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Australian Prime Minister Anthony Albanese (right) shakes hands with Solomon Islands Prime Minister Manasseh Sogavare ahead of a meeting in Canberra earlier this month. Photo: AAP Image via AP

China aid to Pacific nations plunged as Australia’s spending soared in 2020, new report finds

  • Australia and New Zealand provided one-third of all aid to the Pacific region in 2020, according to a new report by the Lowy Institute think tank
  • Chinese aid, meanwhile, dropped to its lowest level since 2008 and was mainly focused on Kiribati and Solomon Islands – recent converts to Beijing
A record US$3.3 billion in aid flowed to Pacific island nations in 2020 as the Covid-19 pandemic hit, a 33 per cent increase on the previous year, according to a report released by the Lowy Institute think tank on Monday.
The pandemic led to border closures, confronting governments reliant on tourism with economic crisis. It also brought a shift in how aid was delivered, with more loans than grants made, and more direct funding to help deliver critical services.

The Lowy Institute’s annual Pacific Aid Map showed Chinese aid to the region dropped to US$187 million in 2020, its lowest since the institute began tracking aid flows in 2008.

Australia and New Zealand provided one-third of all aid in 2020.
The map tracks development assistance to the Pacific islands, an effort the institute says increases transparency of money flows, as China vies for influence with the United States and its allies in the strategically important region.
A move by Solomon Islands to sign a security pact with China in 2022 alarmed Washington and its allies, including Australia.

China put the Pacific Islands on the geopolitical map. What comes next?

Since 2008, Australia has provided 40 per cent of all aid to the region, followed by New Zealand, with 8.6 per cent, Japan, with 8.5 per cent and China, with 8.5 per cent, the report said. Chinese aid, predominantly loans for infrastructure, had peaked in 2016.
The project director of the Pacific Aid Map, Alexandre Dayant, said development assistance remained a diplomatic tool for Beijing, with regional aid focusing on Kiribati and Solomon Islands, which switched diplomatic ties from Taiwan to Beijing in 2019.

Dayant said the overall drop in Chinese aid to the region comes amid negative publicity about the cost of Chinese infrastructure loans, and Pacific island nations having more choice.

US seeks to reassure Pacific island nations with US$810 million package

Australia, which has committed A$600 million in infrastructure loans since 2019, is becoming a prominent Pacific lender and needed to take “considerable care” it did not contribute to the region’s debt problems, the report said.

Australia last week said it would spend another A$900 million (US$576.9 million) in Pacific aid.

The US has also pledged an additional US$800 million after hosting a dozen Pacific islands leaders at a White House summit in September.