Two Island Nations

Recently, two different tiny island nations turned pro-China – Maldives and Nauru. The Maldives case we know well (and care about) in India. A common consequence in both nations’ pivoting to be pro-China was something Indians don’t really care about – the stance on Taiwan. Both Maldives and Nauru declared that Taiwan was an inalienable part of China, there can only be one Chinese government etc.

 

Are these signs that China is “winning”? Not really.

 

The reason both countries pivoted to China was good old money. In Maldives’ case, it owes China a lot of money (by their standards), aren’t in a position to make their EMI payments, and therefore need the lender (China) to either extend the term of the loan or to defer payments.

 

This may be sound surprising to Indians, who see Maldives’ stance as driven by the new Islamist-leaning leader. Sure, yes, in Maldives politics, alternate leader flip-flop between India and China. But the problem of paying back to China was hanging there for a while. The previous Maldives government too had asked for an extension, but China wasn’t going to oblige a pro-India government, was it?

 

This also explains India’s response to Maldives – avoid tourism, stop charitable projects etc. The message to Maldives is that while we can’t lend as much as China, we too can hurt Maldives in the financial/monetary domain. Maldives then is stuck between a rock and a hard place.

 

Nauru, on the other hand, is a nation that flip-flops between Taiwan and China. This time, it has pivoted to a pro-China policy, recognizing one-China only, and stating Taiwan is an inalienable part of China. Why the change this time? Money again. Nauru goes with whoever gives more money and aid. China has won this round of “dollar diplomacy” with Nauru. As Anushka Saxena writes, all of them – China, Taiwan, and the US – play this game of “dollar diplomacy” aka “bribery diplomacy”, so this is just as business as usual.

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