China’s One Belt One Road initiative has hit a road block in the most unlikely place – the Polynesian kingdom of Tonga.
In 2006, at least 60% of the central business district in Tonga’s capital Nuku’alofa was destroyed in riots as pro-democracy protestors took to the streets. The only way the government could afford to rebuild the area was to borrow around $160m from China’s Export Import Bank.
The loans were controversial at the time – critics called them an exercise in “debt-trap democracy” – and earlier this month Tonga’s prime minister Akilisi Pohliva said the country would soon start paying them back – while continuing to do its utmost to persuade China to waive the debt. So far China, while extending the loan period, has ignored such requests, even when made in person by Tupou VI, the King of Tonga.
The repayment will be difficult as Tonga is still recovering from tropical cyclone Gita which struck the main island Tongatapu, inflicting $210m worth of damage – roughly a third of the country’s GDP.
To make matters worse, much of the money earmarked for reconstruction was re-loaned to Tongan businesses, which haven’t repaid their debt to the government. Australian academic Graeme Smith says: “How well China’s aid is used comes down to the state of governance in the recipient country. If the recipient can’t handle the money sensibly – and transparently – you get problems like this.”
Tonga isn’t the only Pacific island nation in hock to China. Vanuatu owes $220m – half its foreign debt – to Chinese banks. Samoa’s debt stands at $416m. Australia’s shadow foreign minister Penny Wong recently called for the government to launch an infrastructure fund to provide neighbouring countries with an alternative. (The US government’s Overseas Private Investment Corporation and the Japan Bank for International Co-operation launched a similar venture late last year.)
China’s growing influence in the South Pacific – if anything its ties to Samoa seem to be strengthening – reflects its financial clout. According to a recent report from America’s William & Mary University, it spent $48bn in East Asia and the Pacific between 2000 and 2016, 95% of which was invested in infrastructure.
With such deep pockets, the Chinese government has been increasing aid to Papua New Guinea, Australia’s closest neighbour. In April, Australian newspapers claimed that Chinese officials had sounded out Vanuatu’s government about building a permanent military base there, less than 2,000km from the Australian coast. Chinese diplomats called the report “groundless”.
In fairness, China insists that Australia and New Zealand’s concerns are misplaced and that, as the South China Morning Post urged in an editorial, “they should be rethinking their aid programmes, diplomacy and outdated policies and working with China to improve lives in the South Pacific”. The Vanuatu government has pointed out that it could find no other donors to help build a new parliament and a new wharf, the longest in the South Pacific, at Luganville.
Yet at the same time, cynics seized upon a remark by one Chinese political commentator who talked hopefully of a maritime silk road, a “capacious exclusive economic zone, boasting fishing and marine resources with huge potential for exploitation”.
Alarm about China’s influence has prompted Australia’s federal parliament to pass new laws against foreign interference – aimed at countering what the government says is intense espionage activity by the People’s Republic.
The political relationship between China and Australia has become more complicated as their economic ties have deepened. In 2017, China accounted for around a third of Australia’s exports – including four-fifths of its iron ore exports – and 21.5% of its imports. There are also at least 200,000 Chinese students in Australia.
The Chinese controversy has already wrecked one promising political career in Australia. Last December, Labor Senator Sam Dastyari was forced to resign over his relationship with Huang Xiangmo, a political donor with links to the Chinese government, which led opponents to dub him “Szechuan Sam”.
Yet some Australian states see China as a useful source of cash – in 2015, the Northern Territories raised $504m selling the port of Darwin to Chinese group Landbridge, a deal that provoked a personal protest from then-president of the US Barack Obama.
Whatever happens in Tonga, Samoa and Vanuatu is not going to wreck One Belt One Road or the 21st century maritime Silk Road project. Yet China needs to handle its debtors carefully and be seen as not behaving like a new colonial power.
Fears that China was exporting a new kind of colonialism gained credence after a remarkable incident in Fiji on 4 August 2017. The China Southern airline doesn’t normally fly to the island but on that day one of its planes made an unscheduled stop at Nadi International Airport. After dark, buses pulled up along the plane, dozens of Chinese security police filed out and dragged 77 manacled people off the buses and onto the aircraft, which then flew off.
The Chinese government said the people were scam artists but Australian journalists claimed that many of them were teenage girls, possibly sex workers. It was later revealed that Chinese officers had spent weeks investigating criminal activity in Lautoka, Fiji’s second largest city.
China has given at least $360m to Fiji, which is governed by prime minister – and dictator – Voreqe Bainimarama after a military coup. Was this the price Bainimarama had to pay for such support?
As Fijian lawyer Aman Ravindra Singh said: “For mighty China to march its police officers up and down the streets of Fiji is so unreal, it is like an invasion of our jurisdiction.”
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