Australian Economy

China in the South Pacific: splintering regionalism and strategic gains through economics

Beijing is moving at high speed to co-opt South Pacific states economically and then use that leverage to achieve broader goals, including the ability to project military power across the Indo-Pacific. China also working to undercut Pacific regionalism and obtain advantage from its bilateral engagement with individual Pacific states, with obvious successes in Solomon Islands, while Manasseh Sogavare remains prime minister, and now with Kiribati.

The swiftness of Beijing’s actions is obscured by both the pandemic and the focus of policymakers and analysts on the global implications of Russian President Vladimir Putin’s war in Ukraine. It would be nice to be able to take comfort in the obvious personal priority that Australia’s new government, notably Prime Minister Anthony Albanese and Foreign Minister Penny Wong, are putting on engagement with the South Pacific, but developments in the region and between China and individual Pacific states create doubt about what can be achieved from the face-to-face diplomacy and the policy approaches outlined so far.

Australia and like-minded partners are moving to enhance their cooperation with Pacific states. However, it seems likely that China’s economic and cash-based engagement will continue exploiting a large seam that our engagement is leaving largely unaddressed.

That’s because we continue to prioritise decades-long approaches focused on aid, capacity-building and defence cooperation, now with the additional, welcome, priority of cooperation on climate change action. These priorities respond to stated needs of Pacific states, but they will probably do little to change the region’s status as the most aid-dependent area on the planet.

And aid-dependent small states are inherently vulnerable to the economic largesse of the Chinese state and its closely aligned corporate actors—banks and companies. We’re seeing this pattern in Kiribati’s engagement with China and, even more obviously with Sogavare’s embrace of Beijing and simultaneous distancing from Australia.

Australia, the US, New Zealand, Japan and Pacific Islands Forum (PIF) members and dialogue partners seek to support the forum’s vision of regionalism because of the values inherent in ‘a common sense of identity and purpose, leading progressively to the sharing of institutions, resources, and markets’.

But there’s an important other aspect to effective regional cooperation, which is for the PIF to act as a shield for the region to resist Chinese co-option that will undercut the security of Pacific states—and of Australia and New Zealand.

Effective regionalism benefits each Pacific state and the whole region. Splintering of regionalism benefits China and allows it to use the same methods of interaction that are damaging in other regions. Europe is the most obvious example.

Beijing has a track record of forming its own Sino-centred forums for engagement and avoiding working closely with multilateral and regional groupings. This allows it to use its weight and scale with individual nations in direct interaction and to avoid confronting the combined weight that regional bodies like the EU or the PIF can bring to bear.

The underlying behaviour of Chinese Communist Party officials and leaders is captured by the infamously frank statement of China’s then foreign minister Yang Jiechi in 2010 when, faced with differences between Southeast Asian states and China, he told ASEAN representatives: ‘China is a big country and other countries are small countries, and that’s just a fact.’ February’s joint statement by Xi Jinping and Putin just weeks before Putin began his war in Europe is a reminder that this way of thinking and operating—where scale and raw power are used to determine outcomes, not respect for sovereignty of nations large and small—is how Xi is pushing his party and individuals like China’s current foreign minister Wang Yi to operate.

In 2012, European states welcomed China’s 16+1 forum, officially called the Cooperation between China and Central and Eastern European Countries, as a way of collaborating economically, seeing it as complementary to EU activities and simply about obtaining direct benefits without the interface of the EU. When Greece joined in 2019, after pushing its role in Xi’s signature Belt and Road Initiative, the grouping expanded to 17 European states engaging with Beijing (the 17+1 forum).

Since then, things have changed. Most obviously, Lithuania withdrew in 2021, calling on others to do the same. Lithuania’s foreign minister, Gabrielius Landsbergis, said: ‘From our perspective, it is high time for the EU to move from a dividing 16+1 format to a more uniting and therefore much more efficient 27+1. The EU is strongest when all 27 member states act together along with EU institutions.’ There’s a direct lesson in this for Pacific states, which smaller European states with histories of dealing with the two big autocratic powers in Moscow and Beijing can help Pacific states to learn without the painful, belated discoveries happening in Europe.

