China has returned as the second largest bilateral donor to the Pacific Islands, overtaking the US and increasing their spending on political and diplomatic influence. According to a report by the Lowy Institute, Beijing has invested 256 million dollars in the region in 2022, which represents a 6% increase compared to the previous year, when the pandemic temporarily limited Chinese projects, quoted by News.bg.
Main highlights of the report:
- Financial decline in the region. Total development assistance in the Pacific is down 18% in 2022 as China steps up investment, particularly through direct government transfers and small grants managed by his embassies.
- China's new strategy. Beijing has rethought its approach, preferring grants instead of loans. The largest grant project is a $135 million road upgrade in Fiji.
- Australia remains the leading donor. Australian support includes $750 million for infrastructure projects in Papua New Guinea, Fiji and other countries aimed at curbing Chinese influence.
- Decline in aid from other donors. The US, New Zealand and Japan have cut their support below pre-pandemic levels, while Taiwan has dropped out of the top 10 donors due to diplomatic reorientations towards China.
China has been responsible for a significant portion of infrastructure investment in the region since 2008, but has faced criticism for potential use of the so-called debt trap diplomacy. The new emphasis on grants, however, signals a strategic shift toward more flexible forms of influence.