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China’s investment in Pacific Islands growing, region’s largest trading partner

China’s cumulative foreign direct investment in Pacific Island countries has grown rapidly since 2014, reaching US$2.8 billion in 2016.

This is an increase of 173 per cent from 2014 following President Xi Jinping’s visit to the region, according to a staff research report published by the United States-China Economic and Security Review Commission. 

According to the report, nearly 70 per cent of the FDI was concentrated in Papua New Guinea, but despite its accelerating growth, Chinese FDI in the region was just 0.21 per cent of its global outward FDI in 2016. 

“Since 2005, Chinese firms have invested in two mining projects in Papua New Guinea worth US$970 million. Aside from these projects, Chinese FDI throughout the region has been mostly in the transport, real estate, and energy sectors,” the report said. 

The report highlighted that Chinese firms have recently signed major deals with Pacific Island countries on a range of infrastructure and real estate projects, with PNG. approving a US$4.4 billion worth of projects to be carried out by China Railway Group for road, agricultural industrial parks, and a water supply upgrade in 2017. 

In Fiji, Chinese firm Guangdong Silk Ark Investment is building a US$500 million resort on the Fijian coast, one of the biggest projects in Fiji, which was projected to be completed last year, according to the report pointing to China’s real estate investment. 

According to the report, Chinese companies have also been active in information and communications, with Chinese telecom company Huawei given the contract to build national broad band transmission network for PNG with international connectivity via Indonesia, drawing concerns from the Australian Government. 

The Solomon Islands also awarded the contract to Huawei to construct an undersea cable to connect the Solomon Islands’ main islands with onward connectivity to Australia. 

According to the Executive Director of the Australian Strategic Policy Institute, Peter Jennings, “Chinese telecoms companies have connections to the Chinese state. This raises the risk of infiltration, intellectual property theft and could give Beijing the capacity to shut down Australian networks in the event of a crisis,” the report said.

Meanwhile, China is the largest trading partner of Pacific Islands Forum (PIF) member countries, excluding Australia and New Zealand, with its total trade goods for 2017 amounting to US$8.2 billion. 

This is according to a staff research report published by the United States-China Economic and Security Review Commission on June 14, 2018 titled “China’s Engagement in the Pacific Islands: Implications for the United States”. 

The report said the amount surpasses South Korea’s $8 billion, Australia’s $5 billion and the United States $1.6 billion total trade goods to the PIF member countries. 

PIF. member countries include Samoa, Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Palau, Papua New Guinea, Solomon Islands, Tonga, Tuvalu, Australia and New Zealand. 

China’s total trade with Samoa for 2017, the report said, was to the tune of US$66 million (T$25.3m) for 2017.   

According to the report, China’s total trade with Pacific Island Countries has increased rapidly over the past decade, which was boosted by President Xi Jinping to the region in 2014. 

The high-level visit “saw the largest year-on-year increase in total trade over this period, growing 63 percent largely due to a sharp boost in Chinese exports,” said the report. 

“In 2017, China’s exports to Pacific Islands Forum countries reached US$4.7 billion, up from US$2.7 billion in 2014. Chinese imports from Pacific Islands Forum countries totaled US$3.5 billion, up from US$2.3 billion in 2014.

“China’s top export destinations in the Pacific Islands are the Marshall Islands (mostly passenger and cargo ships), Papua New Guinea (broadcasting, equipment, iron, rubber and prefabricated buildings), and Fiji (seafood, delivery trucks and rubber). 

“China’s imports from the region consist mostly of raw materials and minerals. Beijing’s top sources of imports in the region are Papua New Guinea (petroleum, rough wood, and nickel mattes), New Caledonia (ferroalloys and nickel mattes), and the Solomon Islands (rough wood).” 

According to the report, China’s involvement in the Pacific has noticeably accelerated since President Xi took office in 2013. 

“An examination of trade, investment, aid and tourism shows that China is becoming one of the dominant economic players in the region, well ahead of the United States,” the report further stated. 

“Given the rapid growth in Chinese activity in all four categories of economic engagement over the past decade, this trend is likely to continue in the years ahead, bringing economic and security implications for the United States and its allies and partners in the region.”


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