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yesterday

Western Donor Retreat Boosts China as Southeast Asia’s Top Infrastructure Financier

The Lowy Institute warns that US and EU budget cuts are creating funding shortfalls in health and education across Southeast Asia.

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The China-backed East Coast Rail Link under construction in Malaysia in 2019. China is poised to gain influence over Southeast Asia's development as Western donors slash aid, a Lowy Institute study says
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A Chinese-owned oil refinery on Made Island off Kyaukphyu, Myanmar, photographed in 2019. Beijing is financing a deep-sea port project at Kyaukphyu

Overview

  • President Donald Trump’s administration has halted about US$60 billion in development aid while seven European countries and the EU plan US$17.2 billion in cuts for 2025–2029 and the UK reduces annual aid by US$7.6 billion.
  • China’s official development finance to Southeast Asia rose by US$1.6 billion to US$4.9 billion in 2023, with infrastructure commitments swelling almost fourfold to nearly US$10 billion.
  • The Lowy Institute projects that Western official development finance to the region will fall by more than US$2 billion by 2026, shifting the centre of gravity toward Beijing and other Asian donors.
  • Lower-income countries such as East Timor, Cambodia, Laos and Myanmar face critical shortfalls in social sectors including health, education and civil society support as traditional aid recedes.
  • China’s no-strings approach, grounded in non-interference principles, is consolidating its influence and appeal among Southeast Asian governments.