New US State Department’s report identifies 16 states vulnerable to China’s so-called “debtbook diplomacy” and economic coercion, including Vanuatu, the Philippines, Cambodia, Laos, Thailand, Malaysia, Sri Lanka, Tonga and Micronesia.
The paper, obtained by The Australian Financial Review, says Papua New Guinea has “historically been in Australia’s orbit” but there is alarm that PNG has been “rapidly taking on Chinese loans it can’t afford to pay and offers a strategic location in addition to significant LNG and resource deposits”.
Former foreign minister Gareth Evans is quoted in the 40-page paper as characterising Laos and Cambodia as “wholly owned subsidiaries of China.”
In an interview, co-author and Harvard Kennedy School scholar Sam Parker said: “China is loaning hundreds of billions to countries that often can’t afford to pay it back, and it is going to want something in return for that money.”
“China’s public-private economic model enables it to convert economic debt into strategic influence and assets.”
The US document, dated 27 March 2018, emerged out of an earlier classified version written confidentially last year for United States Pacific Command.
The latest unclassified report, which has not been publicly released, was written for the US State Department policy planning staff, under the supervision of Harvard’s distinguished US-China researcher Graham Allison, a former US defence assistant secretary under president Bill Clinton.
The US report says debtbook diplomacy is “likely to play an important role in China’s multifaceted campaign to erode strategic advantages” of America and its allies and shift the balance of power in Asia.
Vanuatu is already “deeply in debt” to China and Beijing is “positioning itself to capitalise on the impending fiscal distress of Pacific Island Countries”, the document says.