By: Salman Rafi Sheikh


The Pacific islands that were the focus of some of the biggest and bloodiest battles fought by US Marines during World War II – are gradually slipping into the Chinese orbit as American authority fades.

Although in all high-level summits with US representatives since 2013 Chinese officials have reiterated that the islands can accommodate both Chinese and US interests, China’s incursion into the key US possession of Micronesia delineates clearly the continuing struggle between the two. Chinese entry into the region began in the mid-2000s and has intensified ever since.

Micronesia includes five independent countries: the Federated States of Micronesia, Kiribati, the Marshall Islands, Nauru and Palau; as well as three US territories: Guam, the Northern Mariana Islands and Wake Island. American air and naval bases have been stationed here since WWII, the largest of which is on Guam. The recent China factor has come as the most serious challenge the US has faced in the region.

US Subsidies Prop Up Economies

Over the years, a significant supply of US dollars in the form of subsidies has allowed the US to maintain its hegemony. Even today, the US dollar is the official currency in the Federated States of Micronesia, the Marshall Islands, Palau, the Northern Mariana Islands and Guam.

As of 2013, the Federated States of Micronesia relied on the United States for $92 million in annual economic assistance, 40 percent of its national revenue. In return, it gives the US a mandate for the island nation’s diplomacy in defense and national security-related areas under an accord. Palau and the Marshall Islands also have similar arrangements with Washington.

The US has been reducing aid every year. For instance, between 1987 and 1991, the US provided US$430.5 million dollars to the Federated States of Micronesia and Republic of Marshall Island. However, this amount was reduced to 365.5 million between 1992 and 1995 and it further reduced to 295.5 million between 1996 and 2001.

This aid program is due to end in 2023 and the states, economically challenged as they still are, are desperate to fill the void and no state in the region has been as eager to fill this gap as China. Hence the beginning of Chinese investment and aid and the consequent US-China tussle in the larger Pacific region. In a way, China’s policy to replace the US as the biggest financier of these states seems to be the root where branches of the power tussle in both the South and East China seas sprout from.

China, for its part, has sought to blame the Americans for any possible tensions. On Jan. 30, the Foreign Ministry spokesperson Hua Chunying told a press briefing that that “countries located outside the region” should refrain from disrupting stability in the Pacific Ocean region – the US and its allies.

Beijing Maintains Strength

While China does certainly not want to see what it considers any extra-regional power to have any say in the oceanic matters, it has certainly aimed at maintaining its own position of strength.  While the world media regularly continues to pay particular attention to developments taking place in South and East China seas, there are by the far the only regions where this struggle for control over seas, resources and markets is going on.

The Federated States of Micronesia, which are linked to the US by the Compact of Free Association signed in 1986 and extended in 2003 till 2023, are on the receiving end of Beijing investment, sometimes in excess of capital injections from the US. Additionally, part of the Chinese subsidies go into a trust fund established with the aim of supporting the economy of the Federated States of Micronesia following its independence in 2023 (i.e., after the funding from the United States dries up).