The bad – and good – of China’s aid in the Pacific

The Pacific region is making headlines across Australia after Pacific and International Development Minister Concetta Fierravanti-Wells harshly criticised Chinese aid in the region. 'Useless' is how Fierravanti-Wells has described Chinese aid projects, leading countries to take on debt they can't afford. While her concerns are legitimate, her blunt delivery hasn't been constructive and has led to some considerable political and diplomatic fallout.

So what's the real story? Is Chinese aid in the Pacific useless?

The answer is not so simple. China's aid program is so opaque it is very difficult to understand exactly what it is doing. China does not conform to the sophisticated reporting and accountability mechanisms that traditional Western donors have developed over decades of aid delivery. According to some estimates, China announced more than US$350 billion in aid between 2000 and 2014 under a shroud of secrecy, leading to considerable anxiety about where, why and how Chinese aid is given.

This anxiety extends to the Pacific, where since 2006 China has rapidly expanded both its commercial ties and aid program. The Lowy Institute has invested considerable time to better understand China's engagement. Our map of Chinese aid in the Pacific shows projects committed from 2006 to the middle of 2016. By scouring budget documents from countries across the Pacific, Chinese government websites, secondary sources such as conventional and social media, and conducting numerous interviews, we have compiled the most comprehensive picture of China's involvement in the region. It is not perfect, but it identifies and quantifies Chinese aid better than any other source.

Our research shows Chinese aid in the Pacific has grown substantially, with China committing more than US$1.7 billion in aid to eight Pacific Island countries (including Timor-Leste). To put this into context, total traditional aid to these countries over the same period was over US$9 billion, with aid from Australia making up almost two-thirds this amount.

An important distinction must be drawn between Chinese projects and traditional ones. China typically engages in large infrastructure projects by providing low interest, or 'concessional', loans that eventually have to be repaid. There is often scant information beyond an announcement, with no detail on the terms of these loans or repayment schedule. Australia and other traditional donors typically provide one-way grants that do not need to be paid back and engage in more complex (albeit far from perfect) forms of assistance across multiple sectors, from humanitarian assistance to governance support.

Read more at Lowy Institute

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