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Beijing will vie with Canberra and others in Pacific

Monday, September 3, 2018

Significance

Discussion about Chinese development loans is unlikely, but the issue will be in the background given the controversy over China’s growing Pacific role. Tongan Prime Minister Akilisi Pohiva had proposed that indebted island states develop a collective approach to seeking debt relief from China at the forum but backtracked a few days later. While Australia remains the largest development partner to most Pacific Island states, concerns about indebtedness, and Chinese political leverage, have grown as island states feel the strains of repaying Chinese concessional loans.

Impacts

  • China’s preference for bilateral aid and lending will outweigh any regional initiatives at developing a common approach.
  • Vanuatu, Kiribati and the Solomons will likely graduate from Least Developed Country status by 2021, losing trade preferences.
  • Loss of Least Developed Country status will increase island states’ debt distress risks and vulnerability to economic shocks.
  • China is unlikely to persuade Palau, the Solomon Islands, Kiribati and Nauru to switch allegiances over recognising Taiwan.
  • The PIF forum, attended by observers including the United Kingdom, will focus on security, climate change and good governance.
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