Papua New Guinea and China Trade
China and Papau New Guinea (PNG) have a strong trade relationship, valued at $2.84 billion USD in 2017; China holds the trade deficit in the relationship, to the figure of $1.29 billion in the same year. However, while PNG has been requesting China to enter into a free trade agreement for several years, there is currently no existing free trade agreement between the two countries. Economically, China is a heavy lender to PNG.
- China has loaned a considerable amount of money to PNG, which is apparent in the size of PNG's debt owed to China. By 2023, PNG's annual repayments to China are projected to be $67 million USD. PNG has a history of receiving loans for China, especially for infrastructure projects.
- PNG has been stalled in the process of attempting to complete a $3.9 billion USD loan agreement with China for over a year, due to loan term and interest rate disagreements. For this reason, some experts opine that PNG's recent request for China to help it restructure its debt is unlikely to be met.
- Although not a trade agreement, PNG's current loan status with China could be seen as 'bad,' given that PNG's outstanding debt is 42% of its GDP. As of 2019, PNG owes $1.9 billion USD to China. However, PNG's current fiscal crisis is not a direct effect of the loan itself; multiple factors are at play, including recent debt recalculations and 'excessive' and wasteful spending by the previous PNG government.
Belt and Road Initiative
- PNG was the second country in the South Pacific to sign onto China's Belt and Road Initiative (BRI). Under this initiative, PNG has received $1.9 billion in concessional loans from China. This collaboration was preceded by a 2014 'strategic partnership' that centered around development, and a series of development 'cooperation documents' in 2016.
- Certain concessions that PNG has made as part of its BRI loan agreements could be considered bad for the country, including its agreement for areas constructed with Chinese loan monies to be governed according to Chinese law, rather than PNG law. Another significant concern is the impact of illegal Chinese laborers working within PNG on the country's labor market.
Proposed Free Trade Agreement
- In 2016, China announced that it would be conducting a feasibility study on a free trade agreement with PNG. However, in 2018, the PNG foreign minister announced that China was open to pursuing a free trade agreement and had agreed to conduct a feasibility study, which indicates some delay in the agreement.
- Later, in 2019, the prime minister of PNG was reported as 'pushing hard' for a free trade agreement with China. This is reportedly related to the prime minister's request that China help PNG 'restructure' its debt.
- Currently, China reports that a free trade agreement with PNG is still 'under consideration.' Research discovered no indication that China and PNG have any existing trade agreements.