Debt Diplomacy? China’s Strategic Investments Stir Unease in the Pacific

Vanuatu, a South Pacific nation struggling financially, is ready to move into a new building funded by China. Western countries are concerned about China’s growing influence over South Pacific nations.

A handover ceremony for the Presidential Palace was held on Tuesday in Port Vila, the capital of Vanuatu. Prime Minister Charlot Salwai announced the opening of the new Presidential Palace in front of the billboard reading “China Aid.” The project also included a new Ministry of Finance building and a renovation of the Ministry of Foreign Affairs building. The Chinese delegation was handed a large golden key engraved with “China Aid.”

Local media reported that hundreds of government workers will work in the new building rent-free. China has funded massive infrastructure upgrades across Vanuatu, including a landmark as a gift. The Chinese Ambassador, Li Minggang, said, “to step up pragmatic cooperation in this field.”

The Australian think tank Lowy Institute estimated that China spent over AUD 21 million on constructing the Vanuatu government building. This is significant for Vanuatu, which has a population of only 300,000. It is estimated that 40% of Vanuatu’s external debt is from the Export-Import Bank of China.

Western countries are concerned about China’s growing influence in the South Pacific. Recently, China has shown aggressive diplomatic policy toward South Pacific countries, including the embassy constructions in Tonga and the Solomon Islands. Experts have described this as “Debt-trap diplomacy.” AFP reported, “China has funded a series of major infrastructure upgrade projects in Vanuatu, part of China’s competition for influence with its Western rivals.”