Australia and China Become Top Donors in the Pacific Region

This picture taken shows flags from the Pacific Islands countries being displayed in Yaren on the last day of the Pacific Islands Forum (PIF) on Sept. 5, 2018. Mike Leyral/AFP via Getty Images

China has reclaimed its position as the second-largest bilateral donor to Pacific Island nations, surpassing the United States.

While Australia remains the top donor, its contributions have dipped below pre-pandemic levels, reveals the 2024 edition of the Lowy Institute’s Pacific Aid Map.

This shift underscores the growing geopolitical rivalry between major powers for influence in the Pacific, with China’s presence becoming a key factor in the region’s development dynamics.

China’s Strategic Focus on Infrastructure and Influence

The latest map reveals a modest increase in China’s spending on aid, particularly in infrastructure projects.

The report links this shift to Beijing’s broader effort to gain geopolitical advantage in the region, with infrastructure investments surging between 2008 and 2022 despite global challenges.

This growing presence has raised concerns over debt sustainability, as Pacific nations increasingly rely on loans for major projects.

Experts warn that reliance on loan financing undermines aid effectiveness and exacerbates economic fragility across the region.

Aid Crisis in the Pacific: Debt, Declining Grants, and Geopolitical Tensions

Financial resources provided by governments and international organisations to support developing countries have fallen by 18 percent in the Pacific since 2021.

This decline has made Pacific nations more economically fragile, with rising debt and increasing geopolitical tensions in the region.

Aid is not more scattered, with more “micro-donors” focusing on many smaller projects instead of larger, coordinated efforts. This has exacerbated the situation for vital sectors like health and education.

Moreover, the region’s growing reliance on loans for infrastructure projects has raised alarms over the sustainability of aid and the long-term financial stability of these nations.

Experts: Australia Should Collaborate With China

Australian experts, including those from the University of Melbourne, warn that Australia and its allies must make peace with Beijing to ensure stability in the Pacific Islands.

“This growing rivalry is leading to increased military spending and hasty development commitments, which undermines their mutual security as well as the prosperity of the Pacific Islands,” Professor Jon Barnett, Professor Mark Wang, and Tearinaki Tanielu said.

“The alternative—greater cooperation between Australia and China to support the security and development ambitions of Pacific Island countries—could instead yield benefits for the region.”

Similarly, recent research from Harvard University has reignited concerns that China’s debt diplomacy could threaten Australian interests in the Pacific.

The study suggests that Pacific island nations such as Vanuatu and Tonga, along with others in Southeast Asia, are at risk of being heavily influenced by China due to unsustainable loans for infrastructure projects.