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Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: Chinese aid a sticking point

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China views aid to the Pacific as an expression of solidarity between developing nations. Photo / NZ Herald
China views aid to the Pacific as an expression of solidarity between developing nations. Photo / NZ Herald

When China's Cui Tiankai and America's Kurt Campbell sit down for breakfast in Auckland this morning they will have more than Pacific matters to discuss.

The Chinese Vice-Foreign Minister held an inaugural Pacific consultation in Hawaii earlier this year with Campbell, the US Assistant Secretary of State.

But Cui's confirmation yesterday that China is following negotiations on the Trans Pacific Economic Partnership (TPP) very closely, carries with it an implicit suggestion that the world's new mega-economy may want in to the planned cross-Pacific trade deal, something that is not currently on the table for TPP talks.

"We are open to any initiative that will serve the interests of the region," said Cui, who also underlined the Pacific Ocean as a link, rather than a barrier, between China and the US.

But while China is taking a pragmatic approach to regional trade agreements, it will not be patronised over its approach to Pacific aid.

Cui delivered his nation's message to big donors at a very small and select press conference on the outskirts of the Pacific Islands Forum.

While the language was diplomatic, the essential message was this: Don't blame China for stepping up to the plate when you won't honour your official aid commitments.

But the way Cui frames China's fast-developing role in the Pacific is problematic, not just for Campbell who blew into Auckland yesterday as the 50-strong United States forum delegation was preparing to leave town. But also for New Zealand.

John Key and Murray McCully have been trying to get China to join the forum "elders" - New Zealand and Australia - in forging a more transparent platform for development projects in the Pacific. New Zealand and Australia have long ago severed the no-strings approach to aid contributions, while China's practice of extending aid without any strings attached is seen as potentially embedding corrupt practices in some countries.

But Cui maintains that China's contributions are simply an "expression of friendship". China does not view itself as a "donor" nation to the Pacific countries. Its contributions are simply an expression of solidarity with other developing nations.

The upshot is that New Zealand - as host nation for this year's forum - essentially failed to get China to join the Cairns Compact with its focus on a more transparent mechanism for development assistance in the Pacific.

That said, China and New Zealand are likely to co-operate on joint projects. Cui instances solar power projects as a potential starter.

But while such co-ventures are being discussed at an official level, they did not get the formal tick-off at this year's forum, which McCully had wanted.

He did confirm that Chinese Vice-Premier Hui Liangyu will lead a senior delegation to visit New Zealand later this month.

Cui's team says details are still being worked out and they also stress that China understands New Zealand's sensitivities on Chinese investment in our farms and mines.

In 2003, the last time New Zealand hosted the forum, Chinese Vice-Foreign Minister Zhou Wenzhong dangled the prospect of a free trade agreement between China and New Zealand "some time in the future".

Zhou told me then that opening markets had to be two-way.

"We do have problems in entering the US market ... I think you have the same problem."

The United States presence at that 2003 forum was underwhelming.

Since World War II, the US has not had a big role in Oceania, but China's rapidly growing footprint in the Pacific has changed things.

In the Pacific Partners study which was unveiled at the US-NZ Partnership Forum last February, Ernest Bower noted: "Very few US policymakers understand the importance [of Australian and New Zealander contributions to peace and security in Asia since World War II] ... these are important US partners, but their views aren't sufficiently reflected in our policies. This has resulted in US policy not being robust enough to manage security issues in Asia-Pacific in the next century," he said.

"If we don't shift the policy focus, then we will be behaving negligently, and tomorrow's policymakers have to deal with the repercussions of this relative inattention in the future. We must recognise that the security challenges in Asia are becoming more complex and it's going to take a fulsome effort, engaging everybody [to ensure peace and stability in Asia-Pacific] in the next 20 to 30 years."

The interesting aspect is whether the Pacific nations share the bigger Western countries' concerns.

On Monday, as the dynamic Cook Islands drummers and the swaying hips of the hula dancers slowly lulled the dignitaries at the opening of the Pacific Showcase into a seductive space, it was easy to see why China's more relaxed approach is cutting ice.

- NZ Herald

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