Chinese Government provides $1 million USD interest-free loan — via a September 2003 ETCA — for multiple projects (Linked to Record ID#64077, #64078, and #64079)

📋 Staff Comments

1. On July 21, 2002, then President Rene Harris of Nauru signed a joint communiqué in Hong Kong to establish diplomatic relations with the People's Republic of China (PRC). In the document, the Government of the Republic of Nauru recognized that 'there is but one China in the world, that the Government of the People's Republic of China is the sole legal government representing the whole of China and that Taiwan is an inalienable part of Chinese territory.' The declaration also contained an undertaking by Nauru to close its embassy in Taipei within one month, despite the fact Nauru had never had a diplomatic mission in Taiwan. This move followed the PRC's promise to provide a large aid package. That same day, the Republic of China (ROC or Taiwanese) government issued an ultimatum, demanding that the communiqué be withdrawn within 24 hours or it would take the initiative and sever diplomatic ties. There was much dissension within the Nauruan government over the move by Harris, which the President was alleged to have made on his own initiative. In the confusion, the Nauruan government did not respond to the ultimatum, which was extended an additional 24 hours, and the ROC followed through with its threat on July 23, 2002, breaking diplomatic ties that had existed since 1980. Then, in 2003, the Government of Nauru closed its embassy in Beijing, prompting speculation of an imminent resumption of ties with the ROC. The Government of Nauru ultimately re-established diplomatic ties with the ROC in May 2005. Consequently, many of the PRC-backed development projects that were announced or initiated in 2003 and 2004 were never fully implemented.
2. As this is an ETCA, which is a financing mechanism specific to China's Ministry of Commerce (MOFCOM), AidData has coded MOFCOM as the specific Chinese Government institution responsible for providing this interest-free loan.
3. Since loan terms for the interest-free loan are unavailable, AidData has set maturity period to 20-years by default and grace period to 10-years by default per China's Foreign Assistance White Paper (http://www.cidca.gov.cn/2018-08/06/c_129925064_3.htm) which states that the maturity period of interest-free loans is 20-years, with a drawdown period of 5-years, grace period of 5-years, and repayment over 10-years. AidData treats the drawdown period as providing 5-years of additional grace.

📚 Sources & References

• Votes & Proceedings of the Fifteenth Parliament No. 20
• Votes & Proceedings of the Sixteenth Parliament
• Votes & Proceedings of the Fifteenth Parliament
• Foreign relations of Nauru Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.