New report by AidData shows full extent of China loans and grants in Pacific, with Papua New Guinea, Marshall Islands top recipients
A new report by AidData shows the full extent of Chinese loans and grants to Pacific nations, with PNG the top recipient | FULL LIST
Pacific nations that switched allegiance from Taiwan to China received immediate rewards through development grants and concessional loans worth tens of millions of dollars, new data shows.
Solomon Islands and Kiribati become immediate beneficiaries of Chinese development funding after forming new diplomatic relationships with Beijing.
And other Pacific nations which also took up the offer of loans from Beijing are now highly indebted to China, including Tonga, which now has a public debt exposure to China running at 41 per cent of GDP.
The data is contained within a major new report by AidData, a research laboratory at the William and Mary university in the United States, which has tracked and analysed all Chinese funding into the Pacific between 2000-2021.
The two decades of data shows the People’s Republic of China continues to be a major donor to the Pacific region, which is geographically important for both the west and China.
The PRC funnelled $US15.08bn (the equivalent of $23.16bn in today’s prices) into the Pacific over the past 21 years, with the peak funding in 2009, when $US3bn ($4.6bn) was provided.
The figures identify the same trend as a similar project run by Australia’s Lowy Institute, which last month showed China had transitioned out of large-scale projects and was now providing concessional loans and grants in a more targeted away.
AidData figures showed Australia’s nearest neighbour Papua New Guinea was by far the largest beneficiary of Chinese finance, securing $US7.1bn ($10.9bn), more than half the total amount provided.
PNG, a former administrative territory of Australia that gained independence in 1975, has long struggled financially and successive governments have turned to both Australia and China for development funds and financial support.
AidData figures also showed the tiny Republic of the Marshall Islands, a country with close diplomatic ties with the US, received official sector Chinese funding commitments of $US5.1bn ($7.8bn) over the same period.
Most of the money going into the Marshall Islands went to companies operating shipping businesses there.
The remainder of the money was loaned or given across the other Pacific nations, with Fiji, Vanuatu and Samoa rounding out the top five recipients with loans and grants in the hundreds of millions rather than the billions.
In 2019, both Kiribati and Solomon Islands switched allegiance from Taiwan to China, with an immediate impact on funding.
AidData found a total of $US161.4m ($US147m) in Chinese development finance had been provided to Kiribati since 2000, about a third of it in grants and 71 per cent of it in loans. In 2019, Chinese official sector institutions provided financing for the first time, totalling $US114.8m ($173m).
“On September 20, 2019, the government of Kiribati announced that it was severing diplomatic ties with Taiwan and establishing diplomatic ties with China,’’ the researchers found.
“On the same day, the Chinese government reportedly agreed — at least in principle — to donate two civil aviation aircraft and one commercial ferry … to the government of Kiribati.
“Kiribati’s President, Taneti Maamau, reportedly requested donations from China for the purchase of commercial aircraft after rejecting an offer from Taiwan to provide loans for the purchase of the aircraft.
“Then, in 2021, the Chinese government reportedly issued a grant worth $US17,532,549.04 ($26.8m) to the government of Kiribati for the purchase of an aircraft from Embraer in Brazil, and a grant worth $US6 million ($9.2m) for the acquisition of a tug and barge vessel for the Kiribati National Shipping Line.’’
The report found Solomon Islands, which earlier this year signed a security agreement with China, had also benefited from its diplomatic relationship with China signed in 2019.
It had received $US162.03m ($248m) in development finance from the PRC, most of being provided in the peak year of 2020.
Unlike most other parts of the Pacific where the majority of funding went to transport and storage projects, in Solomon Islands it went to social infrastructure and services (50 per cent), general budget support (48 per cent) and the remaining 2 per cent on health.
“As of 2021, AidData identified only grants, no lending, to the Solomon Islands,’’ the researchers found.
“All grant funding was committed 2019 or later, coinciding with the start of diplomatic relations between the Solomon Islands and the PRC.
“Many of the highest value projects were grants supporting the Ministry of Rural Development’s Constituency Development (CDP) Program.
“From 2019 to 2021, $US74.13m ($113m) total was committed to the program.
“The program funds were to support various local social infrastructure projects and initiatives, directed by constituencies.
“The CDP was financed by the Taiwanese government prior to 2019.’’
AidData researchers looked at 1166 projects across the Pacific since the year 2000 which received funding from China, and found that by 2023, 942 of those projects were completed, 16 were cancelled or suspended, and 45 were still a promise.
The Pacific region investigation was part of a wider report by AidData into Global Chinese Development Finance. The report did not look at Australian funding, but the Lowy Institute has consistently found Canberra is by far a larger donor in the Pacific than Beijing.
“Out of the total Chinese development finance portfolio of $15.08 billion committed between 2000-2021 in the Pacific Island countries, 23% was … (grants and highly concessional loans) and 76% was OOF (other official sector loans),’’ the researchers found.
“When aggregated, the Pacific Island countries … as a region received the 25th-largest amount of Chinese development financing during the 2000-2021 period compared to other individual countries.’’
The researchers found Papua New Guinea was the 41st -largest recipient globally and the Marshall Islands the 53rd-largest with the remaining Pacific Island countries ranking 100th or below.
The report found public debt exposure to China – where the central government or its agencies are ultimately liable for the debt – across the Pacific amounted to $3.08 billion (AUS $4.73 billion), plus a further $6.19 billion (AUS $9.5 billion) in potential or hidden debt exposure, where there may be implicit repayment guarantees in place.
It found 52 per cent of Chinese lending to Pacific Island countries was private, 23 per cent was public debt and 23 per cent was potential or hidden debt.
It found Fiji’s public debt exposure to China was $444.18 million (AUS$682 million) or 10.30% of GDP, while PNG’s debt exposure was $1.65 billion (AUS $2.53 billion) or 6.2 per cent of GDPs.
Tonga’s debt of $193.4 million (AUS $296) million or 41 per cent of GDP was all held by Tonga’s public sector and all went towards infrastructure projects.
They included two major loans from China’s Eximbank for national road and business district reconstructions.
More Coverage
Rate rise off the table is as good as gold
Canberra could do a lot more heavy lifting to help the RBA fight inflation.
There is no good news in these numbers, Jim
The RBA is likely to keep rates on hold next week after the inflation data, but Jim Chalmers and Anthony Albanese are now unlikely to get a rate cut before the election.