans to fund construction, infrastructure and other projects — fell to US$188mn in 2020 from a peak of US$334mn in 2016.

Beijing has been assertively pursuing security and development deals in the Pacific this year. But Dayant said the Lowy data suggested Chinese aid had continued to fall in 2021 and argued that there was “less appetite” in the country than before to fund overseas development.

The 2020 total was the lowest annual figure recorded for China since Lowy started tracking aid in the region in 2008. China does not publish its own data on aid.

China’s foreign ministry declined to comment on the data showing decreasing aid spending in the region. A ministry spokesperson said the country was “continuously dedicated” to providing assistance to Pacific island nations to enhance their “self-driven development” and to jointly build a closer “China-Pacific community”.

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

Neelesh Gounder, senior lecturer in economics at the University of the South Pacific in Fiji, said Chinese loans had been easier to access than those traditionally offered by the World Bank and Asian Development Bank and this had pushed countries in the region closer to Beijing.

However, he said there had been many problems delivering projects with local partners and many of the plans had stalled. “Implementation rates are so low for Chinese projects compared to Australian-funded ones.”

Dayant said some Pacific countries had also “woken up” to the dangers of taking huge Chinese loans for expensive projects they did not need.

Some islands have been left with Chinese-financed “white elephants”, such as a little-used $16mn convention centre in Vanuatu that proved too costly for the country to properly maintain.

Charles Edel, the Australia chair of the Centre for Strategic and International Studies think-tank, said China was still looking to use development aid to expand its presence and influence in the Pacific.

“Beijing has been on the hunt for strategically located real estate 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 seeking to develop deepwater ports and airfields in Kiribati, Papua New Guinea, the Solomon Islands and other locations across the Pacific, projects potentially funded with development aid.

The Lowy data showed overall aid for the region rose to US$4.2bn in 2020 from US$3.1bn a year earlier, as donors such as the Asian Development Bank sought to help Pacific nations cope with the coronavirus pandemic’s impact on migration and tourism, two bedrocks of most of their economies.

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

Australia has consistently been the largest source of development aid to the Pacific over the past two decades, providing more than AUD$1.4billion (US$924 million) in 2020 alone. And Canberra has made improving relations with other Pacific nations a top priority since the election of Anthony Albanese’s Labor government in May.

In last month’s budget, Australia committed to increase direct development aid to the Pacific region by around AUD$900 million (US$594 million) over the next four years. An additional AUD$147million (US$97 million) will be invested in national security and communications projects, while the Australian Infrastructure Financing Facility — which provides loans and grants for Pacific projects — was increased to AUD$4bn (US$2.64 million) from AUD$3.5bn (US$2.31 million).

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

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

Dayant said Beijing had focused support on the Solomon Islands and Kiribati after they switched diplomatic recognition to China from Taiwan. The Solomon Islands received a total of US$25mn in Chinese aid in 2019 and 2020, while Kiribati received $21mn in 2020 alone. Neither had previously been recipients of Chinese aid, according to the Lowy data. “China has not given up on using development assistance to cement key relationships,” Dayant said.