China using 'payday loan' tactic in the Pacific: US ambassador

New US ambassador to Australia Arthur Culvahouse arriving at the American Embassy in Canberra yesterday. Mr Culvahouse is accusing China of using its foreign aid to exert influence in the Pacific.
New US ambassador to Australia Arthur Culvahouse arriving at the American Embassy in Canberra yesterday. Mr Culvahouse is accusing China of using its foreign aid to exert influence in the Pacific.PHOTO: EPA-EFE

SYDNEY • China is using "payday loan diplomacy" to exert influence in the Pacific, the new US Ambassador to Australia has said, in comments that threaten to inflame regional tensions.

The United States and its regional allies have been battling China for greater influence in the Pacific - a region that has votes at international forums like the United Nations and controls vast swathes of a resource-rich ocean.

The geopolitical competition has seen both China and the US increase foreign aid to the region in recent months, which the West says is needed to prevent the Pacific from falling into financial distress and becoming susceptible to diplomatic pressure from Beijing.

Late last year, US Vice-President Mike Pence accused China of ensnaring tiny island nations in foreign-aid "debt traps".

The new US Ambassador to Australia, Mr Arthur Culvahouse, said Mr Pence's criticism was not strong enough.

"I would use stronger language - I would use payday loan diplomacy," Mr Culvahouse told reporters in Canberra, after presenting his diplomatic credentials to Australia's Governor-General Peter Cosgrove.

"The money looks attractive and easy upfront, but you better read the fine print," he said.

Lenders of payday loans typically charge a higher interest rate.

Speaking in Beijing, Chinese Foreign Ministry spokesman Lu Kang said China's cooperation with Pacific-island countries is good for both parties and broadly welcomed by these countries.

Some US officials have not been pleased to see such cooperation, and China hopes the US can do more to benefit these countries' development and not "keep making trouble out of nothing", he added.

China's Ambassador to Australia last year said Beijing does not place undue debt on the region.

The Pacific is also a venue for diplomatic competition between China and Taiwan, claimed by Beijing as Chinese territory. Taiwan's President Tsai Ing-wen will visit three of its diplomatic allies in the Pacific next week.

The arrival of Mr Culvahouse, the first US ambassador to Australia in more than two years, comes at a time of bilateral tensions between Canberra and Beijing.

In 2017, then Australian prime minister Malcolm Turnbull accused China of meddling in domestic affairs. Last year, Canberra banned foreign government-linked companies from investing in a nascent 5G network, effectively blocking China's Huawei Technologies.

China denied the allegations and has called on Australia to shed its "Cold War" mentality.

Analysts believe Beijing may now be using trade to punish Canberra for its criticism.

Sources at Chinese ports told Reuters last month that Australian coal imports are facing longer waiting times to clear Customs than other supplies, and the northern port of Dalian was halting Australian coal shipments.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 14, 2019, with the headline 'China using 'payday loan' tactic in the Pacific: US ambassador'. Print Edition | Subscribe