Is China’s increased diplomatic and economic influence in Oceania a threat to American good governance goals in the region?

Abstract

This paper examines the impact of investment by the People’s Republic of China (PRC) in the Pacific Island nations and assesses whether it is a threat to U.S. goals in the region. Specifically, it attempts to find correlation between changes in PRC infrastructure investment under the Belt and Road Initiative (BRI) and changes in governance as measured by 13 indices over the period of 1996-2020. Good governance, defined as increased transparency, accountability, and effectiveness, is a U.S. strategic goal in Oceania. Most sources assume that PRC investment fosters corruption by circumventing typical lending procedures and by offering “no strings attached” loans, however, evidence had not been sufficiently examined to see if this was the case. This paper concludes that PRC investment in Oceania has not automatically decreased governance. As such, the U.S. need not resist all PRC infrastructure projects in the region. With proper controls and oversight, nations can extract considerable benefit from these projects without sacrificing their good governance. This opens the door for mutually beneficial projects or joint investment, while allowing the U.S.and its allies to expend resources on positive competition.