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By:

Sumant Vidwans

29 August 2024 at 10:09:28 am

The Rising Tide: China’s Tightening Grip on Solomon Islands

China’s quiet rise in Oceania is reshaping Pacific geopolitics, and the Solomon Islands now sit at the centre of this strategic contest. While the South China Sea dominates debate over China’s maritime expansion, China’s quieter but significant rise in Oceania is generating growing geopolitical and security concerns. The Solomon Islands exemplify this shift, emerging as a key arena of competition between China and traditional Western allies. Beijing’s push for deeper security and economic...

The Rising Tide: China’s Tightening Grip on Solomon Islands

China’s quiet rise in Oceania is reshaping Pacific geopolitics, and the Solomon Islands now sit at the centre of this strategic contest. While the South China Sea dominates debate over China’s maritime expansion, China’s quieter but significant rise in Oceania is generating growing geopolitical and security concerns. The Solomon Islands exemplify this shift, emerging as a key arena of competition between China and traditional Western allies. Beijing’s push for deeper security and economic ties signals a strategic move into a region long shaped by Australia, New Zealand, and the United States. The Solomon Islands is an archipelago nation in Oceania, northeast of Australia. It consists of six main islands and over a thousand smaller ones, covering about 29,000 sq km and home to roughly 700,000 people. Honiara, the capital and largest city, sits on the island of Guadalcanal. Modern Solomon Islands history began in 1893, when Captain Herbert Gibson declared a British protectorate. The islands later became a major World War II battleground, seeing fierce clashes between the US, Britain, and Japan. In 1975, the territory was renamed “The Solomon Islands”, gaining self-governance the following year. It became fully independent in 1978 as the Solomon Islands”. The country remains a constitutional monarchy within the Commonwealth, with the British monarch as head of state, represented by a governor-general. China’s growing influence After gaining independence in 1978, the Solomon Islands established ties with Taiwan in 1983 and maintained them for 36 years. Taiwan provided extensive aid in infrastructure, education, and healthcare. But as China’s influence expanded, the Solomons eventually shifted under pressure from Beijing’s One-China policy, which requires countries to recognise only the PRC and reject Taiwan’s claim to statehood. In 2019, the Solomon Islands cut diplomatic ties with Taiwan and recognised China, aligning with a broader regional shift in the Pacific. Soon after, the Solomons signed an MoU with China, joining the Belt and Road Initiative (BRI). Launched in 2013, the BRI is a vast global infrastructure and economic project aimed at boosting trade and connectivity across Asia, Africa, and Europe. The Solomon Islands’ economy depends largely on agriculture, fishing, and forestry, with little industrialisation. Its BRI partnership with China prioritises infrastructure, including upgrades to Honiara’s port, major road improvements, and new sports facilities such as the $119 million national stadium. Cooperation also extends to Chinese language training, scholarships, and government capacity-building programmes. Since switching diplomatic ties, Solomon Islands officials have been visiting China almost monthly on “study tours”. Chinese provincial governments are also building links with Solomon Islands’ provinces, while universities on both sides are signing agreements to set up joint R&D centres. The concerns While the BRI has spurred major infrastructure growth, it has also raised concerns about long-term financial sustainability. A key worry is “debt-trap diplomacy”, where repayment pressures could threaten the Solomons’ control over key assets, as seen in countries like Sri Lanka. The islands also export most of their timber and natural resources to China, deepening economic dependence on the Chinese market. Concerns over China’s influence extend beyond trade and infrastructure. In 2022, the Solomons and China signed a security cooperation pact—initially kept secret—which alarmed Western allies over the possibility of a future Chinese military presence. These concerns soon proved justified. In January 2022, a PLA Air Force aircraft carrying riot gear and security personnel in camouflage landed in Honiara. This deployment, known as the China Public Security Bureau–Solomon Islands Policing Advisory Group (CPAG), has since become a permanent presence. China’s police maintain a 12-member presence on six-month rotations, operating across all provinces. There have also been reports of Beijing influencing local media, and recent international coverage has highlighted China’s role in the Solomons’ domestic politics, including during a no-confidence motion. The alternatives For the Solomon Islands, ties with China offer both opportunities and challenges. While the former Sogavare government leaned strongly toward Beijing, the current administration under Jeremiah Manele is trying to balance relations with both the US and China as the two powers compete for influence. The country is also trying to broaden partnerships with Australia, New Zealand, and others. Manele has repeatedly signalled a preference for partners like New Zealand on major projects such as the Bina Harbour development. But New Zealand cannot fund the project alone, and its attempts to secure additional donors have so far failed — leaving China eager to step in. This is just one example of how smaller nations, unable to attract Western support, often end up turning to China and risking deeper dependence or debt. In the crucial Pacific Ocean region, the Solomon Islands exemplify smaller nations caught between the geopolitical rivalry of the US and China. (The writer is a foreign affairs expert. Views personal.)

