China now favours frequent, small grants as big project lending subsides

China’s Pacific aid spending remains below its 2010s peak but has stabilised around a high-visibility grant model tied to diplomatic objectives. Loans from its mid-2010s lending boom are now entering acute repayment phases, leaving Tonga, Samoa, and Vanuatu with substantial debt obligations to Beijing.

In 2024, Chinese aid spending in the Pacific totalled $255 million. This is a modest increase on its post-pandemic annual average of $225 million but remains well below its 2010s annual average of $330 million. The composition of Chinese ODF continues to shift away from the large-scale lending that defined Beijing’s pre-2018 regional engagement. Pacific demand for Chinese loans has softened considerably since 2019, weighed down by debt sustainability concerns, increased competition from other major partners, and tighter capital availability in China’s policy banks. As a result, both disbursed debt and new loan commitments have continued to be subdued, with only a handful of new loan-financed deals signed since 2020 (Figure 8).

China’s approach to regional engagement has adapted accordingly. In inflation-adjusted terms, China’s grant commitments hit a high-water mark in 2024, running at close to twice the pre-pandemic average. The largest single grant commitment to date is the $135 million Vanua Levu Bridges and Roads Project in Fiji, signed in 2024 with works expected to start in 2026. Several country-record grant projects have been announced in recent years, including the Nauru National Sports Stadium ($73 million), the Vanuatu Earthquake Recovery Grant ($57 million), and the High School Sports Complex in Tonga ($26 million).

Yet the average size of Chinese projects has declined steadily since 2020 (Figure 9), consistent with Xi Jinping’s stated transition towards “small and beautiful” development partnerships.^* The project pipeline is increasingly made up of more modest, locally targeted initiatives. Aid-in-kind donations have grown as part of this trend, with China delivering substantial volumes of equipment to schools, police forces, and hospitals across the Pacific. Scholarship and training projects have also expanded, with a particular sectoral focus on health, media, and policing.

China’s Pacific aid maintains clear alignment with broader diplomatic objectives, evident most recently in Nauru and Vanuatu. In Nauru, the government’s January 2024 switch in diplomatic recognition from Taipei to Beijing was followed by a rapid and visible expansion of Chinese aid. The post-switch aid package was anchored by a $73 million grant for the National Sports Stadium and a $19 million budget support program, alongside smaller, high-visibility grants for a 6MW solar plant, solar streetlights, schoolbag and computer donations, a medical clinic, and a press conference room for the Ministry of Media. The Nauru package echoes past deals that secured shifts in diplomatic recognition, combining high-visibility public infrastructure projects with a high volume of smaller grants and training programs.

In Vanuatu, Chinese aid has expanded in parallel with negotiations over the Nakamal Agreement with Australia and the Namele Agreement with China. Major recent commitments include a $57 million earthquake recovery grant signed in 2025, focused on repairing several Chinese-built government and public buildings in Port Vila damaged during the 2024 earthquake. China has also extended two long-running infrastructure initiatives through the $27 million extension of the Pentecost Road and Melsisi Wharf Project and the $16 million Port Vila Central Business District road upgrade. These large grants sit alongside a sustained pipeline of smaller commitments, most visibly an expanding series of donations to the Vanuatu Police Force, including patrol boats, motorcycles, drones, riot equipment, and training programs, as well as ongoing medical equipment donations and scholarship and training programs. The Vanuatu data suggests China’s aid flows remain highly reactive to diplomatic negotiations.

A final dynamic shaping China’s Pacific engagement is the legacy of its previous large-scale loans to the region, evident in substantial debt repayment pressures in several countries (Figure 10). The standard terms of Chinese loans, typically involving a 3–5-year grace period followed by a 15–20-year repayment deadline, mean that many loans issued during the mid-2010s lending boom are now hitting acute repayment phases. Tonga’s situation is especially difficult. Beijing previously granted Tonga repeated deferrals on its loan repayments but declined to extend the underlying maturity, compressing what was already a substantial repayment schedule into a shorter window (Figure 10). Samoa and Vanuatu also face repayment obligations to China equivalent to more than 1% of GDP, with Vanuatu’s payments set to rise and remain elevated through to 2032.