By Graeme Smith

Over the last few months, aid granted by the PRC in the South Pacific has become a focus of political and media debate in Australia. Points raised include:

There is a problem with the People’s Republic of China’s (PRC) aid in the Pacific. It is fragmented, poorly monitored, project-based and contractor-driven, responsive largely to the needs of political elites in the Pacific. The PRC’s newly established State International Development Cooperation Agency is tasked with addressing ‘serious problems’ in its foreign aid program, and conducting more rigorous planning and monitoring. We should not miss the opportunity that this new agency provides for improving PRC aid in the Pacific.

The PRC’s aid program in the Pacific is significant. The Lowy Institute estimates that China is the third largest donor in the Pacific, with 218 projects. While this makes up just over four per cent of PRC development assistance, in some countries—notably Fiji—these projects are the main source of aid, though primarily in the form of concessional loans rather than grants.3 Pacific leaders welcome PRC aid, as it meets pressing political and development needs. For example, Papua New Guinea, the largest nation in the Pacific, met none of the United Nations 2015 Millennium Development Goals, and faces huge challenges in health, education and infrastructure.

Pacific governments have also rebutted criticisms of PRC aid. The Government of Vanuatu listed a series of buildings, from Parliament House to the Melanesian Spearhead Group’s Headquarters, noting ‘these are not white elephants. These are buildings of national significance to this country.’4 For two large projects funded by China Exim Bank loans, the Luganville Wharf and roads on Tanna and Malekule, ‘No donor was willing [to] help provide assistance on these projects although the economic benefits [are] huge.’

This is a key feature of PRC aid: while Australian and PRC contractors do compete for business in the Pacific, their aid programs have limited overlap and are complementary. The Belt and Road Initiative (BRI) reinforces the focus of PRC aid on infrastructure and enhancing regional transport and communication links. Many Pacific leaders praise PRC aid for not tying up their bureaucrats in meetings and paperwork, and for the speed of its delivery. There are, however, risks associated with PRC aid in the Pacific.