Tonga, a small island nation with a population of just 107,000 and GDP of $426 million, has found itself at the center of the power struggle between China and the West in the South Pacific. The country is heavily indebted to Beijing – to the tune of 24 percent of GDP – and the first payment on a loan it took out a decade ago is due next month. But it’s trying to delay the payment as long as possible, or even to avoid it completely, by banding together with its South Pacific neighbors to pressure China into forgiving the debt it holds over islands in the region. Perhaps most important, it’s being egged on by New Zealand, which over the past few months has joined Australia to try to reduce China’s economic leverage in the South Pacific.
In 2008 and 2010, Tonga took out loans from the Export-Import Bank of China totaling approximately $120 million. Since then, it has been avoiding repayment. The first payments on the 2008 loan were due in 2013. At the time, Tonga asked China