Tue, Nov 20, 2018 - Page 9 News List

China woos Pacific nations with loans, showcase projects

Experts warn there could be big costs: unsustainable debt, white elephant showpieces and social tensions from a growing Chinese diaspora

By Stephen Wright  /  AP, PORT MORESBY

Illustration: Yusha

As world leaders landed in Papua New Guinea (PNG) for a Pacific Rim summit, the welcome mat was especially big for China’s president.

A huge sign in the capital, Port Moresby, welcomed Chinese President Xi Jinping (習近平), picturing him gazing beneficently at Papua New Guinea’s leader, and his hotel was decked out with red Chinese lanterns.

China’s footprint is everywhere, from a showpiece boulevard and international convention center built with Chinese help to bus stop shelters that announce their origins with “China Aid” plaques.

On the eve of Xi’s arrival for a state visit and the APEC meeting, newspapers ran a full-page statement from the Chinese leader. It exhorted Pacific island nations to “set sail on a new voyage” of relations with China, which in the space of a generation has transformed from the world’s most populous backwater into a major economic power.

With both actions and words, Xi has a compelling message for the South Pacific’s fragile island states, long both propped up and pushed around by US ally Australia: They now have a choice of benefactors.

With the exception of Papua New Guinea, those island nations are not part of APEC, but the leaders of many of them traveled to Port Moresby and were to meet with Xi.

Meanwhile, the APEC meeting was Xi’s to dominate. Headline-hogging leaders such as Russian President Vladimir Putin and US President Donald Trump did not attend.

Trump’s stand-in, US Vice President Mike Pence, stayed in Cairns in Australia’s north and flew into Papua New Guinea each day. New Australian Prime Minister Scott Morrison, the nation’s fifth leader in five years, is barely known abroad.

“President Xi Jinping is a good friend of Papua New Guinea,” Papua New Guinean Prime Minister Peter O’Neill told reporters. “He has had a lot of engagement with Papua New Guinea and I’ve visited China 12 times in the last seven years.”

Pacific island nations, mostly tiny, remote and poor, rarely figure prominently on the world stage, but have for several years been diligently courted by Beijing as part of its global effort to finance infrastructure that advances its economic and diplomatic interests.

Papua New Guinea with about 8 million people is by far the most populous, and with its extensive tropical forests and oil and gas reserves, is an obvious target for economic exploitation.

Six of the 16 Pacific island states have diplomatic relations with Taiwan, a sizeable bloc within the rapidly dwindling number of nations that recognize the nation. Chinese aid and loans could flip those six into its camp.

A military foothold in the region would be an important geostrategic boost for China, though its purported desire for a base has so far been thwarted.

Beijing’s assistance comes without the oversight and conditions that Western nations and organizations such as the World Bank or the IMF impose. It is promising US$4 billion of finance to build the first national road network in Papua New Guinea, which could be transformative for the mountainous nation, but experts warn there could also be big costs later on: unsustainable debt, white elephant showpieces and social tensions from a growing Chinese diaspora.

“China’s engagement in infrastructure in PNG shouldn’t be discounted. It should be encouraged, but it needs to be closely monitored by the PNG government to make sure it’s effective over the long term,” said Jonathan Pryke, a Papua New Guinea expert at the Lowy Institute, a think tank in Sydney. “The benefits of these projects, because a lot of them are financed by loans, only come from enhanced economic output over a long time to be able to justify paying back these loans.”

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