Beijing’s great game to win over Pacific’s small island states
Deploying classic tactics – leverage via investment, tourism, diplomacy and political funding – Beijing is winning the strategic competition with Washington across the west and northern Pacific
While the South China Sea is East Asia’s strategic center stage as China expands its military presence and control over that critical seascape, Beijing is quietly and successfully upping its presence in Pacific territories that have traditionally fallen under US influence.
But unlike in the South China Sea, it is not capturing influence with hard power. Instead, it is deploying a range of big-picture, long-game asymmetric tactics that will be familiar to anyone who has studied Beijing’s Belt and Road initiatives in other regions.
While the US fought its now-legendary, trans-Pacific “island hopping” campaign against Japan in many of these territories in World War II, China is today winning a new, non-kinetic war by default – for, beyond East Asian shores, the Pacific suffers from benign neglect in Washington.
Battle for influence
Geo-strategically, these maneuvers are important. China has leapfrogged the so-called “First Island Chain” and is winning a presence in America’s Pacific Island territories and the so-called “Compact States” in the Western Pacific. This means Beijing is creating a salient that effectively splits US defenses along the so-called “Second Island Chain” stretching from Japan southwards to Australia.
The vast real estate in question includes three US territories – Guam, the Commonwealth of the Northern Marianas and American Samoa – and three Freely Associated States – Palau, the Federated States of Micronesia, and Republic of the Marshall Islands.
The latter three are independent nations but are tied to the United States under respective Compacts of Free Association (COFA). The COFA agreements give the US control of defense and the right to prohibit foreign military presences in exchange for financial aid and other benefits – including visa-free travel and the right to reside in the US for citizens.
The US territories and “Compact States” have limited commercial prospects and few natural resources – other than rich fisheries in Micronesia – but they are an important strategic geography for US defense in the Western Pacific.
China’s strategy varies from place to place but encompasses political and commercial tactics, and in the case of the Compact States capitalizes on deep-seated fears over the end of “compact funding” in 2023 (2024 for Palau). In theory, trust funds’ are supposed to make up for the loss of direct US financial aid. Few believe that will be enough.
Northern Marianas: Casino invasion
Around 2014, a Chinese casino company, Best Sunshine, offered to invest billions of dollars in Saipan – the main island in the Northern Marianas. Amid reported bribery, the local government, dealing with a moribund economy and a pension fund in arrears, accepted the offer.
Besides the casino, Chinese bought up property and established businesses, with Chinese companies and workers doing much of the construction. Chinese tourists can now come to the Northern Marianas without visas and are the territory’s main source of visitors.
This has created pro-Chinese locals, including officials and politicians, who benefit from Chinese money, or hope to. And casino money is reportedly funding politicians and candidates in upcoming elections.
Another Chinese casino-resort company, Altar Group, is angling to build on nearby Tinian – two-thirds of which is leased to the US military. A company representative even stated that the US military presence is not good for the tourism and is unproductive.
Local opposition has already stymied US military plans to build an amphibious training site on Pagan Island at the northern end of the Northern Marianas chain. Some local observers claim Chinese funding is behind this.
Guam: Explicit threats
Guam is a key strategic US bomber base that enables force projection far into East Asia. Here, the Chinese are reportedly buying up real estate and businesses. More significantly, Beijing is openly stating that the US military presence endangers Guam residents. Chinese media, for example, routinely refer to the PRC’s new DF-26 missile as the “Guam killer” – as it is allegedly able to hit US bases on the island.
And China recently and publicly installed underwater listening devices in the nearby Marianas Trench. These potentially compromise US submarines.
Micronesia: A 30-year effort
Few people can find Micronesia on a map. It comprises four island states: Pohnpei, Kosrae, Yap, and Chuuk (often known as ‘Truk’). Unlike the other “Compact States” of Palau and the Marshall Islands, that maintain diplomatic relations with China’s arch-rival Taiwan, the Federated States of Micronesia recognized China since 1989 and maintain an embassy in Beijing.
China has taken a steady, systematic approach over the last 30 years, insinuating itself into Micronesia’s political and commercial worlds and society via schemes of grants, loans, donations, gifts, scholarships and training courses, friendship associations, and including the Micronesian states in China-sponsored regional forums, dangling the lures of investment and aid.
Particularly effective is “visit diplomacy,” hosting Micronesian leaders and delegations to red-carpet welcomes in China. A US diplomat once commented: “China has blanketed Micronesia at every level with all-expense paid trips that include daily emoluments.” With the 2023 end of Compact Funding looming, Chinese aid and blandishments of resort or casino developers offering billions of dollars in investment are a tempting option for Micronesia and its state governments.
Much of the population in Micronesia, from the president down, are well disposed towards China, despite concerns of “debt trap” tactics. One observer commented on China’s recent collaboration to upgrade Chuuk’s port facilities: “It seems the game is to tie the governments into non-repayable future debts in exchange for control [as in Sri Lanka].”
Still, Beijing appears to be out-playing Washington – despite current US assistance to Micronesia being 20-times larger than China’s.
Though Compact Agreements give the US legal rights to prohibit possible Chinese military inroads, there are cracks. Environmental monitoring sites, for example, can be dual use. And local politics can stymie US interests – as they have in Vieques, Puerto Rico, where the US Navy gave up a training range owing to local opposition.
Palau: Weaponizing tourism
Palau only has 20,000 citizens, enjoys diplomatic relations with Taiwan, and is traditionally well disposed toward the United States and Japan. Its location east of the Philippines is particularly useful from a military perspective. Washington agreed to a revised “compact agreement” with Palau in 2010, but it took another six years for Congress to approve the money.
Around 2014, China put Palau on its approved tourism list. Chinese tourists flooded in. So did Chinese money, buying up properties, hotels, businesses, and long-term real estate leases. By 2015, over half of Palau’s visitors were from mainland China. As is the case elsewhere, this has created a pro-China constituency. It also has led to politicians criticizing ties with Taiwan, suggesting China is more important.
But as it did with South Korea – over the deployment of a US air-defense system – Beijing turned off the tourism tap in an economic pressure tactic in 2017. The tap remains closed for now.
Marshall Islands: Aiming at Taiwan
Washington has close relations with the Marshall Islands’ government and maintains an important and economically valuable military base at Kwajalein. However, local sources are now noting the deep Chinese presence in the local economy and fishing industry. According to one longtime resident, Beijing is funding local politicians and candidates with the goal of recognizing China instead of Taiwan.
China ‘circles its encircler’
China has accomplished much in the region, planting itself in the heart of America’s key defense terrain in the Western Pacific – though Beijing could argue it is merely “encircling the encirclers”, as Euan Graham of the Lowy Institute has commented.
In each location they’ve managed to split local society – from influential leaders down to the lowest levels – and create a “well-disposed toward China” constituency. Commercial influence – casinos in the Northern Marianas, locking up the Micronesian fishing industry, distorting Palau’s tourist market – is part of the game. And in all territories, Chinese-owned businesses displace local establishments.
And in the Northern Marianas, Beijing has stymied the US military, while installing themselves – and very possibly Chinese intelligence assets – near US bases and training areas on Guam that are essential for deploying US forces to counter Chinese expansion.
Most impressively, China has accomplished all this without force. The US has done little to push back and with China clearly in the ascendant, the ball is now deep in the American court.