Good Loans vs Bad Loans: The Choices That Shape Your Financial Future

Loans are easy to get today; the real skill is knowing when not to borrow.

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In today’s fast-paced financial world, loans have become an integral part of life. From education to housing and from business growth to personal needs, borrowing is more common than ever. But while loans can be useful, not all have the same impact. Some help you grow financially, while others trap you in long-term debt and stress. Understanding the difference between a good loan and a bad loan is essential.


What Makes a Loan “Good”?

A good loan is one that creates long-term value, adds to your assets, or increases your earning ability. These loans support financial growth instead of draining resources.


1. Asset Creation – Loans used to purchase assets that appreciate, like residential or commercial property, are considered good loans. Property values generally rise over time, turning an EMI into a long-term investment.


2. Enhances Skills and Income – Education loans and business loans are classic examples of good loans. An education loan provides skills that increase future earnings, while a business loan can help expand capacity, increase revenue, and strengthen long-term stability.


3. Affordable Interest and Predictable EMIs – Good loans usually have lower interest rates and stable repayment schedules. They fit into your budget without putting excessive pressure on your monthly finances.


4. Taken With Clear Purpose - Good loans are taken only after understanding the purpose, evaluating the returns, and planning the repayment. These loans come with clarity and future benefits, not emotional decisions.


What Turns a Loan Into a “Bad Loan”?

Bad loans are those that do not create income, lose value quickly, or lead to financial strain. They are rooted more in convenience and lifestyle desires than in financial planning.


1. Consumption-Based Borrowing: Loans taken for travel, luxury shopping, gadgets, or lifestyle upgrades fall into this category. These items lose value within months, leaving the borrower paying EMIs without long-term benefit.


2. High-Interest Borrowing: Instant loans, credit card loans, and short-term personal loans carry extremely high interest rates. While they offer quick cash, they often trap people in cycles of repayments, penalties, and rollover charges.


3. No Return on Investment: Borrowing for depreciating items or non-essential expenses leads to a bad loan. After the excitement fades, the borrower is left with EMI payments but no asset that adds to their wealth.


4. Emotional or Social Pressure: Many people take loans to match trends, maintain lifestyle standards, or fulfil social expectations. Such emotional borrowing is one of the biggest contributors to bad debt.


5. No Leverage in Equity Borrowing to Invest in the Share Market: This is one of the most dangerous forms of bad debt. Taking a loan to invest in stocks, futures and options (F&O), or intraday trading is extremely risky. Markets are unpredictable, losses can exceed capital, and interest continues to accrue even when investments fail.Using leverage in equity with borrowed money can wipe out savings, increase pressure, and push you into a debt trap. Equity investing should always be done with your own money, never with loans.


Why People Fall Into Bad Loans

  • Easy availability of instant loans

  • Lack of financial literacy

  • Overuse of credit cards

  • Influence of social media lifestyle trends

  • Misjudging EMI affordability

  • Desire for quick gratification

  • As borrowing becomes easier, irresponsible borrowing is also rising.


How to Identify a Good Loan Before Borrowing

Before taking any loan, ask yourself:

1. Will this loan increase my income or improve my skills?

2. Will the value of what I’m buying grow or depreciate?

3. Are the interest rates reasonable?

4. Can I repay the EMI comfortably from my monthly income?

5. Is this a genuine need or just a desire?


If a loan adds to your future, it’s a good loan. If it only satisfies a temporary want, it’s a bad loan.


India’s Changing Debt Pattern

India has seen a rise in personal loans, credit card spending, and instant app-based loans. Many young people fall into an “EMI lifestyle”, where much of their salary goes toward repayments. On the positive side, home, education, and business loans still support the financial growth of millions.This growing gap shows that financial education is no longer optional — it’s necessary.


Borrow Wisely, Not Emotionally

Loans are powerful tools. Used correctly, they help you build assets, grow your career, and secure your future. Misused, they create stress, limit freedom, and drain wealth.A good loan builds your life; a bad loan breaks your peace. In an era of easy EMIs and effortless borrowing, real strength lies in making informed, mindful, strategic choices.


(The writer is a Chartered Accountant based in Thane. Views personal.)

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