Hit and miss: PM’s Pacific tour records some wins and losses, but competition is the new normal

Yet in recent decades this landscape has shifted markedly, as Beijing has pursued a sustained and deliberate strategy to expand its influence across the Pacific.

What began with modest gestures of aid and technical assistance has evolved into a sweeping campaign of infrastructure investment, concessional loans and promises of economic development, all underpinned by China’s formidable financial and political weight. This effort has not only unsettled Australia’s long-standing role as the region’s security guarantor but also raised questions about how best to navigate a strategic competition increasingly defined by economic statecraft.

Central to Beijing’s approach is the tool often labelled “debt-trap diplomacy”. Pacific Island nations, many of which face acute development challenges and limited revenue bases, have been enticed by Chinese loans offered on terms that appear generous at first glance.

These funds are typically directed towards large-scale infrastructure projects ports, airports, government buildings and roads that promise immediate and visible benefits. Yet the financial obligations attached to these projects frequently exceed the recipient nation’s capacity to repay, leaving governments exposed to long-term debt distress.

In this way, Beijing gains not only leverage over individual Pacific states but also the ability to exert pressure on key issues at regional and international forums.

The economic dimension of this engagement extends well beyond loans. Chinese companies, often backed by state support, have become prominent players in sectors such as construction, telecommunications, mining and fishing.

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Their presence brings much-needed capital and employment opportunities, but it also raises concerns about transparency, governance and the potential erosion of local sovereignty. In some instances, projects have been poorly executed or left incomplete, reinforcing perceptions that Beijing’s motives are less about sustainable development and more about entrenching long-term influence.

This dynamic has placed Pacific governments in a difficult position: while Chinese investment can appear attractive in the short term, the strategic costs may be far greater.

For Australia and other Western nations, these developments present profound challenges. Canberra has long emphasised its commitment to the “Pacific family”, yet its ability to compete dollar-for-dollar with China is limited.

Instead, Australia has sought to position itself as the partner that delivers quality, sustainability and reliability while also working closely with allies such as the United States, Japan and New Zealand to coordinate responses.

Nevertheless, Beijing’s expanding presence complicates efforts to maintain regional stability, as Pacific nations are increasingly able to play external powers off against one another in pursuit of their own interests.

The broader implication is that the Pacific has become a key theatre in the contest for influence between China and the Western world. For Australia, the stakes are particularly high: its security, economic prosperity and regional leadership are all intimately tied to the trajectory of Pacific affairs.

Beijing’s use of debt diplomacy, infrastructure investment and economic engagement underscores a sophisticated strategy that goes well beyond benign development assistance. It is a strategy designed to reshape the balance of power in the Pacific, and one that Canberra must confront with both urgency and nuance.

Highlighting these challenges is Michael Read, economics correspondent of The Australian Financial Review in a piece titled We are already at war with China, warns Palau, in which he unpacked the warning from President of the Pacific Island nation of Palau, Surangel Whipps Jr, who warned that the Pacific is already “at war with China”.

A new Pacific competition

The Pacific Islands are fast emerging as a key theatre in the contest between China and Western nations, with the latest Pacific Islands Forum underscoring just how high the stakes have become. Palau’s president, Surangel Whipps Jr, delivered one of the starkest warnings yet, declaring that his nation was effectively already in conflict with Beijing.

“We must help our people understand because of our location, we are under constant threat – I might venture to say that we are already at war,” Whipps said in Hawaii ahead of the forum.

His remarks reflect growing unease among Pacific leaders about the nature of Chinese engagement in the region, which increasingly revolves around infrastructure investment, concessional loans and economic leverage that risks locking countries into long-term dependence.

Whipps argued that China’s role as the leading investor in Palau’s private sector could not be allowed to continue. “China cannot remain the No. 1 investor in our private sector. That must change,” he said, calling for a broader Indo-Pacific investment initiative to attract private capital and diversify economic options. His prescription reflects a wider recognition that the best counter to Beijing’s influence is not only security partnerships but also tangible economic alternatives.

“The best way to combat this is through partnership with like-minded nations who believe that peace comes through strength, and presence is deterrence,” he added.

Palau’s position is particularly sensitive. With a population of just 20,000, it is one of only three Pacific nations – alongside Tuvalu and the Marshall Islands – that continues to recognise Taiwan diplomatically.

That stance has made it both strategically important and highly vulnerable to Chinese pressure. Palau is also set to host next year’s Pacific Islands Forum, placing its leadership at the centre of regional debates over how to respond to Beijing’s rise.

