US-China relations: how Washington’s Pacific funding crunch ‘plays right into’ Beijing’s hands

The deal, which dates back to former US President Ronald Reagan’s administration and equates to about US$100 million a year, funds education, infrastructure, disaster preparedness and climate change resilience, among other urgent needs.

Last year, the fund made up about 20 per cent of the Marshall Islands’ annual government revenue and roughly 30 per cent of Palau’s.

In exchange, Washington is granted exclusive military access to key waters with missile testing sites and bases for weapons and radar.

But it has been held up in Congress and as Washington vacillates, Beijing could be about to step in as small, strategically located countries become a contest ground for rivalry between the world’s two largest economies.

“It plays right into the way the Communist Party of China thinks, or what it tries to tell us,” Palau President Surangel Whipps Jnr told This Week in Asia.

“‘Join us and the sky is the limit.’ You need tourists? We can give you a million tourists, we can build all the resorts you want. Just sign diplomatic relations with us. But you have to denounce Taiwan.”

Beijing views Taiwan as part of China which must be reunited, by force if necessary.

Most countries do not recognise the self-governed island as an independent state but are opposed to any unilateral change to the status quo.

“Of course, we said we’re not denouncing Taiwan,” Whipps Jnr said. “They’re an ally and friend. We will stand by them.”

Details on Nauru’s deal with Beijing remain unclear, but reports suggest it will receive US$100 million for its change of allegiance.

Marshall Islands and Palau have diplomatic ties with Taiwan while the Federated States of Micronesia recognises Beijing’s one-China policy.

In April last year, the Micronesian Congress