An academic says the move by Kiribati to establish diplomatic ties to Taiwan is tied to funding, despite official denials.
Andrew Ladley, the director of Victoria University's Institute of Policy Studies in Wellington, also says while China has reacted strongly to the move, it's unlikely to pull out of Kiribati where it has a satellite tracking station.
And, he says China and Taiwan will continue to compete with each other over the ties they have with Pacific Island countries.
But, Mr Ladley says small states need to be careful.
"Those states are vulnerable to what is called sovereignty renting, in other words trying in some way to rent out elements of their sovereignty, whether it is flags of convenience or tax havens or passports for sale or a range of other things...they are extremely vulneable to having to look to rent out aspects of their sovereignty as the only means of surviving"
Mr Ladley says depending on adhoc funding or grants from powers that have the money to hand out, is not a stable base to be able to govern on.