China’s Pacific charm offensive pays off as Nauru drops Taipei for Beijing

Where most countries send congratulations to those who win presidential elections, the Pacific Island nation of Nauru sent an altogether different message to Taiwan’s President-elect Lai Ching-te. After the Democratic Progressive Party (DPP)’s win in the presidential election over the weekend, Nauru notified Taiwan on Monday that it would no longer be recognising the island as an independent nation. Instead, Nauru’s 12,000-odd inhabitants would from now on consider Taiwan “an inalienable part of China’s territory”.

The loss of Nauru’s support is just the latest blow to Taiwan’s dwindling group of diplomatic allies, a motley collection of developing nations across Latin America, the Caribbean and the Pacific that continue to recognise Taiwan – under its formal name of the Republic of China – as the sole legitimate representative of China on the international stage. This binary choice – neither Beijing nor Taipei will allow countries to recognise both claimants – is a holdover from the years following the Chinese Civil War, when Chiang Kai-shek’s defeated Kuomintang continued to represent China at the UN from its outpost on Taiwan.

Since DPP candidate Tsai Ing-wen’s 2016 election to Taiwan’s presidency ushered in the end of an eight-year “diplomatic truce” between Taipei and Beijing, the People’s Republic of China has poached nine of Taiwan’s remaining diplomatic allies through promises of economic aid and development. By shrinking the circle of countries that continue to recognise Taipei internationally, Beijing seems bent on further isolating Taiwan, incensed by what it characterises as the DPP’s dangerous separatist tendencies. Nauru makes ten.

‘Chequebook diplomacy’

Steve Tsang, director of the SOAS China Institute in London and co-author of a new book, “The Political Thought of Xi Jinping”, said that Taiwan’s unwillingness to reach deeper into its pockets was making it increasingly difficult to convince its remaining diplomatic allies – now numbering just 12 – to stay by its side.

“The first thing to bear in mind is that Nauru is a country of just less than 13,000 people, so the provision of economic or development incentives that can persuade it to switch recognition from Taipei to Beijing can be quite small,” he said. “The issue here is that Taiwan’s government has, for a few years now, decided not to go head to head with the Chinese government in chequebook diplomacy, so it will lose some of its ‘allies’ to Beijing if Beijing is determined enough to outbid Taiwan.”

Despite President Tsai Ing-wen’s declaration in 2016 that Taipei would no longer buy support through “chequebook diplomacy”, Taiwan has continued to provide humanitarian aid and concessional loans to the handful of countries that recognise it. Nauru has hosted a Taiwanese technical mission involved in agriculture, energy, scholarships and training since 2006, and has been a consistent recipient of grants and below-market-rate loans from Taipei. Alongside Australia and New Zealand, Taiwan continues to pay into Nauru’s Intergenerational Trust Fund, set up in 2015 to help replace the nation’s vanishing phosphate revenues.

Apparently, it hasn’t been enough. Nauru is now the latest Pacific Island nation to make the switch to Beijing. In 2019, Kiribati and the Solomon Islands both declared for China, with Taiwanese media alleging that the latter had been convinced to abandon Taipei in exchange for some $500 million in financial aid – a claim that has never been confirmed.

But it’s no secret that China has been stepping up its economic and diplomatic engagement with nations across the Pacific, with Beijing believed to have spent $3.9 billion in aid in the region between 2008 and 2021 to Taiwan’s $395 million over the same period. And while Taiwan’s engagement with countries with smaller populations has effectively meant that it has spent twice as much as Beijing per capita, China is also steadily abandoning the large-scale, big-budget infrastructure projects characteristic of the early years of its Belt and Road Initiative for more targeted projects in health and agriculture.

Keeping its head above water

Dr Asha Sundaramurthy, an expert on the Oceania region, said that the results of China’s charm offensive were clear.

“China’s volume of aid and increased engagement in the region has played a significant role in shifting the recognition of Taiwan in the last decade, with Kiribati and Solomon Islands reversing in 2019,” she said. “Now, only the Marshall Islands, Tuvalu and Palau remain as three Pacific Islands recognising Taiwan.”

This is not the first time that Nauru has seemingly sold its diplomatic recognition to the highest bidder. Nauru chose to recognise China in July 2002 after more than two decades of diplomatic ties with Taiwan. Taiwan’s foreign ministry accused China at the time of buying Nauru’s loyalty with $137 million in grants and debt repayments. The government reversed its decision in May 2005, recognising Taipei once again as the rightful China. The following year, the Taiwanese government funded Nauru’s purchase of a Boeing 737 jet to replace an earlier aircraft – the nation’s only one – that had been repossessed by American financiers the year before.

