The US steps up its game as China circles the Pacific ~ die Rechte koop

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Hilary Whiteman

The US steps up its game as China circles the Pacific

On a small group of atolls in the central Pacific Ocean, Kiribati islanders celebrated their Independence Day Tuesday with a President who had skipped the region's first face-to-face meeting in three years.

President Taneti Maamau not only opted out of the Pacific Island Forum meeting in Suva, Fiji, but withdrew the country from the 18-member group as a matter of principle over a dispute involving its leadership.

Some saw Beijing's hand in Maamau's decision to leave the alliance, a claim China's Foreign Ministry rejected as "completely groundless" during a regular news briefing Monday.

But on Tuesday, it was the United States' turn to step forward with incentives for Pacific Island leaders to counter Beijing's efforts to dominate an increasingly competitive geopolitical tussle in a region of great strategic importance.

A senior administration official told reporters in a call the US was "significantly stepping up (its) game in the Pacific Islands."

The incentives included more funding for fisheries, extra aid, and offers of new US embassies in the Pacific — including one in Kiribati, which along with the Solomon Islands appears to be moving closer to China.

The measures were personally presented to Pacific leaders Wednesday in a virtual address by US Vice President Kamala Harris — underscoring Washington's efforts to stress the Pacific's importance to US strategy.

"The history and the future of the Pacific Islands and the United States are inextricably linked," Harris told the forum.

"We recognize that in recent years, the Pacific Islands may not have received the diplomatic attention and support that you deserve. So today I am here to tell you directly: We are going to change that." she added.

It's not clear if Kiribati's decision to pull out of the forum influenced the scale of the US commitment — the US has been promising greater engagement in the region for months as China sought to strike a flurry of deals with Pacific leaders. But Kiribati's decision to go it alone while tightening its economic and diplomatic ties with China shows the depth of the diplomatic challenges in the region — and the pressure Pacific leaders are under as they try to manage their domestic and regional affairs.

"There's clear regional and subregional dynamics at play," said Anna Powles, a senior lecturer at the Centre for Defence and Security Studies at Massey University in New Zealand. "What is unclear is what President Maamau's gameplan is, what he's hoping to achieve by withdrawing Kiribati from the forum, and how this will benefit the people of Kiribati."

China may deny playing a role in Kiribati's decision not to attend the forum, but Professor Anne-Marie Brady, a specialist on China's policies in the Pacific at the University of Canterbury, said Beijing's influence is clear.

"Kiribati appears to have been given instructions not to attend," Brady said, based on her observations of China's recent activity in the Pacific. "The timing of the announcement shows it is meant to be a disruptor to Pacific unity, just when it was about to come up with a collective response on China's attempt to set up a security treaty in the region."

An island nation with vast fishing resources

Kiribati is a group of 33 atolls scattered over a large area of the central Pacific, covering 3.5 million square kilometers (1.3 million square miles) of ocean — an area larger than India. Around 100,000 people live there under pro-Beijing President Maamau, who was re-elected for a second term in 2020.

Three years ago, when the Pacific Island Forum last met in Tuvalu in August 2019, Kiribati was aligned with Taiwan, the democratic island that China's Communist Party regards as its sovereign territory, despite having never ruled it.

But within weeks of the forum, Kiribati followed the Solomon Islands in switching its allegiance to Beijing. And within months, Maamau had met Chinese leader Xi Jinping in Beijing to sign a memorandum of understanding for cooperation on China's Belt and Road initiative. Xi said China was willing to integrate the Belt and Road with Maamau's 20-year vision (KV20) — from 2016-2036 — to create a "wealthier, happier and peaceful country."

"Kiribati is absolutely desperate for development, so it will be signing as many development agreements as possible," said Jessica Collins, a research fellow with the Lowy Institute's Pacific Island Program. "Thirty percent of Kiribiti's population live in poverty. You've got a growth rate of about 0.3 to 0.6%. They're really going to be struggling in the current economic climate."

According to Maamau's KV20 blueprint, success depends on building the country's key sectors of tourism and fishing. Not only does Kiribati offer access to stunningly beautiful coral reefs, it has one of the world's largest exclusive economic zones.

"China is very invested in accessing Kiribati's EEZ and accessing Kiribati's fisheries," Powles said. Though it's unclear what role China played in Kiribati's decision to leave the forum — if any — Powles said there has been "significant concern about the level and extent of Chinese influence in Kiribati at the highest political levels."

Diplomatic maneuvers overshadow climate crisis

Washington's promise of greater support and engagement came at the end of the forum's first full day, as leaders sought to present a united front over their biggest challenge — the climate crisis.

"The time for slow and steady action has passed," Vanuatu Prime Minister Bob Loughman told the forum. "The Pacific Islands Forum leaders have called climate change the single greatest threat to the livelihood, security and well-being of our people."

To help the Pacific Island respond to the threat, the US said it and its allies and partners — Australia, Japan, New Zealand, and the United Kingdom — would establish the Partners in the Blue Pacific to support Pacific priorities and boost Pacific regionalism. It mirrors the name of the 50-year Blue Pacific plan the Islands are expected to launch on Thursday — with or without Kiribati.

Other US commitments include tripling funding to $60 million a year for 10 years to secure US fishing rights in the Pacific, the release of America's strategy on the Pacific Islands and the appointment of the first US envoy to the Pacific Islands Forum.

To achieve the US's soft power goals, the Peace Corps will return to four countries including Fiji, Tonga, Samoa, and Vanuatu and the US will increase aid funding to the region.

"What we're putting on the table is a true partnership based on friendship, and respect and transparency," said the senior administration official. "What we offer is an affirmative positive agenda to take on short and long term challenges together."

