Senator Concetta Fierravanti-Wells, minister for international development and the Pacific, told The Australian newspaper in an interview published on Wednesday that China was lending to Pacific nations on unfavorable terms to construct "useless buildings" and "roads to nowhere."
"You've got the Pacific full of these useless buildings which no body maintains, which are basically white elephants," she told the newspaper. Fierravanti-Wells later said sustaining debt was a significant threat to economic stability of countries in the Pacific.
"We work cooperatively with China and we encourage China to utilize its development assistance in a productive and effective manner," she told Australian Broadcasting Corp. "We just don't want to build something for the heck of building it. We just don't want to build a road that doesn't go anywhere," she added.
China's Foreign Ministry spokesperson Lu Kang later said Fierravanti-Wells' published comments "show scant regard for the facts and are nothing but irresponsible," adding that China had made an official complaint to the Australian government.
"For a long time, on the basis of fully respecting the will of the Pacific island countries' governments and people and taking into full account their development needs, China has offered a great deal of assistance to them," Lu told reporters.
Chinese aid had "significantly fueled the economic and social development of these countries and delivered tangible benefits to the local people," assistance that has been warmly welcomed by those countries, Lu said.
"We hope that certain people in Australia should engage in self-refection instead of pointing fingers at and making irresponsible remarks about other countries," Lu added. The diplomatic row follows a Chinese protest last month at Prime Minister Malcolm Turnbull's announcement that Australia will ban foreign interference in its politics — either through espionage or financial donations. The move was motivated largely by Russia's alleged involvement in last year's U.S. election and China's growing influence on the global political landscape.
The Chinese foreign ministry said then that Turnbull's remarks were prejudiced against China and had poisoned the atmosphere of China-Australia relations. Australia's opposition foreign affairs spokeswoman Penny Wong said on Wednesday that Fierravanti-Wells' comments demonstrated the Australian government's clumsy approach to foreign policy.
China is Australia's largest trading partner, and the close bilateral relationship has affected Australia's relations with the United States, its closest defense ally. China transferred at least $1.8 billion in aid and loans to South Pacific countries in a decade through 2016, the Sydney-based Lowy Institute international policy think tank found.
Jonathan Pryke, director of the Lowy Institute's Pacific islands program, said Fierravanti-Wells' concerns about the terms of the Chinese loans were "quite legitimate." "One of the big problems about Chinese aid in the Pacific is that a lot of it comes in the form of loans and a lot of those loans, we don't actually know what the conditions are," Pryke said.
Pacific countries including Tonga, Vanuatu and Samoa were "already experiencing significant debt stress as a result of taking out these major loans," he said. "It does raise significant questions about: will China forgive these loans, what are the actual terms?" he added.
Fierravanti-Wells called on international development agencies including the World Bank and Asian Development Bank to increase their presence in the Pacific. "The expansion of the World Bank and ADB's loan book to the Pacific is very important because it will afford the opportunities for the banks to have visibility of the existing loan books of the countries and to assess the viability and the sustainability of repaying those loans," she said.