Fergus Hanson and Jenny Hayward-Jones | April 23, 2009
Article from: The Australian
AS Chinese leaders like to see it, China gives aid without any political strings attached. But when you suddenly start bankrolling a pariah military dictatorship, does that argument really hold any water?

In the year following the 2006 coup in Fiji, Chinese aid pledges increased seven-fold. That is, from about $US23million in 2006 to a staggering $US161 million in 2007. A lot of that aid was not dispersed immediately, but what news escapes from Fiji these days suggests China has kept up its commitment to roll out the promised funds. The Fiji Electricity Authority and theChinese Development Bank signed a $US70 million loan agreement to commence the construction of the Nadarivatu Hydropower project. Chinese loans are also helping to fund other infrastructure projects in Fiji.

The relative weight of China’s aid program in Fiji is worth noting. Whereas Australia is still the largest aid donor in the Pacific region as a whole, its 2008-09 aid program for Fiji is a rather meagre $26.9million. As the interim regime in Fiji has been isolated by Western nations in an effort to help the people win back their democracy, China has stepped in to fill the donor void.

Although funds from China have yet to make a measurable beneficial impact on Fiji’s economy, the symbolism of Chinese aid is important. While the international community has been shunning Fiji’s interim government, Chinese Vice-President Xi Jinping met Fiji’s President Josefa Iloilo and interim Prime Minister Frank Bainimarama when he visited Nadi on a transit stop on February 9.

Bainimarama’s regime has been pursuing a look-north policy since his relations with Australia and New Zealand fell apart after his December 2006 coup. Unlike Australia, New Zealand, the EU and the US, China refuses to comment on the domestic political affairs of other nations. In its dealings with Fiji’s interim government, Beijing has not mentioned the importance of democracy nor linked its aid to elections. Bainimarama has portrayed China as Fiji’s saviour to his supporters and to Fijians concerned about their next pay cheque.

Fiji’s economy deteriorated rapidly in the first quarter of 2009. A perfect storm of devastating floods in January, the negative impact of the global financial crisis on demand for tourism and exports, and ongoing loss of business confidence following the coup had already hit Fiji before the April 10 abrogation of the constitution made matters much worse. The Reserve Bank of Fiji had already forecast a contraction of the economy; exports and investment were already lower than expected. Official foreign reserves have plummeted to just 2.7 months of import cover.

Fiji’s relative size and strategic importance in the Pacific mean that the wider Pacific Islands region will suffer from its economic decline. Preventing the collapse of Fiji’s economy is critical not only for Fiji but for the stability of the region. Fiji clearly needs financial assistance, and quickly. But it is important that assistance is provided in a manner that helps the people who need it and does not simply prop up Bainimarama and his coterie.

China has chosen to step up its aid to Fiji and take on the mantle of major donor. Its track record elsewhere suggests China has neither the will nor capacity to assume responsibility for fixing things if the country implodes. Australian and NZ officials have realised this and recently we have seen the question of China’s role in Fiji raised with senior Chinese officials.

If China wants to be taken seriously as a responsible international actor, it needs to behave in a mature way in Fiji. Fiji’s interim government will almost certainly request more financial assistance from China to help it respond to its liquidity crisis. China is likely to be willing to help.

Beijing knows the Fiji economy is in trouble and, as an investor in the island nation, will be keen to do what it can to help Fiji avert a financial catastrophe. The financial assistance Fiji requires, however, is beyond the capacity of any single donor, even China.

Rather than offer more bilateral assistance, China should be encouraged by Australia and others to direct new assistance to Fiji through international financial institutions. This would be consistent with the commitments made by the G20 leaders in London to increase the resources available through the international financial institutions so those institutions can help developing countries cope with the global financial crisis. It would send an important signal to Fiji’s interim government that its only option is to deal with the international financial institutions and adopt the disciplines they recommend to stabilise the economy. And it would fit squarely with G20 leaders’ efforts to integrate China into co-ordinated responses.

Looking at China’s engagement with other regimes (Sudan’s and Burma’s, for example), the prospect of it changing its approach might seem far-fetched, but Fiji is a little different. Relatively, China doesn’t have that much to gain from Fiji. China also wants rewards from Australia (such as approval for resources investments), which offers some room for compromise. For China’s policy in Fiji, these changes would have few costs and some important benefits.

China doesn’t have to be the bad guy in Fiji. If it chooses to deliver its aid through responsible international systems, it has the chance to have a real development impact in Fiji, enhancing its reputation in the region while demonstrating a maturity befitting a great power.

Jenny Hayward-Jones is program director of the Myer Foundation Melanesia Program and Fergus Hanson is a research fellow at the Lowy Institute.