The idea that the EU is strongest when all EU states act together through EU institutions is obviously true—perhaps even more true—for the Pacific. The PIF magnifies the weight and influence of each member state and gives the region more agency and authority when dealing with even the largest powers. This sense of common purpose has been obvious in how PIF members have worked to change international policies on climate change, for example. They have achieved much more together than each could have done alone. Arguably, the strong Pacific voices on this issue helped enable the Australian policy change we are now witnessing.

The PIF leaders and their democratically aligned dialogue partners must bring this same cohesion and sense of common purpose to bear in dealing with the uncomfortable truth that, right now, the South Pacific is a key place on the map that Beijing has identified as providing real, rapid opportunities to achieve long-desired strategic gains.

So far, though, on China the Pacific is moving in the opposite direction to Central Europe. Just this week, Kiribati’s government announced that it’s leaving the PIF while signalling a growing appetite to engage directly with Beijing. For all the denials of anything other than benign and normal international relations, this centres on expanding China’s ability to project military power unconstrained by US and allied power.

The Pacific is again a central place for active and direct strategic competition, and denying that or pretending otherwise will only advantage Beijing and leave Pacific states—and their people—victims of insecurity and tension.

Dealing with this must be the role and responsibility of the Pacific states themselves, but Australia and its partners must acknowledge that our current policies will continue to fail to reverse the momentum of Beijing’s moves in the region.

For Australia, this starts with not rewarding China’s government for simply meeting with Australian counterparts by agreeing to ‘shelve differences’ as Beijing acts against our strategic and national security interests in the South China Sea, in its partnership with Moscow and now in direct security moves in our near region.

Our differences with Beijing are stark and growing—as other governments and organisations are also now finding—and focusing only on the positives is a path to disarray and disadvantage.

China is not making the gains it is with Sogavare, and now with Kiribati’s president Taneti Maamau, because of its positive work with the Pacific on climate change. It’s making its strategic gains from economic engagement—and cash splashes for elites who help achieve Beijing’s goals. Beijing is also rewarding those who act against regional interests and pursue short-term transactional and political benefit.

Without a much larger, more ambitious strategy for the South Pacific that has an economic and workforce focus and marks a radical shift from our decades of failed capacity-building and aid, we will be bystanders as Beijing’s direct reach and presence grow. Cutting aid is obviously a bad idea, but that doesn’t mean that simply expanding aid is the path to success.

The good news is that the real advantage Australia and New Zealand have is economic. The working model for what a prosperous and stable region looks like can be found in the wildly successful Australia – New Zealand Closer Economic Relations framework and visa-free travel for work. This opens economies and employment markets between Australia and New Zealand and, if extended to small Pacific states, would turn aid-dependent places into joint contributors to successful economic regionalism, addressing the needs of South Pacific workers for meaningful employment while simultaneously filling growing workforce gaps in Australia’s economy.

Another advantage Australia and its partners have in the South Pacific is the fact that we’re democracies and so can engage not just with counterpart governments, but with democratic opposition figures and voices and non-government institutions, and at people-to-people levels. This will also require a shift in government thinking in Canberra to make meetings with opposition figures—like Matthew Wale in Solomon Islands and Tessie Lambourne in Kiribati—a normal part of relations. Engaging beyond the government of the day is routine in other relationships, like the Australia–UK partnership and the Australia–US alliance, for example.

As the realisation dawns on the new Australian government, and on the governments and institutions in Tokyo, Washington, Paris and Brussels, that opening embassies, expanding aid programs, having greater ambition on climate change and doing small-scale but valuable work on ocean management and illegal fishing isn’t reversing China’s strategic momentum, things will have to change.

Australia and New Zealand, working closely with partners, must move towards a bigger way of thinking and acting centred on economics and democracy. And, as we see with the splintering of the PIF and bilateral moves from Beijing with small-state leaders, time is not our friend.

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