Australia, for its part, used the forum to deepen its own strategic partnerships. Prime Minister Anthony Albanese confirmed that Canberra and Fiji would begin negotiating a new security pact, upgrading the existing Vuvale agreement. “Preliminary discussions have been about increased security agreements or upgrade in our security relationship that could range from increased interoperability, the sort of training that we’re seeing with the Pacific policing initiative being expanded to increased engagement between our defence forces,” Prime Minister Albanese said.

While he avoided comparisons with Australia’s deals with Tuvalu and Nauru, both of which give Canberra veto rights over Chinese security or infrastructure projects – the Fiji talks mark a potential milestone. With nearly 1 million people and a functioning military, Fiji is the Pacific’s second-largest state after Papua New Guinea, and its alignment carries significant weight.

Yet progress has not been straightforward. On the eve of the forum, Vanuatu rejected a proposed $500 million “nakamal agreement” with Canberra, which would have provided Australia with veto powers over Chinese investment in critical infrastructure.

Prime Minister Jotham Napat explained that members of his coalition government “were concerned that the deal would limit the country’s ability to strike agreements with other countries”.

Symbolic gestures also highlighted the contest for influence. Both China and Australia provided vehicle fleets for Solomon Islands officials attending the forum, while Canberra blanketed Honiara with billboards showcasing its climate policies, aid initiatives and seasonal work programs. These efforts illustrate the degree to which the competition is as much about visibility and perception as about policy substance.

The forum has reinforced a central reality: Pacific nations are not passive actors but strategic players capable of balancing major powers against one another.

While Beijing’s loans and investments offer short-term development gains, concerns about debt, sovereignty and transparency remain acute. For Australia and its partners, the challenge is to provide credible, sustainable alternatives that address local priorities while countering the risks inherent in China’s economic statecraft.

As Whipps warned, the contest is not a distant or abstract debate. “I might venture to say that we are already at war,” he said – a reminder that for some Pacific leaders, the battle for influence has already begun.

Final thoughts

Australians need to confront some uncomfortable realities if we are serious about safeguarding our future.

The Indo-Pacific is no longer a distant geopolitical stage; it is the heart of global competition. Power is shifting rapidly as China expands its reach, India accelerates its rise, and countries like Vietnam, Thailand, Japan and South Korea flex their economic and military muscle. This is not a passing moment. Strategic rivalry in our neighbourhood is becoming the new normal – and Australia must recalibrate its whole-of-nation approach to meet it.

The danger lies not just in external threats but in our own complacency. Without a major lift in investment, reform and long-term planning, Australia risks being outpaced. Future generations could find themselves living in a country overshadowed by wealthier, more powerful neighbours, with diminished influence and reduced security.

For too long, we have preferred quick fixes and reactive policymaking. Since Federation, governments have chased short-term gains rather than laying the groundwork for enduring resilience. But the ground is now shifting beneath us. Incremental thinking is no longer enough. We must adopt a long-range vision that positions Australia to harness new opportunities while also countering rising risks.

As US geostrategic analyst Peter Zeihan has argued, the systems that underpin today’s global order are far more fragile than they appear.

In The End of the World is Just the Beginning, he warned: “Bottom line: the world we know is eminently fragile. And that’s when it is working to design. Today’s economic landscape isn’t so much dependent upon as it is eminently addicted to American strategic and tactical overwatch. Remove the Americans, and long-haul shipping degrades from being the norm to being the exception. Remove mass consumption due to demographic collapses and the entire economic argument for mass integration collapses. One way or another, our ‘normal’ is going to end, and end soon.”

The implication for Australia is stark. We cannot assume the regional order will remain stable, nor that economic integration will always favour us. The question is not whether disruption is coming but how prepared we will be when it arrives.

What is missing today is a comprehensive national response. When will Canberra set out a clear and detailed strategy that both industry and the public can rally behind? When will we see a plan that embeds resilience across our economy, institutions and defence posture, rather than relying on incremental adjustments?

Australia stands at a fork in the road. With China pressing its influence and regional competition intensifying, we can either remain a secondary player or step forward as a shaper of the Indo-Pacific’s future. The choices made now will determine whether Australia thrives in this era of upheaval, or whether we are carried along by forces we failed to prepare for.

Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch at This email address is being protected from spambots. You need JavaScript enabled to view it. or at This email address is being protected from spambots. You need JavaScript enabled to view it..

Stephen Kuper

Steve has an extensive career across government, defence industry and advocacy, having previously worked for cabinet ministers at both Federal and State levels.