  1. Budhau Says:

    CHINAS HELP MAY HARM FIJI – that is not the issue. Australia and New Zealand are moe worried about the South Pacific becoming a Chinese sphere of influence – the Chinese threat has more to do with A/NZ and they are warning us that it may harm Fiji. This is not about Fiji, this is about Chinese presence in the Pacific.

    The authors of the above piece, while educated, knowledgeable folks, they are probably pushing the Australian agenda. NZ and Australia feel more threatened by the Chinese presence in the South Pacific.
    The authors wrote, “China doesn’t have that much to gain from Fiji”, as compared to Burma or Sudan. I think the authors are wrong, the issue is not what they have to gain from Fiji, the bigger question is what is the Chinese plan for the South Pacific.

    When A/NZ suspended military assistance to Fiji after the May 2000 coup, it was China that stepped in to fill the gap. If was the Chinese who helped pay for the construction of the venue of the 2004 South Pacific Games in Suva. China has been helping island nations like Fiji, Vanuatu, Tonga and PNG with training and logistical aid to their military.

    PNG has got huge investments in from the Chinese and Chinese aid to the PNG is only second to Australia.
    Chinese influence is spreading rapidly in the South Pacific and the Australians are worried. What the Australians are worried about is that in the end, China will challenge the US as the big power in this region. It is about whether this region would be a US or Chinese sphere of influence.

    That is why, I think, the Chinese will stick with the Fiji regime. The more A/NZ try to isolate Fiji causing a deterioration in our economy, the closer Fiji will get to China. After we have a democratically elected government, there is no guarantee that Fiji will get back to A/NZ like the good old days.

    BTW – those Chinese, they don’t look at the Moody’s rating to give loans to Fiji.

  2. Raude Says:

    Budhau you must be lonely on this site, get a life and go n plant sugar cane… or show your face and go and help Vore….Bushy bush lawyer….

  3. Privatesnooper Says:

    It does not matter whether we turn to China or India – what is wrong is that
    we allowed military to snuff out elections, free media and violation of human rights etc – arent indians holding elections with one Gandhi member of the BJP (which supported Mahen after the 2000 coup) saying Muslims dont belong to India?

  4. Willy Says:

    The notion that China has little to gain from buying into Fiji is nonsense. Chinese foreign policy is long term and prepares for a stand in the fight for global resources and influence. China needs access to fisheries, minerals and perhaps most importantly a navy base in the Pacific. Fiji can provide those things and every $ China is spending is expected to produce a significant return for the PRC. The problem is that the racial tensions in Fiji will be exacerbated by bringing in more Chinese, which is inevitable if FB continues to cooperate with China.

  5. Budhau Says:

    Willy, I agree with some of the stuff that you said. Yes, we have had racial tension in Tonga, Solomon Island and PNG with the Chinese moving in.

    In Fiji we have a history with the Chinese, though many of those old families have migrated, we also have had many inter-racial marriages – that explains all those Part Fijian/Part Chinese folks in Fiji.

    How it could be different in Fiji is that the Chinese may gradually move in to replace those Indians who are moving out. The Fijian population may show a preference for the Chinese over the Indians. However, we have seen problems with prostitution, gambling and gang related activity among the newly arrived Chinese in Fiji.

    I still feel that it is the Australians who are worried about the Chinese presence in the South Pacific and they are attempting to make the Chinese look bad when it is helping Fiji – while Australia has no problem dealing with the Chinese. They had the same policy in the cold war days where an Island nation was not trusted to deal directly with the Soviet Union when it was OK for Australia and New Zealand to deal with the Soviet Union.

    Hey Snooper, when that Gandhi dude, in a political speech made remarks that were considered inflammatory and anti-Muslim they charged him and threw his ass in jail.

    Now compare that to the SDL government minister Caucau when she said “”A priest warned me that we must keep a careful and guarded watch over fellow Indo-Fijians because they are like weeds. They tend to push to grab to take over the land and the nation.”

    Qarase, as the PM, in whose cabinet Caucau was a Minister – Qarase refused to rebuke her publicly. Not only that, the SDL renominated her as the SDL candidate in the 2006 election, over the objections of that Cakobau dude. She was the same woman who was recently charged in San Francisco with beating up a boyfriend when she caught him making out with another woman….and she is the daughter of the former President of the Methodist Church.

    You see the kind of losers the SDL had – and it goes to support Naisoro’s argument that he had selected some “unemployable imbeciles” as SDL candidates.

    On the other hand, when Butadroka made some abusive racist remarks, Mara back than invoked the the Public Order Act and had Buta charged and threw his ass in jail.

