Nepal | June 05, 2020

China’s largesse in Tonga threatens future of Pacific nation

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NUKU’ALOFA: The days unfold at a leisurely pace in Tonga, a South Pacific archipelago with no traffic lights or fast-food chains, and where snuffling pigs roam dusty roads.

Yet even in this far-flung island kingdom, there are signs a battle for power and influence is heating up among much larger nations — and Tonga may end up paying the price.

Government officials work in a shiny new office block that was an $11 million gift from China. Dozens of bureaucrats take all-expenses-paid training trips to Beijing each year. And China has laid out millions of dollars to bring Tongan athletes and coaches to a training camp in China’s Sichuan province.

“The best facilities. The gym, the track, and a lot of equipment we don’t have here in Tonga,” said Tevita Fauonuku, the country’s head athletic coach. “The accommodation: lovely, beautiful. And the meals. Not only that, but China gave each and everyone some money. A per diem.”

China also offered low-interest loans after pro-democracy rioters destroyed much of downtown Nuku’alofa in 2006, and analysts say those loans could prove Tonga’s undoing. The country of 106,000 people owes about $108 million to China’s Export-Import bank, equivalent to about 25 per cent of GDP.

Teisina Fuko, a 69-year-old former parliament member, suspects China finds his country’s location useful.

“I think Tonga is maybe a window to the Western side,” he said. “Because it’s easy to get here and look into New Zealand, Australia.”

“It’s a steppingstone.”

For decades, the South Pacific was considered the somewhat sleepy, backyard of Australia, New Zealand and the United States. Now, as China exerts increasing influence, Western allies are responding.

After Cyclone Gita destroyed Tonga’s historic Parliament House last year, the government first suggested China might like to pay to rebuild it. Then Australia and New Zealand stepped in and are now considering jointly funding the project.

Experts say the South Pacific could be important to China’s navy or coveted for its fisheries, seabed minerals and natural resources. China is also engaged in an ongoing effort to lure away the few remaining countries that recognize Taiwan instead of China — several of them Pacific island nations.

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

China has poured about $1.5 billion in aid and low-interest loans into the South Pacific since 2011, putting it behind only Australia, according to an analysis by Australian think-tank the Lowy Institute. And that figure rises to over $6 billion when future commitments are considered.

Some worry the loans could become debt traps when nations can’t repay.

China’s ambassador to Tonga, Wang Baodong, said China has only benevolent intentions in Tonga and no hidden agenda. “Some people in the West are being over-sensitive and too suspicious,” he said. “No need.”

It’s not just money that is flowing in from China. Chinese immigrants began arriving in the 1990s when Tonga started selling passports.

The idea was to attract wealthy Hong Kong residents hedging their bets ahead of the former British colony’s return to China in 1997. Instead, they were snapped up by rural Chinese looking for a better life.

In a country with few jobs, Tongans worry that Chinese immigrants are now running most of the corner groceries and are expanding their business interests into farming and construction.

Wang acknowledges the criticism that Chinese immigrants run many businesses but said Tonga’s leaders recognize the contribution they make and have even called on Tongans to learn from their hard-work ethic.

The real threat to Tonga’s future may lie in its crippling loans from China. Repayments were due to start last year, and panic crept in.

Last August, Prime Minister ‘Akilisi Pohiva called on other Pacific nations to join forces to demand debt relief, warning that China could snatch away buildings and other assets. But he reversed his position days later, saying Tonga was “exceedingly grateful” for China’s help.

Within months Tonga announced it had been given a reprieve and didn’t need to start repayments for another five years.

Tonga also said it was joining China’s Belt and Road Initiative, the trillion-dollar investment-and-lending program that is a signature policy of President Xi Jinping.

Tongan officials don’t seem eager to discuss the relationship with China, saying all questions about China’s loans and aid should be directed to Chinese officials.

Wang said there was no link between Tonga getting a break on its loans and joining the Belt and Road Initiative. He said Tonga had raised concerns about the loan, and China was willing to help.

Fuko thinks the loans have given China the upper hand with Tonga.

“I don’t know how we are going to pay that back,” the former lawmaker said.

An unintended consequence of Tonga’s China loans could be a reduction in foreign investment and a withering of the revenues needed to pay them back.

Critics point to the Foreign Exchange Control Act Tonga introduced last year, designed to keep money in the country and protect its currency during financial emergencies.

Tongan-based lawyer Ralph Stephenson said that while the law isn’t being enforced, it’s still spooking investors.

“The penalties for breaching the act are Draconian,” he said.

Wang said any notion that China might be engaged in a Pacific power struggle with the West or was using Tonga to keep tabs or even spy on New Zealand and Australia is nonsense.

“Tonga is a small country. It’s almost impossible to hide any secret,” Wang said. “For some of our Western friends, personally, I think they should be confident in their relations and influence in this region.”

For Ola Koloi, who runs a tourist lodge, China’s footprint is too pervasive, influencing what she can buy since so many goods for sale come from China.

She said the loans to China should worry every Tongan.

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

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