Chinese investments in Tonga threaten future of Pacific nation

Chinese investments in Tonga threaten future of Pacific nation

FORUM Staff

The offer of millions of dollars in low-interest loans to Tonga from the People’s Republic of China (PRC) could prove problematic for the Pacific nation, say some analysts.

Tonga, a Polynesian kingdom of more than 170 South Pacific islands, already owes U.S. $108 million to China’s Export-Import bank — equivalent to about 25% of the gross domestic product — according to The Associated Press (AP). Now, the PRC has offered loans to help rebuild much of downtown Nuku’alofa, which was destroyed by rioters in 2006.

U.S. Ambassador to Australia Arthur Culvahouse Jr. is among those issuing a warning about what he called “payday loan diplomacy.”

“The money looks attractive and easy upfront, but you better read the fine print,” Culvahouse told AP.

Others noted that a debt trap could cripple Tonga, which is already vulnerable to costly natural disasters and may have little ability to repay a Chinese loan. When Sri Lanka failed to repay a Chinese loan, for example, its government was forced to hand over control of its Hambantota port, giving the PRC a strategic foothold closer to India.

In recent months, the PRC has moved increasingly to expand its influence among Pacific island nations. Australia, New Zealand and the United States have countered the Chinese ambition by increasing and improving their own individual and collective relationships to offer the Pacific islands more transparent partnership options.

“It’s not entirely clear what China wants in the South Pacific,” Rory Medcalf, head of the National Security College at Australian National University, told AP. “It’s just clear that China is becoming very active and making its presence felt.”

Medcalf speculated, however, that a strategic Pacific base could provide a security bridgehead for China’s navy, which currently has to sail through islands in Japan, Taiwan and the Philippines — strong U.S. allies — to get to the Pacific.

Other possible motives behind the PRC’s Pacific moves could include greater access to the region’s fisheries, minerals and other natural resources as well as trying to weaken the support and recognition several Pacific island nations — including Tonga — continue to provide to Taiwan, Medcalf told AP. Other analysts contend that the PRC could also by vying for votes in the United Nations General Assembly, given that sovereign Pacific island nations have equal representation there.

China has given about U.S. $1.5 billion in aid and low-interest loans to the South Pacific since 2011, more than any other country except Australia, according to an analysis by the Lowy Institute, an Australian think tank. That figure swells to more than U.S. $6 billion when future commitments are included, AP reported.

Chinese immigrants already operate most of the grocery stores on the islands of Tonga, selling imported goods, according to AP. Tongans now worry that the Chinese will expand into farming and construction, further limiting what few options locals have for earning money to survive and diluting Tongan culture.

Ola Koloi, who operates a tourist lodge in Tonga, told AP that the PRC’s footprint is already too invasive, influencing what she can buy since so many goods for sale in Tonga come from China. These Chinese loans, she said, should worry every Tongan.

“I feel like I’ll be Chinese soon,” she told AP.

(Pictured: King Tupou VI of Tonga, left, shakes hands with Chinese President Xi Jinping after a signing ceremony at the Great Hall of the People on March 1, 2018, in Beijing.)

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