Read the full story here.

Beating the Heat

A heat wave is sweeping through China, with residents resorting to air raid shelters and public fountains to stay cool, as 84 cities across the country on Wednesday issued their highest-level red alert warnings.

A red alert means temperatures are expected to reach over 40 degrees Celsius (104 Fahrenheit) in the coming 24 hours, according to the national Meteorological Administration.

Authorities have also issued warnings for regions ranging from central Shaanxi province to the eastern coastal Jiangsu province. The provinces of Zhejiang, Sichuan and Yunnan could also see temperatures rise above 40 degrees Celsius on Wednesday, according to the Central Meteorological Observatory.

Shanghai fears new lockdown

Millions of Shanghai residents braved sweltering heat Tuesday to wait in line for compulsory Covid tests, as growing case numbers and the emergence of a highly infectious Omicron subvariant spurred new fears of a return to mass lockdown.

Shanghai authorities have ordered the majority of the city's 16 districts to undergo two rounds of testing from Tuesday to Thursday, after a case of the new BA.5.2.1 subvariant was detected in the community on July 8.

The highly transmissible BA.5 variant is spreading rapidly worldwide and is seen as a great threat by authorities in China — the last major country adhering to a stringent zero-Covid strategy.

New Omicron subvariants have been reported in several Chinese cities, including the capital Beijing, the northeastern port city of Dalian, and the central city of Xi'an, which was shut down for seven days over the outbreak.

Shanghai saw a jump in infections earlier this month, due to an outbreak linked to a karaoke bar. Over the past 10 days, it has reported more than 400 cases.

The growing outbreak has fueled fears the commercial hub is headed back into a mass lockdown, just weeks after its residents emerged from two months of grueling home confinement.

The city of 25 million ended its citywide lockdown at the start of June, but has continued to impose tough restrictions, including relentless testing and snap lockdowns on compounds where Covid cases were found.

As of Tuesday, 240 neighborhoods across Shanghai have been marked as medium- or high-risk areas and placed under lockdown.

Shanghai officials have repeatedly denied that a citywide lockdown is imminent, but that has failed to convince residents, who noted that authorities had also made similar claims in March in the lead up to the previous lockdown.

On Monday, two neighborhood committees in Shanghai said residents should "prepare food and medicines that can last for 14 days at home, to be on the safe side."

The notices, after being widely circulated online, caused panic among residents, many of whom are scarred by their prolonged isolation in April and May — which led to widespread food shortages and blocked access to medical care.

In response to the uproar, a neighborhood committee worker told the state-run Health Times the proposal was meant to prepare residents for the growing outbreak, as close contacts — as well as secondary contacts — of an infected case can also lead to neighborhood lockdowns.

"Fine, let's spend our whole life living in the fear of food scarcity and the shadow of hoarding daily necessities," said a comment on Weibo, China's Twitter-like platform.

"It's been over three years, when will it be over? How many three years do people have in their lives? Enough is enough!" said another.

Nectar Gan is China Reporter for CNN International in Hong Kong. She covers the changes taking place in China, and their impact on the world.

Chinese authorities will start refunding bank customers whose accounts have been frozen for months, following some of the biggest protests the country has seen since the start of the pandemic.

Customers from four rural banks in the central province of Henan, and one in neighboring Anhui province, will be repaid by authorities starting Friday, according to statements late Monday by the provincial financial regulators.

The first payments will be sent to customers with a combined amount of less than 50,000 yuan ($7,445) on deposit at a single bank, they said. Separate arrangements will be announced in due course for customers with more than that in their accounts, the authorities added.

The rural banks have still not offered a clear explanation as to why and for how long the funds will remain frozen. In May, the national banking regulator said that a major shareholder of the Henan banks was responsible for having illegally attracted money from savers via online channels.

The repayments will be handled by two other banks, but the regulators didn't say where the funds would come from.

The announcements come after a mass demonstration on Sunday in Zhengzhou city, Henan province, which was crushed violently by authorities. It was the largest protest yet by the depositors, who have been fighting for months to retrieve their frozen savings.

A 45-year-old entrepreneur from Wenzhou in eastern Zhejiang province, told CNN Business last month that he has been unable to access a penny of his family's life savings of $6 million.

Runs on small Chinese banks have become more frequent in recent years and some have been accused of financial improprieties or corruption. But experts worry that a much bigger financial problem could be looming, caused by fallout from a real estate crash and soaring bad debts related to the Covid-19 pandemic.

As many as 400,000 customers across China were unable to access their savings at the rural banks in Henan and Anhui provinces, according to an estimate in April by Sanlian Lifeweek, a state-owned magazine.

That's a drop in the ocean of China's vast banking system, but about a quarter of the industry's total assets are held by around 4,000 small lenders, which often have opaque ownership and governance structures and are more vulnerable to corruption and the sharp economic slowdown.

Police in Henan said Sunday that they had arrested a number of suspects, accusing them of using the rural banks to illegally solicit public funds since 2011.

Despite the police action, and the move to repay some depositors in the coming days, analysts warn that the crisis may not be over yet.

"The situation is still evolving," said Betty Wang, senior China economist at ANZ, in a note to clients on Tuesday.

"Despite the small size of the assets involved, the social impact of the incident could be significant if it is not handled appropriately. It could also trigger another round of regulatory tightening," she said, adding that Beijing could launch a fresh round of investigations into the online banking sector, village banks, or "potential local corruption."

Laura He is a reporter and digital producer for CNN Business. She covers news about Asian business and markets from Hong Kong.

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