Greg Ansley: Beijing's moves have Canberra in a bind

There were furrowed brows behind the smiles as Chinese Premier Wen Jiabao flew out of Australia last week bound for Fiji and the first China-Pacific Island Countries Economic Development and Cooperation Forum, where friends of Beijing were to be courted heavily.

Wen did not disappoint his hosts. For those island states which did not recognise Taiwan, Wen delivered loans totalling 3 billion yuan ($615.54 million) for economic development, removed import tariffs and cancelled debt for the poorest, promised to provide free malaria medicines to stricken countries, and added Papua New Guinea, Samoa and the Federated States of Micronesia to the list of destinations Chinese tourists are allowed to visit.

No one in Canberra could publicly object to this kind of largesse in a region Australia regards as important to its own well-being. And Wen's visit to that country had been profitable enough, offering potential billions in uranium sales and other business, and declaring that - as with New Zealand - Beijing wanted to stitch up a free trade agreement within two years.

But Canberra is worried by the giant in its backyard. Although Wen may have said China's interest in the South Pacific was strategic rather than expedient, Australia regards the use of money to buy friends by both Beijing and rival Taiwan as a potential timebomb that could explode by promoting instability and corruption.

While urging calm and a sense of proportion - Japan, for example, remains the Pacific's biggest aid donor - distinguished Australian-born Harvard China scholar Professor Ross Terrill warns that Beijing's drive for friends, influence and wealth could cloud Canberra's future in its immediate region.

"Chinese fishing, investment and tourism in the South Pacific build on a foundation first established in 1970s rivalry with the Soviet Union and developed in competition with Taiwan for diplomatic recognition from pint-sized, hands-extended island states," Terrill wrote in an analysis of China's rise for the Australian Strategic Policy Institute.

"Twenty years hence, China and Australia could be the two powers in the shadows as a tug-of-war goes on in the internal and external policies of Papua New Guinea and other South Pacific states."

China and its emerging global role are already sufficiently taxing. So far Canberra has not had to make any real choices of allegiance, managing to balance relations with Beijing and the United States, but there are plenty of potential pitfalls. Noted an examination of Australia's relations with China by the Senate foreign affairs, defence and trade committee: "The relationship is not risk-free."

The committee's report, released just before Wen's visit but not widely reported, warned Canberra to steer clear of tensions between the US and China, but advised the Government to encourage Washington to lift its commitment to the region to counter Beijing's growing influence.

At the same time, the committee expressed concerns about US attempts to contain China, at tensions over Taiwan, and difficulties between China and Japan, another of Australia's key allies and trading partners.

Much closer to home was Beijing's growing clout in the South Pacific, and the vulnerability of island states to "financial influence and corruption".

The committee on one hand wants to ensure that rival aid from China and Taiwan is used according to international development guidelines - rather than to buy allegiance - and on the other wants to ensure Canberra beefs up its own presence and influence.

Australian prime ministers, the committee said, should make sure they place the highest priority on attending all meetings of the Pacific Forum.

At the heart of Canberra's concern is the amount of money pouring into the Islands, much without the strings normally attached to aid.

"Among some Pacific Island nations, competition between China and Taiwan for diplomatic recognition has, on occasion, appeared to take on the characteristics of a bidding war."

So far, Beijing has been winning. Since establishing formal relations with Fiji and Samoa in 1975, China has brought Papua New Guinea, the Cook Islands, Vanuatu, the Federated States of Micronesia and Tonga on side.

Taiwan has lured Kiribati and Nauru away from Beijing and in addition successfully courted the Marshall Islands, Palau, Solomon Islands and Tuvalu. All were excluded from Wen's recent generosity.

Wen's Fijian visit, the first by a Chinese Premier, was in itself an indicator of how seriously his nation plays this game. The committee noted that the leaders of tiny Pacific states are received in Beijing with lavish receptions. The Prime Minister of the Cook Islands, Dr Robert Woonton, for example, was "speechless" when he arrived in 2004 to be greeted by Wen at the Great Hall of the People, a 19-gun salute, and the flags of his country circling Tiananmen Square .

University of the South Pacific emeritus Professor Ron Crocombe told ABC radio that China was "heading straight for the jugular" in the region.

In Washington, a congressional committee noted that the head of a Pacific state of less than 500,000 people received the same treatment as the late President Richard Nixon.

And the money flows. Before Wen's Fijian visit, the Australian Foreign Affairs and Trade Departments estimated that Chinese aid to the South Pacific could be as much as A$300 million ( $357.78 million) a year.

Much of this was high-profile projects that stamped Beijing's presence: a parliamentary complex in Vanuatu, government offices in Samoa, a sports stadium for the 2003 South Pacific Games in Fiji, VIP car fleets for states hosting the Pacific Islands Forum, and a courthouse and police headquarters in the Cook Islands.

Australia worries that the payoff for choosing one side or the other could rebound across the region. Evidence given to the committee warned that the battle for influence between China and Taiwan further destabilised already weak and unstable governments, and fed endemic corruption. In 1998, PNG had tried to win A$3 billion ($3.57 billion) from Taiwan by promising to dump China.

Australian National University emeritus Professor Helen Hughes told the committee that in a region where corruption was now so entrenched that even large scandals scarcely merited a day's attention, China and Taiwan had made matters worse by engaging in chequebook diplomacy.

The Foreign Affairs Department was equally concerned: "We see chequebook diplomacy as directly undermining the efforts [to improve living standards, good government and political stability] that we have made over many years - particularly the efforts that we have intensified in recent times."

Strategic issues also concern Canberra, including the growth of Chinese investment in important resources, such as fishing, and the potential for a military presence.

Despite Chinese denials, speculation continues that a space telemetry tracking station on Kiritbati's Tarawa atoll could be used to monitor US missile tests or become part of a future Chinese space warfare effort.

For Australia, the Pacific is becoming a Chinese puzzle.