Pacific Persuasion: Beijing’s increasing economic muscle in the South Pacific

A century after European countries battled for colonial supremacy in the South Pacific, a new power is emerging in the region: China . Long regarded as a strategic backwater, the scattered islands, atolls and jungle-clad archipelagoes of the South Seas are emerging as an area of key interest for Beijing as it flexes its strategic and economic muscle.

Thousands of Chinese settlers have poured into the region in recent years, along with powerful triad gangs involved in drug trafficking, people smuggling, prostitution and illegal gambling. China ‘s interest in the South Pacific is three-fold, analysts say: to thwart Taiwan ‘s diplomatic ambitions; to secure much-needed raw materials such as timber, gas and gold; and to challenge the power of the US .

The expansion of Chinese influence comes as Britain reduces its presence in the South Pacific, this year closing its high commissions in Tonga , Vanuatu and Kiribati .

“It’s really over the past five years that Chinese interest has accelerated,” said Susan Windybank, a regional analyst with the Centre for Independent Studies (CIS), an Australian think-tank.

“The Chinese regime has become a lot more confident in pushing a geopolitical agenda. Slowly but surely, they are building up economic ties and diplomatic influence. China has had a benign image in the region until now, but they are starting to panic a few people.”

A report released by the CIS this month said: “The very fact that the Southwest Pacific is considered a strategic backwater may make it more attractive as a testing ground for China’s growing power {hellip} in a region hitherto considered an ‘American lake’.

“Chinese influence coincides with growing political instability in a region facing an uncertain economic future, thus making the islands vulnerable to manipulation,” the report said.

Pacific nations may be minuscule, but their support is vital in the mainland’s diplomatic war with Taiwan .

Beijing has been courting island governments and extending its network of embassies to prevent countries switching their diplomatic allegiance to Taipei . Beijing is now believed to have more diplomats in the region than any other country.

In the past few years, Beijing has rolled out the red carpet for the leaders of a dozen Pacific nations, from Tonga and Vanuatu to Samoa and the Federated States of Micronesia . Now reported to be the third-largest aid donor to the region, the mainland’s assistance is bestowed with no strings attached. “A lot of Pacific countries are tired of the conditions put on aid by Australia and New Zealand ,” said Samantha Magick, the editor of Pacific, a regional news magazine. “They’re looking to Chinese aid because Beijing doesn’t make it at all conditional on good governance.”

Pacific governments also play the ” China card” in an attempt to remind their traditional donors, such as Australia , that they can turn to other benefactors if necessary.

“Chinese aid is quite different from other countries – it goes straight for the jugular,” a senior Pacific academic, Ron Crocombe, said. “It goes towards trips and favours for the politically powerful, and very lavish receptions.”

Professor Crocombe, a Cook Islander and emeritus professor at the University of the South Pacific in Fiji , said island nations needed to curb Chinese influence. He compared China ‘s entry into the region with the arrival of Britain and France in the 19th century.

“It wants to be the major influence in the Pacific in a fairly short time,” he said.

China’s newly expanded business interests range from multi-million-dollar mining ventures to tiny restaurants and grocery stores set up by poor settlers, many of them illegal immigrants whose passports and visas are bought from corrupt officials.

Chinese began settling in the Pacific more than a century ago, and many a sleepy Pacific capital has a thriving Chinatown , but a sharp distinction is being made between established communities and the new wave of migrants.

Large numbers of Chinese have moved to countries such as Fiji and the Marshall Islands and in some cases are starting to “tip the ethnic balance”, according to Ms Windybank. Fiji is particularly concerned about the trend because decades of unrest between ethnic Fijians and the descendants of Indian cane-cutters have led to several military coups, vicious racial violence and huge economic disruption.

The CIS estimates that about 3,000 state and private Chinese companies are now operating in the Pacific, with nearly $6 billion invested in tourist resorts, clothing factories, forestry and fishing.

An increasing number of Chinese-run general stores are popping up in cities such as Nuku’alofa, the capital of Tonga , Port Vila in Vanuatu and Honiara in the Solomon Islands .

The business acumen and hard work of the Chinese is beginning to stir resentment in the famously laid-back Pacific, where business initiative is often stifled by the custom of having to share profits with extended family members.

At a regional ministerial meeting in the tiny nation of Tuvalu last month, Fred Fono, the Solomon Islands ‘ minister for national development, labelled as “dodgy operators” many of the new Chinese enterprises. “You travel anywhere in the region, you see Chinese businesses,” Mr Fono said.

“Some of them are very good at evading taxes, they are very smart at smuggling their goods without paying duties.”

The CIS says legitimate Chinese businesses are being overshadowed by criminal syndicates and triad gangs. Last year, police in the Fijian capital, Suva , busted a massive methylamphetamine-making operation involving Chinese and Hong Kong nationals. The drug, known as “ice”, would have had a street value of more than $4 billion. The factory was described as the biggest of its kind in the southern hemisphere.

“Chinese criminals are very active in fraud, people smuggling, illegal gambling and drug trafficking,” Ms Windybank said. “Questions are being asked as to whether there is official support for these elements from China , or at least tacit recognition. They can’t be totally ignorant of it.”

China ‘s need for raw materials to fuel its spectacular economic growth has prompted it to invest in mining, logging, and oil and gas extraction in Papua New Guinea , timber in Fiji and gold in the Solomon Islands . Its most significant resources project is a $4.6-billion, majority Chinese-owned nickel mine in Papua New Guinea ‘s Madang province.

“If it goes ahead, it will be one of the biggest offshore-mining developments undertaken by a Chinese company,” the CIS said. ” China has no experience in open-cut mining in the tropics. It also has a very poor mine safety record.”

Until last year, Beijing also had a strategic presence in the region, maintaining a missile and satellite-tracking station in Kiribati , a remote archipelago which was formerly part of the Gilbert and Ellice Islands , a British colony.

The station was dismantled after Kiribati switched diplomatic allegiance to Taipei , bringing to an end years of speculation that it was used to spy on an American missile-testing facility in the neighbouring Marshall Islands – a charge Beijing denied.

China is at present unable to project military power into the South Pacific to complement its growing economic and diplomatic role because it has no “blue-water” navy capable of sailing long distances.

Nonetheless, analysts warn that countries such as Australia , New Zealand and the US , which have traditionally seen the Pacific as their backyard, can no longer take their influence for granted.

“You can’t disconnect what is happening in Southeast Asia , where countries are being sucked into a Sino-centric orbit, from the South Pacific,” Ms Windybank said.

“Ultimately, China ‘s ambition is to be regional hegemon.”