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Australia revamps Pacific strategy as China looms

11 November 2018

Australian Prime Minister Scott Morrison is expected to announce a $US1.5 billion fund to provide loans to Pacific nations today, in a speech putting forward the Government's new foreign policy strategy in the Pacific. The two countries have also been vying for influence in sparsely populated Pacific island countries that control vast swathes of resource-rich ocean.

But China's growing ties, including substantial low-interest loans to some countries, have prompted concerns in Canberra that small nations such as Vanuatu or Tonga may fall into a debt trap and are unable to repay loans and may become politically indebted to Beijing.

Australia is ramping up its commitment to the Pacific, opening several new diplomatic posts and establishing a multi-billion-dollar infrastructure bank for projects in the region.

There are also plans to strengthen Australia's defence and security ties with Pacific islands through joint exercises and training.

Morrison said Australia would also expand its diplomatic presence in the Pacific, posting staff to Palau, the Marshall Islands, French Polynesia, Niue and the Cook Islands.

"This US$2 billion infrastructure initiative will significantly boost Australia's support for infrastructure development in Pacific countries and Timor Leste", according to a speech Morrison is due to deliver in the state of Queensland and seen by Reuters.

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Ties between Australia and China, its largest trading partner, have been strained since Australia accused China of meddling in its domestic affairs late previous year. "Australia needs more tools to engage with the Pacific", said Jonathan Pryke, a Pacific Islands foreign policy expert with the Lowy Institute, an Australian think-tank.

Payne said the government judged that the acquisition would have resulted in "an undue concentration of foreign ownership by a single company group in what is our most significant gas transmission business".

The two countries have endured turbulent ties following Canberra's introduction of laws late a year ago to curb foreign interference - measures that were seen as aimed at Beijing.

Speaking after a meeting in Beijing with Chinese Foreign Minister Wang Yi that marked a thaw in recently chilly relations, Payne stressed "the importance of Australia's welcoming of Chinese investment in Australia".

Wang said that since taking office, the newly elected Australian government has made positive gestures toward developing China-Australia relations on many occasions.

In May, Australia said it would spend about A$200 million to develop an undersea internet cable to Papua New Guinea (PNG) and the Solomon Islands as an alternative to an offer from China's Huawei telecommunications giant.

Australia revamps Pacific strategy as China looms