China makes a Pacific comeback amid post-Covid contraction of aid to the region

China has regained its place as the second-largest bilateral donor to Pacific Island countries, narrowly edging out the United States, the 2024 edition of the Lowy Institute’s Pacific Aid Map reveals.

This year’s edition, which encompasses the period from 2008 to 2022, shows that a modest uptick in Beijing’s spending in the Pacific has been accompanied by the resurgence of major Chinese infrastructure project commitments and a more targeted focus on winning influence in specific countries, as Beijing seeks geopolitical advantage in the region.

Australia remains the largest donor to the region by far, but Australian grants have dropped slightly below their pre-pandemic average.

Overall, official development finance (ODF) to the Pacific has plummeted by 18 per cent from 2021 levels, with falls in grant support and growing donor reliance on  loan financing.

The report concludes that, despite a three-year pandemic-induced ODF surge, development support in the Pacific has become increasingly inadequate, caught between elevated regional needs, economic fragility, debt pressures, and heightened geopolitical tension.

The seventh edition of the Pacific Aid Map includes data on more than 37,000 projects by 97 development partners, totalling almost $50 billion, across 14 states: Cook Islands, Fiji, Kiribati, Marshall Islands, Federated States of Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

KEY FINDINGS

• Rhetoric outpaces action in the Pacific: ODF to the Pacific Islands region plummeted by 18% from 2021 levels, with falls in grant support and growing donor reliance on non-concessional financing.
• China reclaims its position as the Pacific’s second-largest bilateral donor: After a pandemic lull, Beijing has narrowly displaced the United States in ODF spending and ramped up its project commitments.
• Beijing’s Pacific strategy gets smarter: China’s ODF has acquired a more targeted focus on winning influence in specific countries, involving more grants and community-level outreach.
• Global headwinds complicate the Pacific’s ODF outlook: While Covid-related assistance dropped by 60%, non-pandemic development support also fell by 13%.
• Aid securitisation hampers human development: Strategic competition has come with a larger focus on infrastructure, opening gaps in health and education priorities.
• The infrastructure race poses growing debt risks: Some 60% of infrastructure financing in the Pacific is now being financed by loans.
• Geopolitics drives fragmentation of aid: The rise of “micro-donors” has meant that the same amount of ODF per capita is being dispersed across many more projects by many more donors.
• Taiwan drops off from the Pacific’s top ten bilateral donors: Taipei’s ODF declined to just $7.2 million in 2022, less than a fifth of its historical average.
• The pandemic response has driven progress on cross-cutting priorities: Gender equality, climate action, and aid localisation efforts have gained greater attention, but further work is needed.

ABOUT THE PACIFIC AID MAP
The annual Pacific Aid Map — launched by the Lowy Institute in 2018 — is a comprehensive database tracking official development finance flows in the Pacific Islands region. By promoting greater transparency of ODF flows, the Lowy Institute seeks to increase coordination, improve accountability, and strengthen decision-making and policy debate on aid, development, and geo-economic competition in the region.

The Pacific Aid Map is available to read and download at the Lowy Institute website.

MEDIA CONTACT
Andrew Griffits
Head of Media and Communications
media@lowyinstitute.org