On Wednesday, RNZ reported:
New research shows that China has emerged as the world's largest creditor for developing nations, which are due to pay back at least $54 billion to Beijing this year.
Australian foreign policy think tank the Lowy Institute has crunched data from the World Bank and found some of the world's poorest countries are now facing "record high debt payments" to China.
China rapidly boosted investments in infrastructure last decade, funding railways, ports and roads across the developing world under its sprawling Belt and Road Initiative - projects which have often been welcomed by governments across Latin America, Africa, Central Asia and South-East Asia.
But the lending has also placed pressure on government balance sheets around the world.
Tonga’s debt crisis is a microcosm of China’s loan strategy across the Pacific. Since 2006, China has lent USD $1.3 billion to nations like Vanuatu and Samoa, often for flashy infrastructure projects with questionable economic returns. In Tonga, repayments eat up 3.5% of GDP annually, diverting funds from critical services. The 2022 volcanic eruption, which wrecked 36% of Tonga’s economy, only deepened this vulnerability. Meanwhile, China’s refusal to forgive these loans, despite Tonga’s pleas in 2013, 2018, and 2020, raises red flags about Beijing’s intentions. Is this “bilateral friendship” or debt-trap diplomacy to secure influence in a geopolitically sensitive region?
In April, RNZ reported:
China defends Tonga loans amid rising debt concerns: A call for fair representation
China's embassy in Tonga has taken to Facebook to defend its loans to the Kingdom, following fresh media coverage and concerns about the country's rising debt.
The Facebook post, shared on 24 April, says China gave the loans to help Tonga during a difficult time.
"Recently, there were news reports on the loans provided by China to Tonga many years ago," the post says.
"China offered concessional loans to Tonga based on the principles of bilateral friendship and equal cooperation.
Australia and New Zealand can break the debt cycle. Australia’s AUD $45 million budget support in 2022/23 gave Tonga breathing room, while New Zealand’s NZD $4 million grants and post-disaster aid show what’s possible. Together, they could provide targeted grants or low-interest loans to clear Tonga, and other Pacific nation's Chinese debt, freeing up fiscal space for them to build the schools and hospitals they require, plus increase their climate resilience.
Beyond debt relief, both nations should fund infrastructure that meet needs without any strings attached. Unlike China’s opaque loans, Aussie and Kiwi aid is transparent, grant-based, and aligned with Pacific values of community and sovereignty.
This isn’t just charity; it’s strategy. China’s loans come with soft power perks, UN votes, potential military access, and leverage over Pacific leaders. By stepping up, Australia and New Zealand can reinforce the Pacific as a region of democratic resilience, not a pawn in Beijing’s game. The next Pacific Islands Forum, to be held in September 2025 in Honiara, Solomon Islands, offers a platform to coordinate a repayment plan to help Pacific nations escape their crippling debts. But let’s be clear: our aid budgets are dwarfed by China’s deep pockets. Australia and New Zealand must prioritise smart, sustainable investments over token gestures. They must get Pacific leaders onboard with a debt reduction plan that will work.
Critics might argue this risks escalating tensions with China, which ignores the problems the current debts cause. But let’s stop pointing fingers. Tonga turned to China when we were slow to act post-2006. But that’s exactly why we must act now, not with arrogance but with partnership, respecting the agency of Pacific nations. If we don’t, we risk losing our political influence in the Pacific to Beijing’s chequebook.
