ABSTRACT
Over the past two decades, China has significantly increased its influence in the Pacific through aids, loans, trades and other forms of economic engagement. This development has drawn much attention from scholars and policymakers, and the notion of “China as an alternative” to traditional powers has gained prominence in the academic and political spheres of the region. In contrast, Taiwan’s involvement has been understudied and sidelined. This chapter critically examines the dominant discourses and explores the implications of diplomatic ties with either Taiwan or China concerning economic development of the island nations in Oceania. We assess economic, aid and trade data over the past two decades and compare economic performances. Utilizing the Difference-in-Differences method, our research shows that aligning with Taiwan is an economically reasonable choice for small island states that depend heavily on fisheries. On the other hand, larger countries whose revenue relies largely on logging and mining are more susceptible to political pressure and potential sanctions from Beijing. Our study suggests that diversified import and export markets are a crucial prerequisite for Oceanian countries that aim to exercise their sovereignty and resist external pressure from major powers amid geopolitical rivalry.
