Australia will create a A$2 billion (US$1.46 billion) fund to provide loans to Pacific nations to build infrastructure, Prime Minister Scott Morrison is expected to announce on Thursday.
The new fund comes as Canberra seeks to counter China’s influence in the region, Reuters reports.
Australia and China have been vying for influence in sparsely populated Pacific island countries that control vast swathes of resource-rich oceans.
China has spent US$1.3 billion on confessional loans and gifts since 2011 to become the Pacific’s second-largest donor after Australia, stoking concern in the West that several tiny nations could end up overburdened and in debt to Beijing.
To counter, Morrison plans to announce that Australia will renew its focus on the Pacific, primarily through a new infrastructure fund, according to the report.
The new initiative “will significantly boost Australia’s support for infrastructure development in Pacific countries and Timor Leste,” according to a speech Morrison is due to deliver in the state of Queensland and seen by Reuters.
“It will invest in essential infrastructure such as telecommunications, energy, transport, water, and it will stretch our aid dollars further.”
Australia’s new infrastructure fund could test the nation’s already cool relations with China.
Ties between the two countries have been strained since Australia accused China of meddling in its domestic affairs late last year.
Australia’s Foreign Minister Marise Payne will on Thursday meet her Chinese counterpart in Beijing, the first visit by a senior Canberra in two years after bilateral relations soured.
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