    So you see Snooper we will always have racists, the issue is what the government of the day does about such racism.

  6. makare59 Says:

    The regulated media goes down well in that a lot of people like me, don’t get stressed anymore with the venom and negativity that was spewed on the people of Fiji under the umbrella of media freedom. Privatesnooper…….we didn’t allow the militrary to snuff out elections. T’was Grass and his Pelican who appealed the HC decision that has put us all in Limbo. Grass could have gone peacfully into the dialogue so we could quickly get back into elections but he chose otherwise. I tell you from my experience with brief conversations with Grass he is a down to earth person. No doubt he has been led astray by his advisors…..As for Human Rights, what’s 10 lives compared to the genocide in Rwanda,Burma etc. too many to name. What about Grass’s request for Aussie troops to invade Fiji, now thats what I call : Intent to violate human lives(rights)You can imagine the number of lives that we’d have lost…….The next elections, I ain’t voting for The Grass’, Mahen or Bullfrog’s Party. There may be a CHINESE Party I’m looking foward to voting for.

  7. Makare59 Says:

    What the learned Budhau would suggest the govt of the day should do?

  8. Corruption Fighter Says:


    You don’t think that China reads Moody’s? This only goes to show how little you understand about business. Have a look at the China Exim Bank webpage. They have an Al credit rating from Moody’s.

    China Exim Bank is not an aid organization . It’s an export finance facility to help Chinese suppliers make profits. China has more than enough poor people of its own to help.

    Any loan by Exim to the Dictatorship will have to take into account two things. Can they repay? The Moody’s report casts real doubts and that’s before they consider the possibility of collapse in the sugar industry without EU assistance and with continued Dictatorship incompetence.

    The other thing the Chinese will take into account is whether a restoration of the 1997 Constitution could lead to a repudiation of any contract. The so-called Interim Government is blatantly illegal and anybody that deals with them understands the risk of repudiation by a legal government.

  9. Budhau Says:

    CF – If you look at the way China makes decisions on loans, one thing becomes very clear – that they ignore standards. And this is nothing new – some of the loans made to the third world countries by the western countries in the 70’s and 80’s were done in the same manner and billions were written off through debt relief programmes.

    Here, what we have is a rivalry between the US and China regarding the South Pacific as to whose sphere of influence this would be. You may recall that the US may have had a role in the 1987 coup because of the Bavadra government’s stand of nuclear free pacific – which was a change in policy compared to the Mara government and the US was not pleased about that change. Fiji is a significant regional player in this game.

    Thus, I don’t think China would be looking at the lowering of the Moody’s rating when it assesses its relationship with Fiji and whether decisions on loans would be negatively impacted by the lower Moody’s ratings.

    Looking at the overall picture, it would be naive to suggest that Moody’s lowering Fiji’s ratings would affect the preferential loans that Fiji may be getting from China.

    You also wrote, “The other thing the Chinese will take into account is whether a restoration of the 1997 Constitution could lead to a repudiation of any contract.”

    I am sure the Chinese are very familiar with the doctrine of repudiation and how some countries have been able to get out of debts – the most recent case being that of Iraqi loans under Saddam Hussein.

    Despite that, the Chinese continue to loan, recently to countries like Burma. Moreover the amount involved in Fiji loans and aid is insignificant, compared to the billions loaned to “at risk” countries in other parts of the world. It is a balancing act that the Chinese must do between risks and the benefits – I think Congo under Mobutu looked much worse than Fiji under Frank.

    So you see CF, if the issue was a inability to pay, we have seen how countries addressed that problem in the last few decades. If the issue was repudiation, I am sure China is aware of the risks involved and the benefits.

    Therefore, I don’t think that Moody’s lowering our ratings will have any impact on Chinese loans to Fiji.

  10. Budhau Says:

    Hey CF – on an unrelated issue – The Kadavu House in the news this week – check out the two related story below – one from this week and the other one is about a year old.

    BTW – I think Chaudary was up to something back then.

    Kadavu House dispute
    Friday, April 24, 2009

    Taken from / By: fbcl
    The Kadavu Provincial Council is now seeking legal counsel concerning their ownership status of the Kadavu Development Company.

    Former Council chair Ratu Josefa Nawalowalo says the issue of who owns the company is expected to be resolved at the next provincial council meeting.

    “The Kadavu Provincial Council records paying out money to the Kadavu Development Company to help set it up and likewise other shareholders. In as far as the issue of ownership of the Company, that is an issue that is yet to be resolved.”

    Meanwhile Kadavu House was opened in traditional chiefly style in a ceremony laced with the presence of all the 9 chiefs of Kadavu in Suva this morning.

