We depend much on China for trade: Data

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Solomon Islands trade with China is now so huge that the country is one of the most China-dependents in the world, according to data from the international Monetary Fund and other international sources.

The data, analysed by the Chief economist at the Australian Department of Foreign Affairs, show China ranks as the number one destination for Solomon Islands exports dwarfing all other trading partners.

In 2020, 64.4 percent of Solomon Islands exports went to China.

The table below shows Solomon Islands principal export destinations in 2020.

Source: Australian Department of Foreign Affairs and Trade Solomon Islands Economic Fact Sheet

By comparison, other countries – including those ranked in the ‘Top 10 China Dependent Countries’ by leading business magazine Forbes- send less than 40 per cent of the exports to China.

Last week, longest serving Member of Parliament, Danny Philip said, 70 per cent of Solomon Islands exports are bought by China and it seems that Solomon Islands export rate to China is growing.

He described Solomon Islands and China trade relations as very important while acknowledging that Australia remains Solomon Islands’ partner of choice.

“What we need is not to compromise. We own this country very much. We only want the best for SI and its people. Everything that happens needs to be the best for the people.

“We are open to all sorts of things. Beggars have no choice but we don’t want to open ourselves to geopolitics. We do not want Solomon Islands, small as we are, drawn into these geopolitical things,” Philip said.

Is Solomon Islands benefiting from its resources?

Solomon Islands has huge potential in agriculture but the economy depends very much on logging and most logs end up in Chinese markets.

Leader of Opposition Parliamentary group Matthew Wale described the country’s economic model as exploitative.

The country’s wealth goes overseas through unrestrained transfer pricing, aided and abetted by leaders, he explained

In his statement to media earlier this month, he said the “exploitative economy” only works for foreign interests.

“The extractive industry leads the way, aided and abetted by Solomon Islands government leaders.

“Natural resources are removed from our islands, and our people are poorer after that.

“No tangible sustainable development has resulted from this exploitative economy.

“Indigenous Solomon Islanders own all the natural resources, and are marginalized by this exploitative economy,” Wale said.

He said there is no incentive to change the status quo, as long as key government leaders continue to be the beneficiaries of this exploitative economy.

Wale said the exploitative economy will never build the future Solomon Islands that give hope to young Solomon Islanders.

“Indigenous Solomon Islanders ask why their own government goes out of its way to serve foreign business interests, and neglect their own people.

“This is a key driver of internal discontent, and a threat to stability,” he said.

What’s best for Solomon Islands?

Dr Transform Aqorau suggested that the best security arrangement is that we all work with partners to develop the country with infrastructure that would help Solomon Islands graduate from least developed status and give a future to young people.

“Think about the future of our young people and how they are going to be able to lead a comfortable life in this country,” he told the same event at which Hon Danny Philip spoke..

Is Solomon Islands vulnerable to a China  trade trap?

Economic theory tells us it is dangerous to be too dependent on any one industry or trading partner.

China has a history of using trade to exert pressure on  its trading partners. The more dependent a country, the more vulnerable it is to such action,

In early 2020, China slapped restrictions on a wide range of Australian exports after  Australia supported a call for a global inquiry into China’s early handling of Covid-19.

Affected exports included lobster, beef, timber, cotton, barley, wine, coal and copper,

Even though Australia sends 32.6% of its exports to China – or around half the value of Solomon Islands exports – the trade restrictions caused significant disruption.

The action raises questions about the impact Chinese trade restrictions could have on Solomon Island’s much more China-dependent economy.