Popluation: 290,000
GDP growth: 2.9% in 2019; -3.3% forecast in 2020
Life expectancy: 70.3 years
Median age: 21.1 years

China’s strategic influence in the Pacific has spread rapidly in the past decade. China transferred at least $2.2 billion to Pacific nations between 2006 and 2016. With Pacific governments now owing about $1.3 billion to China, there are fears in the West that the region is now under Beijing’s sway and shoulders unsustainable debt. The tiny island nation of Vanuatu is a case in point.

China’s footprint in Vanuatu began in the 1980s when it sent more than 220 doctors to work there. Since then, China has invested in roads, sports arenas and education institutions.

Vanuatu has a GDP of just under $1 billion. Beijing has provided hundreds of millions of dollars in grants and loans. That has included $11.8 million to build an official residence for Prime Minister Charlot Salwai.

In 2018, just prior to the Asia-Pacific Economic Cooperation (APEC) summit, Vanuatu became a signatory to the One Belt, One Road initiative, as have Fiji, Papua New Guinea, Samoa and Tonga. The substance of the agreement was vague, and poorly communicated to the people of Vanuatu. It included a large cash gift, a new infrastructure loan, the establishment of a joint trade commission, and commitments to maintain “facilities connectivity” and policy coordination.

Analysts have suggested China seeks to use its lending to highly indebted Pacific nations as a way to wield control over their economies – a so-called “debt-trap strategy.” Vanuatu already owes around $130 million to China, which accounts for roughly half its external debt and more than one-tenth of annual GDP.

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Australia and U.S. worries about Chinese government interest in Vanuatu have intensified with Chinese development of Luganville wharf, a port big enough to handle warships. Both China and Vanuatu denied the report of a Chinese military presence.

Analysts suggest any Chinese military ambition in Vanuatu would come in stages, starting with access agreements to service Chinese naval ships. If these fears are realised, it could become China’s first overseas base in the Pacific and only its second confirmed overseas base.

Chinese private investments in Vanuatu are booming. Rainbow City, which is under construction, is a massive housing and shopping development on Vanuatu's main island, Efate. Locals are concerned it could overrun their way of life. Over the next 10 years, the construction that is set to cover 86 hectares of open land will dwarf neighboring villages and resorts.

Vanuatu has a thriving citizenship-by-investment scheme. It allows foreigners to become citizens within months and eventually get passports even if they are not permanent residents. The scheme is popular with Chinese nationals. It costs around $150,000 USD for a passport application and more for couples and families. Some 1,800 people acquired passports through the scheme in 2018.

Web page produced by: Minh-Ha Le
Videos & Photos: Radio Free Asia
Editing: H. Leo Kim, Mat Pennington
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