2 days ago
The tiny Pacific nation evading China's grip
Avenida de Hudi-Laran is one of the busiest roads in Dili, the capital of East Timor.
On any given day, motorbikes, cramped minibuses and yellow taxis speed past restaurants, spas and furniture supply stores.
But instead of the usual Portuguese or Tetum – the country's two official languages – many of the establishments boast Chinese names.
The expansion of Chinese-owned businesses has grown to such an extent that most people refer to Hudi-Laran, meaning 'banana complex', as 'China-Laran' now.
It's a sign of Beijing's increasing investment in the small country, but its level of influence appears to have its limits.
At a time when more and more Asian countries are falling into debilitating debt traps that grant China sweeping leverage, East Timor is resisting – for now.
It is one of the world's youngest countries, having gained independence in 2002 after hundreds of years as a Portuguese colony and more than two decades under Indonesian occupation.
The nation, located around 430 miles north-west of Australia, makes up the eastern half of the island of Timor, sharing the land with Indonesia.
Its strategic position in the contested Indo-Pacific and nearby shipping lanes make the country ripe for Chinese influence.
'We do not view China as a threat, least of all as an enemy,' José Ramos-Horta, East Timor's president, told The Telegraph, insisting his country remains neutral in the battle for control of the Pacific.
East Timor sits crucially near the Second Island Chain, a series of islands stretching from Japan through Guam – a US territory with a key military base – to Indonesia's eastern islands.
Although further from China than the First Island Chain, which includes Taiwan and the Philippines, the second chain is widely viewed as an emerging battleground of influence.
Pete Hegseth, the US defence secretary, said in April that the US would be boosting investment in the outlying chain of islands.
East Timor is also situated near the Ombai-Wetar Strait, a deep-water passage that's critical for movement between the Indian and Pacific oceans.
Given its placement, China has attempted to increase its military presence on the island, proposing the construction of a radar facility in 2007, which it claimed would only be used to detect illegal fishing.
However, a leaked US diplomatic cable revealed that the site would've allowed China to collect intelligence on American and Taiwanese military activity in the South China Sea, where Beijing has expanded its presence in recent years. The government in Dili rejected the proposal.
East Timor relies mostly on security agreements with its neighbours: Australia and Indonesia.
While open to participating in joint military drills with China, Mr Ramos-Horta said there was only so much East Timor could offer a country such as China when it comes to defence.
'It's a bit like an elephant inviting a mosquito for joint military exercises. The Chinese will take cruise missiles, we will take slingshots,' he said.
The bulk of East Timor's relationship with China is economic, but it has opted for a different route to many other countries.
Chinese aid has funded East Timor's presidential palace, foreign ministry and military headquarters, and Chinese state-owned companies built and currently control the national power grid and its major port.
The country upgraded its ties with China in 2023 to a comprehensive strategic partnership, which opened the door to 'unlimited' economic cooperation, one expert told The Telegraph.
Despite Beijing's economic involvement in such infrastructure projects prompting concern, East Timor has avoided the 'debt trap' that has destabilised so many others.
China has a history of lending billions to vulnerable governments that struggle to repay the loans and eventually fall under its thumb. Such has happened in Sri Lanka, which owed China nearly $25 billion (£19.5 billion) before it defaulted and fell into its worst financial crisis in decades.
But while Chinese firms have built key infrastructure in East Timor, the projects have been through private tenders.
The south-east Asian country has never taken a loan from China, meaning its influence there 'remains limited', according to Loro Horta, East Timor's ambassador to China.
In 2012, it came close to accepting a $50 million loan from China to upgrade its drainage system, but Dili rejected the proposal because it gave Beijing disproportionate control over which company would carry out the project.
Instead, East Timor took out grants from partners such as the Asian Development Bank and the World Bank, where there are fewer strings attached.
The nation also follows a 'friends to all' policy, under which it receives foreign aid and investment from a wide range of partners – including Australia and the US – so it isn't entirely dependent on any one actor.
China's grip looms
Part of East Timor's ability to resist China's pull stems from its oil and gas revenue, but experts have said this could soon change.
Despite being one of the poorest countries in the region by GDP per capita, it earns close to half a billion dollars in petroleum revenue annually, which funds nearly 90 per cent of its state budget.
However, its main oil fields are predicted to be fully depleted within the next decade, meaning the country could be left bankrupt, according to Damien Kingsbury, a professor emeritus at Deakin University in Australia.
The government is optimistic that more oil will be uncovered before it's too late, but others are worried that the impending economic crisis could push East Timor down the slippery slope towards greater dependency on China.
'Small countries such as East Timor risk having large investors and donors such as China swamp their local economy and thus lose a capacity to make independent economic decisions,' said Prof Kingsbury. 'China could end up having an outsized influence in policy making.'
This has happened to countries in the Pacific before. The Solomon Islands, Kiribati and Nauru have all switched recognition from Taiwan to China in the past decade after developing closer ties with Beijing.
The Solomon Islands, historically one of the poorest countries in the Pacific, signed a security agreement with China in 2022, opening the door for Beijing to establish a military base in the region.
However, East Timor's 'friends to all' policy could help it to avoid falling into a similar entanglement.
'I have no particular grounds for concern. China has a positive relationship with East Timor – it's significant but not one of the top donors by any means,' said Michael Leach, a professor at Australia's Swinburne University of Technology.
'The Timorese leadership have always been careful to balance their relationships in sensitive ways,' he added.
East Timor's bloody past
The fact that East Timor has remained relatively unscathed when it comes to China is also a result of its recent bloody history.
Indonesian forces occupied the country between 1975 and 1999, and killed around 200,000 people – of a population of only around 600,000. They tortured and slaughtered civilians and resistance forces, in what many scholars have labelled a genocide.
'Indonesia killed a lot of people, a lot of people suffered, and a lot of people sacrificed tremendously in order for it to be a sovereign nation and so they value that sovereignty,' said Charlie Scheiner, a long-time researcher at La'o Hamutuk, one of East Timor's oldest and largest human rights NGOs.
No one understands this better than the president and prime minister, who both led the struggle.
Mr Leach explained that Xanana Gusmão, the prime minister, spent years fighting and was later imprisoned 'in pursuit of the dream of self-determination and independence', which 'informs a lot of his outlook today on maintaining Timorese independence'.
For Mr Ramos-Horta, who went on to win the Nobel Peace Prize for his efforts, his experience travelling the world and courting diplomatic support made him 'no stranger to the sort of traps that small countries can fall into with foreign policy if they're not careful', according to Mr Leach.
Experts agree that East Timor's relationship with China is likely to expand – especially economically – but it will probably not reach a point where there would be a risk to its sovereignty or independence.
'Timor will always be a democracy. We can never be a dictatorship because we are so disorganised and undisciplined – it's impossible to have one country dominate Timor,' insisted Mr Loro.
'Many have tried. They usually fail,' he added jokingly.
