Small island states are turning to China — and then back again

Maldives President Mohamed Muizzu’s visit to India early last month was considered unprecedented in diplomatic spheres. Nevertheless, it followed an established pattern of small island states in the Indo-Pacific swinging back toward the major regional powers they are traditionally close to after testing the waters with Beijing.

These small island nations are often constrained by limited resources and rely heavily on other countries for aid, trade and security — while remaining wary of the potential of larger powers interfering in their internal affairs and encroaching on their sovereignty.

With the Indo-Pacific becoming a contested arena at an unprecedented pace due to China’s so-called peaceful rise, it is imperative for Japan, Australia and India to harmonize their policies toward small island states to ensure they are not co-opted by Beijing.

For example, Muizzu’s recent visit to India came later than expected. After assuming office in November last year campaigning on an “India out” platform, he broke with the long-standing tradition of the Maldives' heads of state visiting India once installed. Muizzu went to China instead, where he signed several security-related agreements.

Muizzu’s strategy directly challenged India’s influence and national security interests in the region. His shift facilitated the entry of Chinese research vessels into the Indian Ocean, with operations near India’s exclusive economic zones raising alarm bells in New Delhi. Of particular concern is that the Maldives’ Feydhoo Finolhu Island, leased to China until 2066 for a nominal sum of $4 million, could serve as a future outpost for the People’s Liberation Army.

This pivot has also led China to become the Maldives’ largest creditor, with loans amounting to $1.37 billion, equal to 20% of the island nation’s public debt, and solidifying what has been called an “India out, China in” approach.

However, facing an imminent financial crisis — with only $400 million remaining in national reserves and a credit downgrade from rating company Moody’s — Muizzu swiftly reversed his stance. During his latest visit to India, he pledged to never hurt India’s security interests and signed a comprehensive vision document on maritime and security cooperation, once again positioning his country as a strategic ally to New Delhi.

The Maldives’ geopolitical pivot is not unique among small island nations in the Indo-Pacific, which have often fluctuated between external influences based on economic and strategic needs.

For example, under former Prime Minister Mahinda Rajapaksa, Sri Lanka initially welcomed Chinese investment but, when it was unable to service its debt, ultimately ceded control of the Hambantota port to Beijing under a 99-year lease. Facing economic collapse and without sufficient support from China, Sri Lanka turned back to New Delhi, which provided a $4.5 billion aid package to stabilize the smaller neighbor’s economy.

Similarly, after seizing power in a coup, former Fiji Prime Minister Frank Bainimarama initially distanced himself from Australia in favor of closer ties with China. Yet, when Chinese assistance proved insufficient, Fiji realigned with Canberra, signing the Vuvale Partnership.

These precedents likely influenced Muizzu’s decision to recalibrate his strategy and return to India’s sphere of influence to avoid the political and economic fallout experienced by other leaders.

China’s Belt and Road initiative has been a critical factor in encouraging these small island states to break away from their traditional regional relationships. The BRI seemingly offers attractive trade and aid terms, positioning China as a benefactor, and one not overtly set on meddling in other nations’ internal affairs.

Yet, as small states grapple with dependency on outside aid and the existential threat of climate change, the reality is that they often find themselves compromising their sovereignty in exchange for financial support through initiatives such as the BRI, which also frequently lead to debt dependency.

Although Indo-Pacific small island states have so far reverted to their traditional allies, mainly due to economic pressures, a sustained and more considerate financial engagement from China could destabilize these allegiances, posing a significant hurdle for other regional powers.

China’s strategic maneuvering threatens the liberal international order but remains within the "gray zone" — neither peaceful nor involving direct military intervention. In the medium to long term, these developments pose a serious challenge to regional democracies like Japan, Australia and India, which advocate for maintaining the status quo and a rules-based order in the Indo-Pacific.

To harmonize their policies, Japan, Australia and India should extend aid and trade to small island states while assessing the terms and conditions attached to such support, which some receiver nations perceive as undue interference. Tokyo, Canberra and New Delhi also need to raise awareness among these states about China’s strategic ambitions.

Some of Beijing’s official statements are indicative in this sense. In 2010, then-Foreign Minister Yang Jiechi stated at an Association of Southeast Asian Nations forum that “China is a big country and you are small countries, and that is a fact.” Similarly, a Chinese Ministry of Foreign Affairs communique last year stated that “China will work with regional countries to manage regional security affairs with a coordinated approach.”

This language indicates how Beijing perceives smaller nations and its intention to redraw the regional security paradigm.

The establishment of the “Quad” security dialogue between Japan, Australia, India and the United States provides a degree of reassurance to Indo-Pacific island states. However, the Quad’s exclusive nature does not ensure robust deterrence or an active balancing of power. Therefore, Japan, Australia and India must be more responsive to the concerns voiced by other regional actors, like the Philippines, which has openly criticized China’s maritime assertiveness as increasingly illegal, coercive, aggressive and deceitful, or ICAD.

Supporting vulnerable states not only empowers them with a stronger voice and greater autonomy, but paves the way for countries embroiled in territorial disputes with China to seek alternatives. It is therefore crucial for Japan, Australia and India to foster stability and reinforce a rules-based order amid the region’s evolving geopolitical landscape, and to do so working in concert.