A few scant years later, Nauru would also become one of the only countries in the world to officially recognise the breakaway republics of Abkhazia and South Ossetia following the 2008 war between Russia and Georgia. Even Russia’s close ally Belarus baulked at acknowledging the renegade provinces, but Nauru – alongside Nicaragua and Venezuela – established relations with both self-proclaimed states. According to Russia’s Kommersant newspaper, the Kremlin rewarded the island nation for its support with some $50 million in humanitarian aid.

Although this transactional approach to international relations may seem mercenary, Nauru’s modern history makes it clear that the country has been left with few other ways to, quite literally, keep its head above water. A remote Pacific Island nation covering just 21 square kilometres, Nauru’s relationship with the vast world beyond its shores changed drastically following the discovery of high-grade phosphate reserves there on the eve of the 20th century. Built up over untold thousands of years by the fossilised droppings of the seabirds that roosted on the tiny island’s central plateau, these phosphate reserves would prove an invaluable source of fertiliser for the British Empire once the island nation was wrested from German hands after World War I.

Under the stewardship of the British Phosphate Commissioners – representatives of Australia, New Zealand and Great Britain who were given a mandate by the League of Nations to mine the nation’s phosphate to sell to the Empire’s farmers at below-market rates – more than 35 million metric tonnes of the fertiliser were stripped from the island by the time the nation won independence in 1968. By then, more than a third of the island had been strip-mined, leaving the central plateau a wasteland of sun-bleached limestone towers and shattered coral.

Nauru’s primary phosphate reserves are now all but exhausted. With little left to fall back on aside from selling off fishing rights, Nauru has become one of the countries most reliant on foreign aid to survive – and one of the low-lying island nations most vulnerable to climate crisis.

Stripped of arable land and frantic for new sources of revenue, the government has become deeply dependent on a deal with Australia to operate an offshore processing centre for asylum-seekers hoping to reach Australia by boat. The processing centre was estimated as being likely to generate more than $100 million for Nauru in 2024, on top of the $31 million given directly by Australia in development assistance in 2023. According to the US-based Migration Policy Institute, Australian payments to Nauru through the deal accounted for about two-thirds of the island’s total revenue in 2021-2022. More than 15 percent of the island’s population was employed at the centre in 2021, with many more finding work in the secondary service industries that sprung up around the operation. But with the number of detainees currently held there believed to have dwindled to a bare dozen and Australia winding down its financing of the scheme, it’s a deal that seems unlikely to keep delivering.

Beijing’s ‘punishment’ against Taiwan

Speaking to Taiwan’s semi-official news agency CNA, an unnamed Taiwanese diplomat alleged that Nauru had asked Taipei for roughly $83.23 million to help fill a financial shortfall caused by the processing centre’s temporary shutdown. The Taiwanese official told CNA that Beijing had likely offered to step in and make up the shortfall. An unnamed Australian official in Taiwan told the Australian Financial Review that the report was accurate, although the official said that the processing centre remained open despite only holding a handful of people inside. Neither Nauru nor China have publicly commented on any financial incentives for the switch in affiliation.

Tsang said that the timing of Nauru’s announcement – so soon after the DPP won a renewed mandate – was no coincidence. 

“The timing will suggest that Beijing has worked on the government of Nauru well before the Taiwanese elections, and this is one of the options Beijing has as a ‘punishment’ against Taiwan and its people for choosing a presidential candidate Beijing has said they should not support,” he said. “But among the range of options Beijing has to show its displeasure, this is one that does relatively little damage to Taiwan.”

Although losing the friendship of a tiny island nation halfway around the world may ultimately mean little to Taipei, Nauru may well be counting on China’s continued largesse to give it a way out of its economic dead-end.

“For the islands’ perspective, they seek to partake in the economic growth of the emerging Asian Century – which is spearheaded by China,” Sundaramurthy said. “The island countries are also playing a delicate game of balance between security and development while ensuring the region avoids becoming a site of power contestation.”

Despite Taipei’s shock at Nauru’s announcement, Tsang said, Taipei’s increasing diplomatic isolation – on paper, at least – may end up having unexpected benefits as Taiwan continues to re-imagine its own identity.

“When no country formally recognises Taiwan by its formal name, the Republic of China, it will just be known as Taiwan,” he said. “So it will get to a point when it will be against Beijing’s interest to reduce further small states that recognise Taiwan by its official name.”