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China, we reject your rejection

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COMMENTS

18 May 2011 10:37

Mary Fifita is the Board Research Officer at SBS and co-author of China in the Pacific: The New Banker in Town.

China has reacted badly to analysis of its aid program in a Lowy Institute policy brief Fergus Hanson and I published last month

It was however, a softer touch than the press conference approach China used last time it wanted to react to a Lowy Institute report in this series. China's Ambassador to Fiji, Dr Han Zhigiang, rejected the view that Pacific states would have to pay back their loans from China, saying the Chinese Government would not force any government to repay loans if they could not afford to do so.

Data gathered on China's aid program in the Pacific is somewhat at odds with this claim. The most distressing cases of debt burdening are in Tonga, the Cook Islands and Samoa. Tonga's debt to China amounted to US$100.4 million, or almost one-third of its 2009 GDP. In both Samoa and Cook Islands, loan debts were at 16% of GDP, with the Cook Islands having had its credit rating downgraded in 2009 by Standard and Poor's, in part due to loans it had taken from China to fund construction of facilities for the South Pacific Mini Games.

'In addition, our assistance are directed at infrastructure projects that will remain in the islands', continued Ambassador Han. Providing bricks and mortar however, is only the first step. As the previous report in this series indicated, consideration also needs to be given to maintenance and operating costs.

Ambassador Han's comments did echo sentiments expressed in China's White Paper on foreign aid, released in late April, the first such document China has published. According to the White Paper, China has signed debt relief protocols with 50 countries, canceling 380 mature debts totaling US$3.47 billion. The Lowy report noted that, in 2006, China extinguished US$11.5 million in debt owed by Samoa. However, there was also anecdotal evidence that China had turned down requests from governments who asked for loans to be forgiven.

The publication of a White Paper is one step in the right direction. It indicates that China is attempting to act maturely and strategically; China is well aware that the secrecy clouding its foreign aid program is a major weakness. As China foreign aid expert Deborah Brautigam rightly acknowledges: 'They're trying to figure out what it means to be a responsible great power, and one of the things they've been getting beaten up about a lot is foreign aid.'

Of course, China is not the only one responsible for this state of affairs. Pacific states cannot escape blame for taking loans they cannot repay. Island countries and all major donors need to look at sustainable debt levels in the region.     

Photo by Flickr user smemon87.

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