    Kadavu Development Company owns Kadavu Provincial Holdings the owners of Kadavu House.

    Fiji Broadcasting Corporation LTD

    Chaudhry destroys Fijian businesses: LQ
    Fijilive – 10 FEB 2008

    Fiji’s interim Finance Minister Mahendra Chaudhry is out to destroy indigenous Fijian businesses, says his political rival and ousted Prime Minister Laisenia Qarase.
    Qarase has described Chaudhry’s accusations as total ignorance of Fijian
    traditions and customs.
    He was responding to Chaudhry’s claims that the Kadavu Provincial Council was used as a front by the Kadavu Holdings Limited, Kadavu Development Company and the SDL government to secure favourable treatment under the affirmative action programme, for the construction of the Kadavu House.
    Qarase downplayed Chaudhry’s statement saying he (Chaudhry) had a
    personal agenda against Fijian business operators, wherever they were.
    He said KHL was part of the Kadavu Provincial Council and the council had a role in terms of approving the project proposed by the commercial company.
    “There are no ulterior motives in assisting this project rather clearly our
    position in trying to enhance Fijian participation in the commercial sector and Chaudhry does not like that/’ Qarase said.
    Attempts are being made to obtain a comment from Chaudhry.


  11. Teejay For a Free Fiji Says:

    An article in today’s The Australian newspaper about Australia’s defence stratey suggests there is some mistrust about China. I would agree that China has a long term strategy to gain hegemony in the Asia -Pacific region.
    Australia’s new defence White Paper makes it clear also that Australia will be spending billions over time.
    The Australian article says “The new white paper says Australia’s defence force should be capable of taking the lead security role in Australia’s neighbourhood, particularly the South Pacific, as well as having the ability to deploy military forces further afield.”

    I would suggest that Australia sees Fiji as a crucial ally in ensuring regional stability, in the longer term. And given the current sense of Chinese ‘cheque book diplomacy’ with the Dictator Bainimarama, those of us in the South Pacific should be aware of what is occurring now and how it will impact in the future. The Australian government is aware of this.

    If interested, follow the link:,25197,25383010-601,00.html

  12. Relax Man Says:

    Why should only it be only the white colonialist countries that should help us??? lets turn to India and China, at least they understand us not like this white asses who want us to do whatevere they want. Enough is enough go to hell Aust and NZ. Agree with your comments Budhau!!

  13. Makare59 Says:

    Relax man thats a bit rough. We’ve always had a close connection with the white colonial countries and of course the chinese seaman who were here as early as the 1830’s for sandalwood. The Indians arrived much later. Aust and NZ have always had their way with us in a one sided affair. A few decades back we were still the Sambo in the garden. Things have changed now. If we turn to India and China, then its ok because of these unfair treatment dished out by these countries. Restraint from racist comments might be better, keep your cool man. FB is trying is trying to eradicate or minimize the racism that was rampant in our midst.

  14. Asgrocky Says:

    To eradicate rascism from your midst is to take the author of it out of the equation. Then you can give the formula to all the leaders of the world to do the same because it’s going to be a miracle that solves all the problems of the world, if your FB succeeds. Rascism was around before FB was born. It has no face. People are dying everywhere in the world today being murdered by this rascism. Even your bible quoting Police Commissioner is rascist to the core. It lurks in every corner. Has trillions of eyes, tongues, ears, minds,and they walk and talk, run, even fly and travel very fast, it does not discriminate, it crosses all boundries destroying everone in its paths. So you think FB is the miracle man to take him out, yes, maybe just eradicate him, no, no, no, just minimise the little bugger. Yeh, you do that FB, makare 59 and relax man will catch him for you. They speak the same lingo. Nooooo problemo, we do good job, we good people we are, we catch him for you, FB. You man of ggod vision, boss, you can see rascism. Tell us where to find him we catch him, boss. No worries, you eradicate, you minimise the sucker sucking fiji.

  15. Budhau Says:

    There is certain amount of racism on the part of A/NZ and the US – in that they do not trust these “Islanders” can deal with China. If there is any relationship with China, that the Chinese would manipulate these unsophisticated natives and the next thing you have is a Chinese Naval base in Fiji or something like that.

    They has the same attitude during the cold war when they did not want the island nations dealing with the Russians.

    Of course the Russians and Chinese would try and get what they can – but you have to trust these Island leaders to do what is bet for their country and their people. What is best for the Island nations may be be the same as what is best for A/NZ and the US.

    Asgrocky – racism is here to stay, I think what they are trying to do is try and get rid of some of the institutionalized racism in Fiji. As for individuals having a dislike for one race or the other – all we can do is teach our children better.

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