Tuesday, 2 July 2013

In the South Pacific, Chinese economic development continues

There is a paradigm shift happening in the Asia Pacific that is energising the region in a slow but clear way. For the foreseeable future at least, many of the Pacific’s smaller states are set to continue their trend of relying on larger power patrons for funding while developing stronger ties with each other, creating something of a Pacific network.

This is in parallel to the overarching narrative of the Asia Pacific’s other 21st Century competition power dynamics between the United States and China. Both giant powers wish to leverage more influence over the various small countries in the region. But as the South Pacific develops economically there is a desire to diversify options for investment and trade. And as the interconnection intensifies, it is presenting a whole new security dynamic and offering all new opportunities in the same basket.

The bottom line reason is that neither China nor America views the South Pacific as highly important strategically for their interests. There are bigger fish to fry in Asia. The scattered Pacific islands represent a huge geographical area with only limited strategic value, and so far offer little in the way of attractive natural resources. East and South Asia are gaining much more of Washington and Beijing’s attention in the Asia Pacific, and for good reason.

The South Pacific is a different beast to the rest of Asia, and the American’s promise to “rebalance” towards the Asia Pacific has unfortunately tended to emphasise ‘Asia’ at the expense of the ‘Pacific’ in that sentence. Few doubt that qeopolitical competition between the US and China will increase significantly in the coming decades. There is also little doubt that countries all throughout the Asia Pacific will find themselves in difficult positions about how to align and when.

Remember that by 2025, the section of Asia predicted to account for around half the world’s economic output will not be the smaller nations in the South Pacific. It will be Vietnam, Japan, the Philippines, Indonesia, and South Korea.

They are all growing rapidly and some will be among the world’s top performing economies for in future years. But the South Pacific, despite a large influx of loans from China, and from traditional partners such as Australia and New Zealand, still lags behind in development and economic heft.

A niggling worry for South Pacific states is those loans and aid structures set up by China and other larger powers. Speaking at the Otago University Foreign Policy School this week, University of Hawaii’s Professor Terence Wesley-Smith makes the point that China’s rise in the Oceania will be for the long haul. But their interaction with the Pacific region appears to be more commercial rather than strategic. Any talk of a Chinese conspiracy to build military bases smuggled in by aid projects is “crazy stuff”.

According to Mr Wesley Smith, Beijing’s foreign policy objectives are very pragmatic and not threatening. State-owned enterprises operating throughout the Pacific, as well as an estimated 3000 private Chinese companies both small and large, do not reflect a creeping Chinese expansionism and in reality probably have very little oversight from Beijing and even less state coordination. Simply put, there is no ‘China Inc’ approach in the South Pacific.

But it is a harsh truth that capitalist expansion and liberal capitalism especially, leads to military acquisitions or at least preferable relationships. The more developed an economy, the more dynamic and adventurous it becomes. Trade is increased with the outside world, and these new interests need protection. What China is attempting in the Pacific may not appear to be overtly strategic but there is a classic balance-of-power situation developing in which China’s trading partners in the South Pacific may need to reconsider their national security.

The challenge is not necessarily for Pacific nations, but rather the traditional networks such as Australia and New Zealand. China is working with South Pacific countries directly to deliver aid, investment, and trade. Although China is looking to connect with traditional diplomatic and economic partners, their loans and aid to South Pacific nations largely sidestep those partners.

Pacific islands like dealing with China, and Beijing has deep pockets. There are many benefits to a close relationship with Beijing and it is important for those nations to receive the funding China offers. However, China still does not yet consider the South Pacific a top priority. Only 4 percent of Chinese investment goes to Oceania, whereas China spends 45.7 percent on its many African interests.

From the perspective of the countries in the South Pacific, China’s presence represents options and opportunities. Just like any developing nation, island countries in the Pacific prefer to receive aid and investment without preconditions for political or societal changes. Chinese soft loans have come largely without strings attached and Beijing has fostered close partnerships with pariah regimes such as Fiji after all their traditional partners walked away. China does not appear to encourage Fiji or other South Pacific countries to “do things the Chinese way”.

But what the Pacific island countries are finding is that the old way of using China for their economic prosperity and the US for national security might not be meeting the modern demands of a region becoming more interconnected.

China is both a stakeholder and challenger in the region. They are acting like a regional power, but are eschewing power in favour of a hands-off trade agenda. More Chinese citizens are spreading away from the Chinese mainland, headed for the sunny shores of the South Pacific – around 80,000 Chinese civilians live in the region as well as an estimated 30,000 illegal immigrants.

All of this is part of Beijing’s more assertive foreign policy stance. China is looking to move forward from Deng Xiaoping’s strategy of laying low in the world. While the South Pacific might not be high on Beijing’s priority list, interacting with the island nations is another opportunity for China to show that it is an important global actor.

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