oneworldtalk

The big clumsy panda in the Pacific

Fergus Hanson
July 23, 2009

The US is often portrayed as an 800 pound gorilla careering its way across the globe. China, by contrast, is seen by many as having escaped the disadvantages of its enormous size and crafted a well-thought-out foreign policy.

Free from the demands of election cycles, China can pursue a subtle long-term agenda and fill the vacuum left by the growing impatience with the great gorilla. Consequently, Beijing's soft power is supposed to be inexorably rising as America's declines. It's an alluring theory for some, but at least in parts of the world, it's a long way from the truth, especially when it comes to aid.

China regards the details of its overseas aid as a state secret and publishes no annual reports on its program as other donors do. Not surprisingly, this has led to wildly inflated estimates of its size. The US State Department, for example, still alleges on its website that China promised tiny Nauru $US130 million ($160 million) in aid, which equates to a staggering $US13,000 per Nauruan.

These inflated estimates have fed the perception that Beijing's power and influence are expanding rapidly. In the Pacific - as elsewhere - it has led to claims that China is working on a long-term plan to supplant US dominance. However, a detailed mapping of China's secretive aid program suggests the reality is quite different.

While China refuses to share information about its aid program anywhere, official figures have been collected from individual countries in the Pacific to allow for the most accurate assessment of its program to date. The results are surprising and suggest that while there is no doubt China has emerged as a major donor, it is a long way from being the region's major aid giver. More significantly, it reveals a surprisingly clumsy and non-strategic approach to aid delivery on Beijing's part.

When a similar, but less detailed, study on China's aid to the region was released in June last year, China revealed just how sensitive it was to public reporting on its aid activities. The Chinese Foreign Ministry denounced the report as "totally pointless and unacceptable". Given the problems with its aid program it is now easier to understand the response.

In a region where Australia gives almost $US600 million a year in foreign aid, China pledged just $US53 million in grants last year, with an additional $US153 million in soft loans. That is still a sizeable amount of aid and compares with other major donors like Japan, New Zealand and the European Union. But the way China approaches its aid program and the response to it suggest it is not doing much to advance China's standing in the region, let alone maximise development outcomes.

Far from pursuing a long-term strategy, China is mired in a vicious cycle of short-termism. This is a legacy of its long-running battle with Taiwan over diplomatic recognition, which has led China to undercut its own long-term interests as well as undercutting stability in the South Pacific.

A look at aid flows over time, for example, suggests China is an erratic and unpredictable donor. Aid flows fluctuate sharply between years, making it extremely hard for tiny island economies to depend on China. It funds projects without any regard to recurring costs, which has left Samoa with a $US13 million Olympic-style swimming pool complex that would be beyond the means of many larger states to maintain.

Debt burdening is another looming problem. Countries like the Cook Islands - population 21,000 - borrowed almost $US10 million from China for sporting facilities. Its Deputy Prime Minister has asked how it could repay the loan, making the sanguine comment: "We hope New Zealand will be [able] to assist us with this." In 2007, Tonga took out a soft loan with China for the equivalent of 22 per cent of its entire gross domestic product.

The secrecy of its program has led to questions over whether China is overpricing the infrastructure it builds as aid, forcing Pacific states to take out larger loans from China than necessary.

Overall, it is not a pretty picture, which is a shame, because the region is in desperate need of well co-ordinated and implemented development assistance. China also has a wealth of knowledge to share, given its own success in reducing poverty at home.

The recent diplomatic truce between China and Taiwan offers a unique opportunity for China to help break this cynical cycle of short-term opportunism, most recently exhibited in its misguided efforts to prop up the dictatorship in Fiji. China needs to start engaging the region in a more meaningful way. It could do this without any detriment to its long-term national interests.

Like the US, China will at times fall victim to its giant size. In the Pacific, it is much more of an 800-pound panda than a deft diplomatic whiz. It would do well to reconsider its approach.

Fergus Hanson is a research associate at the Lowy Institute for International Policy.