2026 Pacific Aid Map: Australia expands Pacific aid lead as China shifts strategy

Australia has overtaken China to become the Pacific’s dominant source of lending and infrastructure investment, according to the 2026 Lowy Institute Pacific Aid Map (Opens in new window).

But the contest for influence in the region continues, with China shifting strategy and trading big-ticket infrastructure loans for a high volume of grants, training programs, and equipment donations to sustain its presence.

The ninth edition of the Pacific Aid Map tracks more than 50,000 projects worth US$60 billion in official development finance (ODF) spending across the Pacific Islands region from 2008 to 2024. It shows total ODF to the region stabilising at US$4.1 billion in 2024, a 10 per cent rise that ended three consecutive years of decline. The report estimates ODF fell to US$3.8 billion in 2025.

Australia disbursed US$1.5 billion in aid to the Pacific in 2024, accounting for 37 per cent of all development finance to the region, more than three times the next-largest bilateral partner.

Canberra has also signed US$2.4 billion in new loan agreements since 2021, making it the region's largest source of new lending over that period. Australia’s lending, first to support Papua New Guinea’s budget, and more recently through infrastructure loans, has made it the region’s leading lender, ending China’s dominance of that position through much of the 2010s.

Chinese grant commitments reached a record high in 2024, almost double their pre-pandemic average, as Beijing accelerated small projects — school upgrades, clinics and other highly visible initiatives — favoured under Xi Jinping's new development strategy. Meanwhile, Chinese lending has yet to recover.

New loan commitments have fallen from an average of US$360 million a year during the 2010s to around US$90 million annually since 2020 as Beijing has been crowded out by Canberra.

The United States’ aid cuts have fuelled uncertainty across the Pacific. But Washington has protected its most important regional partnerships by renewing its Compacts of Free Association with the Federated States of Micronesia, the Marshall Islands and Palau, committing US$7.1 billion in legislated funding to the three North Pacific states over the 2024–43 period.

The report details the contest for influence playing out as Pacific economies face mounting pressure from repeated global shocks and persistent energy insecurity. It warns the region could be locked into a prolonged economic slowdown, with consequences for incomes, jobs and food security, and increasing risks to governance and regional stability.

On Australia, China and the regional aid picture, Pacific Aid Map lead author Riley Duke said:

"As other donors retreat and repeated economic shocks hit the region, Australia's large and sustained support has been a stabilising factor for Pacific economies."

“Australia's push into infrastructure, particularly strategic infrastructure, is reshaping the regional aid picture.”

"A decade ago, China was the region's dominant bilateral lender and infrastructure funder. Australia now holds that position.”

"Chinese aid in the Pacific is highly reactive to diplomatic developments, functioning as a strategic lever Beijing can pull. When a country switches diplomatic recognition from Taipei to Beijing, or opens strategic negotiations with Australia, Chinese aid flows react."

"Pacific economies are caught in a continual cycle of shock and recovery."

"Energy insecurity remains extreme in the Pacific, fiscal buffers are thin, and the scale of the international response is still uncertain."

“These aren't just economic risks. Prolonged pressure on household incomes and government budgets can undermine social cohesion and regional stability.”

KEY FINDINGS

• Pacific aid stabilises but is increasingly debt-driven.
• Australia remains the largest Pacific aid partner while the United States reinforces North Pacific ties.
• Australia and multilateral development banks dominate lending to the region.
• China maintains aid strategy shift from large-scale lending to high-frequency, small-scale grants.
• Chinese state-owned firms dominate Pacific infrastructure contracts, including for multilateral projects.
• The Iran war is the latest in a series of shocks to hit the region, but the scale of the international response is uncertain.
• Energy insecurity remains extreme despite sustained renewables investment.
• Social protection has expanded domestically but donor support is limited.

ABOUT THE PACIFIC AID MAP

The annual Pacific Aid Map, first 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 geoeconomic competition in the region.

MEDIA CONTACT
Andrew Griffits
Head of Media and Communications
+61 2 8238 9035
media@lowyinstitute.org (Opens in new window)