Vanuatu’s Prime Minister Charlot Salwai has formally requested the Bank of China to establish operations in the Pacific Island nation, according to a statement released by his office on Friday. During a visit to bank officials in China, Salwai proposed the setup of a Port Vila branch, potentially serving as a clearing bank for the yuan, although a final decision is pending.
The announcement comes amidst efforts by the United States and Australia to enhance financial accessibility in the strategic Pacific Island region. Global banks have been progressively withdrawing from these areas due to challenges posed by small populations and significant distances that limit profit potential. Moreover, many countries in the region lack sufficient resources to combat financial crime effectively, posing risks for banks that might become involved in costly scandals.
Earlier this week, the United States and Australia jointly hosted a meeting in Brisbane aimed at devising solutions to improve financial access in the Pacific Islands. This initiative occurs amid China’s increasing efforts to expand its influence in the region.
According to the Vanuatu government statement, establishing a yuan clearing facility could help lower the costs of Chinese goods, which are currently priced in U.S. dollars due to currency dynamics.
Bank of China, which already operates in New Zealand, Australia, and Papua New Guinea, did not immediately respond to requests for comment on the potential expansion into Vanuatu. Earlier this year, the bank signed a memorandum of understanding with Nauru to explore banking solutions in the region.
Prime Minister Salwai’s visit to China coincides with preparations for a Pacific Island leaders’ meeting in Japan next week, following his earlier engagement with technology firm Huawei in Shenzhen.
The potential establishment of a Bank of China branch in Vanuatu marks a significant development in the Pacific Island nation’s financial landscape, potentially reshaping economic ties and fostering regional financial integration.