Research staff at the Lowy Institute meet with many visiting foreign delegations: European foreign ministers, US State Department and Pentagon officials, Pacific Island MPs, senior officials from Asian countries, academics from India and China. We also meet regularly with Australian ministers and foreign affairs, defence, aid and treasury officials.
In almost every such meeting I have participated in over the last five years, the first question directed at me has been: 'what is China doing in the Pacific Islands and should we be worried about it?'
China's role in the Pacific Islands also fascinates journalists and is frequently raised in media interviews I do about the region, such as this one with the ABC's Michael Brissenden.
In a new Lowy Institute Analysis paper, published today, I attempt to put the rhetoric around the seemingly non-stop rise of China in the Pacific Islands into perspective. My analysis finds that if China's aims in the region are to be described in terms of geo-strategic competition, then on the available evidence, it is not a particularly committed competitor in the Pacific Islands.
Michael Brissenden's article in The Drum is a good reflection of official and popular concerns about Chinese influence in the region. The Defence White Paper 2013 cautions that Australia's contributions to the region may well be balanced in the future by the growing influence of Asian nations and is concerned that 'no major power with hostile intentions could establish bases in our immediate neighbourhood from which it could project force against us.' [fold]
China's military muscle, the impact of its aid and its loans, its investment and its diplomatic leverage are commonly mentioned by analysts and officials interested in China's role in the region, who also speculate that China has geo-strategic ambitions in the Pacific Islands. Writings on China's influence in the Pacific Islands can be found here, here, here, here, here and at the Lowy Institute itself.
Yet a review of the three main elements of China's engagement with the region – trade and investment, aid, and diplomatic and military ties – provide a weak case for the argument that China is challenging Australia's dominance.
China is the region's second largest bilateral trading partner, but at US$2 billion, the value of its two-way trade is only about one-third of the value of Australia's trade with the region. Chinese investors are competing in, not dominating, an increasingly crowded business environment, which includes investors from Australia, New Zealand, the US, France, Malaysia, Thailand, South Korea, the Philippines and Japan. Australian investment in Papua New Guinea alone is worth just over A$16 billion, almost as much as Australia's investment in China itself.
China's aid program to the region has attracted significant attention, not least at the Lowy Institute itself, which published four reports on Chinese aid in the Pacific Islands from 2008 to 2011. But my report, which draws on new research conducted by Lowy Institute Research Associate Philippa Brant for her published PhD, shows that China is only the fifth-largest donor in the region.
The complexities surrounding the various agencies charged with delivering China's aid make it difficult to extract accurate annual records, so looking at five-year totals of expenditure is more likely to give an accurate representation of China's expenditure. A comparison with OECD donors over the 2006-2011 period shows that Australia is by far the lead donor in the region, disbursing US$4.8 billion over five years, followed by the US (US$1.27 billion), New Zealand (US$899.3 million), Japan (US$868.8 million), China (US$850 million), France (US$718 million) and EU institutions (US$595.8 million). Australia devotes 23% of its aid to the region compared with China's 4%.
China has invested in its diplomatic network in the Pacific and wined and dined Pacific leaders. But in a competitive vote-buying environment, there is no evidence that China's diplomats are any more successful in persuading Pacific Island governments to support China's international policies than the diplomats of other countries seeking Pacific Island votes in the UN or elsewhere.
China's military assistance to the region is limited to the provision of uniforms and non-lethal equipment and the refurbishment of barracks for the defence forces of Papua New Guinea, Fiji and Tonga. This pales in comparison to the A$53 million Australia spends on defence cooperation with Pacific Islands and the A$130 million spent on operations securing the neighbourhood.
China is engaged in economic competition in the region and there are undoubtedly significant benefits on offer for Pacific Islands countries from their close proximity to the global centre of economic gravity. Impressive GDP growth rates in Melanesian countries over the last five to ten years is testament to that. But there are also risks to absorbing a rapid rise of economic interest from China and other Asian countries; debt distress and a crowding out of local small business are two.
Australia's dominant role in the region is not under threat from China. Rather than speculating on China's future ambitions, Australia's priority should be to assist Pacific Island countries to maximise the economic benefits of China's new role, while helping to minimise the negative consequences that flow from some of China's commercial and development activities in the region. Australia's new strategic partnership with China could offer an opportunity to have more constructive conversations with China about our region.
Photo by Flickr user Ostrosky Photos.
