China has been rapidly expanding its banking operations in the Asia-Pacific region, especially in the context of a gradual withdrawal by Western banks.
For example, after Australia’s Bendigo and Adelaide Bank announced its plan to withdraw from Nauru, Bank of China, which has opened offices across the region, signed a memorandum of understanding on cooperation with the Nauruan government. This quick reaction raises worries that China might have a broader hidden agenda.
The withdrawal of Western banks is partly due to increasingly stringent financial supervision requirements.
However, their withdrawal makes it more difficult to open US dollar-denominated bank accounts in Pacific island nations, which weakens those nations’ financial resilience. Over the past decade, correspondent banking relationships in the region have been declining twice as fast as the global average.
The US and Australia are taking steps to address this challenge. Speaking at the Pacific Banking Forum in Brisbane, Australia, which ran from July 8 to 9, Australian Assistant Treasurer Stephen Jones said that his nation wants to be the partner of choice in the Asia-Pacific region, in both banking and defense.
He said that Australia would be concerned if there were some nations operating in the region whose principal objective was advancing their own national interest rather than the interests of Pacific island nations.
US Department of the Treasury Undersecretary for Terrorism and Financial Intelligence Brian Nelson said that Washington recognizes the economic and strategic importance of the Asia-Pacific region, and is committed to deepening its engagement and cooperation with its allies and partners to bolster financial connectivity, investment and integration.
These US initiatives are no doubt aimed at countering China’s growing influence in the region.
The World Bank and the Asian Development Bank are working on improvement programs to resolve problems facing de-risking efforts in Pacific island nations. These efforts would require the cooperation and support of all stakeholders.
Taiwan, too, should play an active role. As a major economy in the Asia-Pacific region, Taiwan should use its financial strength and technical knowledge to help Pacific island nations boost their financial resilience.
Taiwan could provide them with technical support to help them build a sound financial system and work together using multilateral cooperative platforms to resist any penetration by outside forces.
Fang Kai-hung is an assistant professor at Taipei University of Maritime Technology.
Translated by Julian Clegg
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