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  • Writer's pictureBy Mar-Vic Cagurangan

Panuelo holds the door wide open for Beijing, offers FSM as a transshipment hub for China's goods

Quid pro quo? Officials say president's offer has nothing to do with $16M grant from China

FSM Foreign Affairs Kandhi A. Elieisar receives Chinese Ambassador Huang Zheng during a May 26, 2021 handover ceremony for China’s $16-million grant. Photo courtesy of FSM Information Service

Reaffirming its "great friendship" with Beijing, the Federated States of Micronesia has offered to be a regional transshipment hub for China's commerce, which would entail wider accessibility of the nation's waters.

FSM President David Panuelo said his country is strategically located to accommodate the air and maritime logistics as a transit hub for goods in transit between China and the South Pacific, and China and South America.

"Recalling my statement at our bilateral engagement in Beijing, I again reaffirm our offer for the Federated States of Micronesia to become an economic and commercial hub for the 21st Century Maritime Silk Road," Panuelo said in his congratulatory message to "our very dear Chinese friends" on the centennial anniversary of the Communist Party of China.

Panuelo renewed the offer two days after the FSM received China's $16 million development grant which officials said was part of the economic and technical cooperation agreements sealed between FSM and Beijing in December 2019.

The FSM government, however, quickly sought to dispel public suspicions of a quid pro quo.

"Contrary to pernicious rumors across the FSM, the economic and technical assistance from China comes with no political conditions or strings attached,"

the Office of the President stated in a press release.

"This recent assistance, like historical assistance to the FSM through the FSM-China Great Friendship, is through the form of a grant— not a loan—and is based on China’s aid principles of equality, mutual benefits, openness, and sustainability," the government press release said.

In his congratulatory message to Chinese President Xi Jinping, Panuelo reaffirmed his nation’s commitment to China's Belt & Road Initiative and offered his support "to help ensure that the 21st Century Maritime Silk Road adds value and increases the prosperity of citizens across the Blue Pacific Continent."

The Maritime Silk Road is the sea route part of the Belt and Road Initiative, which is China's strategic program to expand its influence in the region, a campaign that the United States seeks to stamp out.

The U.S. military's Indo-Pacific strategy involves operational buildup in the Pacific region to thwart China's People's Liberation Army. At the same time, the U.S. Coast Guard has beefed up its patrol against illegal fishing in the Pacific region.

While further sealing FSM's alliance with China, Panuelo at the same time affirmed its "enduring partnership" with the United States. "We hope to see more cooperation, and less competition, between two of our closest allies," the president said.


But Panuelo won't hide his love for China.

"From your successful containment of the Covid-19 pandemic to the eradication of extreme poverty, the Chinese people are blessed to see real development and real change within their own lifetimes. That is a testament to the Communist Party of China’s intentions to work together toward a prosperous community with a shared future for humankind," the president said.

Panuelo applauded "the hard work and vision of H.E. Xi Jinping, T.H. Li Keqiang, and the people of China, for their accomplishments and their continued commitment to global prosperity."

The president said China's generous aid -- "and in the form of grants, not loans. to FSM"-- was a testament to a "great friendship" between the two nations.

"From major infrastructure projects that benefit the average citizens’ life on a daily basis to technical capacity-building efforts to improve our ability to sustain ourselves, our nation is stronger and more resilient because of our friendship with China and its people," Panuelo said.

In an apparent attempt to mitigate diplomatic tension, Panuelo said both China and the U.S. are important to the region's efforts to address climate change.

"Of particular importance to the Federated States of Micronesia and our people is the recent establishment of a Climate Change Working Group between our great friends in the People’s Republic of China and our enduring partners in the United States of America," Panuelo said.

"As an existential threat that affects every country on the planet, it is our view that it is both essential and vitally important that our great friends and enduring partners cooperate together," he added.


Reiterating FSM's one-China policy, Panuelo vowed to bring his nation's cooperation with Beijing "to greater heights."

On May 26, Foreign Affairs Secretary Kandhi A. Elieisar received China's $16 million in capital improvement grant, which was handed over by Huang Zheng, China's ambassador to FSM.

“I am delighted to sign this economic and technical cooperation agreement between our two countries,” Elieisar said in a statement. “This signing ceremony is the result of the consensus between H.E. David W. Panuelo and H.E. Xi Jinping."

Elieisar said the grant money will be used for FSM's economic and social development projects.

“Each time when I come to this room to reach agreements on cooperation, I am so glad,” Huang said in a statement. “Despite the difficulty of the Covid-19 pandemic, our hearts are coming closer and closer. "Today’s grant of around $16 million will surely make important contributions in the sustainable development of the FSM and the wellbeing of the FSM’s people.”

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