TAIPEI (Taiwan News) – Australian think tank, Lowy Institute, published a report on Monday (Oct. 21), urging China to stop making loans to South Pacific nations and saddling them with debts they are unable to pay back, according to a Liberty Times report.

Quoting the Lowy Institute, Bloomberg said China's loans to these countries are massive and there is no mechanism to protect the solvency of these countries, which is risky for them. The Lowy Institute report opines that if China continues making these type of loans there will be grave consequences, the Liberty Times report said.

Lowy Institute indicated that six South Pacific nations – Cook Islands, Fiji, Papua New Guinea, Samoa, Tonga, and Vanuatu – are China debtors. From 2011 to 2018, China provided US$6 billion in loans to the region, equivalent to 21 percent of the region’s GDP, the report added.

With China extending its influence from the South China Sea to the island nations of the South Pacific Ocean, which are considered to be Australia’s backyard,  both U.S. and Australian authorities are concerned that China might trade in the loans for the right to build military bases in the region, the Liberty Times said.

Even though Lowy Institute’s report said there is no evidence that China is deliberately engaging in debt-trap diplomacy, it urged the Chinese government to adjust the scale, nature, and opacity of their loaning activities in the region.