Pacific islands hold out their hats to Beijing as pandemic sinks economies

Their economies ravaged by the pandemic, tiny Pacific island nations are increasingly turning to China-led agencies for cash after they have exhausted financing options from traditional western partners.

And Beijing is proving to be a very willing provider of cash and other aid.

China’s growing reach in the region is unsettling for the US and its allies, who have been the dominant powers in the Pacific since World War II.

One of the most remote outposts of the war, the Cook Islands has a free association agreement with New Zealand and shared citizenship, while remaining its own country.

It comprises 15 islands whose Exclusive Economic Zone covers nearly two million sq km of ocean.

The Cook Islands’ government in Avarua received a US$20 million from China’s Asian Infrastructure Investment Bank (AIIB) late last year after loans from the US and Japan-led Asian Development Bank (ADB) and a grant from New Zealand proved inadequate.

Before that Fiji secured a US$50 million loan from AIIB, and Vanuatu accepted a US$12 million grant from the Chinese government.

Pacific island countries have used their remoteness and natural borders to ward off Covid-19, but have faced economic devastation as tourism collapsed.

Despite being small, these states possess strategic ports and air strips and control vast swathes of resource-rich ocean. They also represent votes in vital international bodies.

Fletcher Melvin, president of Cook Islands’ Chamber of Commerce told Reuters, “China is very willing to lend money to any Pacific island nation. As much as Australia and New Zealand have encouraged the islands to look to them first it’s been a lot easier getting money out of China.”

Over 30% of the Cook Islands’ US$153.2 million external debt now lies with Beijing-linked bodies, up from 16% before the pandemic.

The ADB said in a statement to Reuters that late last year it provided the Cook Islands with a US$20 million loan, which was the “country limit” for the island nation. Wellington also provided US$16 million in aid.

After getting what it could from those sources, the Cook Islands then sought funding from Beijing, sources told Reuters.

The Cook Islands has previously defended its economic ties to China, which has funded several projects, including a water supply system.

Anna Powles, of the Centre for Defence and Security Studies at Massey University in Wellington, said: “If the AIIB becomes the primary lender to the Pacific and the region’s economic recovery is driven by Chinese lending, then certainly there will be significant concern that economic dependence could be exploited by Beijing.”