China is cutting aid rather than stepping into the gap

China remains the largest individual bilateral donor to Southeast Asia despite year-on-year contraction. There is little sign Beijing is seeking to fill funding gaps left by traditional bilateral partners

China is not filling the gap left by aid budget cuts from traditional bilateral development partners in Southeast Asia. China’s share of bilateral ODF to the region averaged about 20% between 2015 and 2024 but fell to around 14.5% from 2022, where we expect it to hold in 2025. China has announced no recent cuts, yet its funding has fallen faster since 2015 than that of any other partner except South Korea.

Total Chinese ODF in 2024 fell to $3.67 billion, down 22.7% on the 2023 total of $4.74 billion. The bulk of the decline reflects the $512 million capitalisation of the China–ASEAN Investment Cooperation Fund II (CAF II) in 2023. Correcting for regional initiatives, which have historically been lumpy investments, China’s bilateral ODF fell by 13.3%, similar to the fall in bilateral ODF by traditional development partners.

The largest decline in China’s ODF spending was in Indonesia, where its funding fell by $820.9 million to $567.5 million in 2024, representing a new low for Chinese ODF in Indonesia. Additional lending to meet the cost overrun of the Jakarta–Bandung High Speed Rail project accounts for $448 million of China’s 2024 ODF spending in Indonesia. Spending in Thailand also fell sharply, dropping by $90.3 million to just $175,000 upon completion of the Northeast Thailand Oil Pipeline.

China does not spend in the same sectors as traditional bilateral development partners, preferring infrastructure over social sector spending. Its cuts, therefore, risk leaving significant financing gaps across the board, and particularly in critical social sectors.

The 2024 data point to a longer-term convergence between China’s commitments and its actual spending, although new commitments have become more volatile. On the supply side, that convergence may signal a shift away from an aggressive lending portfolio towards a more mature phase. The continuing volatility suggests China is willing to wait for the right projects, becoming a more selective financier, and may also reflect a less programmatic approach to its financing. On the demand side, it may point to increased scrutiny of Chinese-funded projects by Southeast Asian countries weighing domestic consequences against foreign policy considerations.¹

China’s ODF remains heavily weighted towards non-concessional lending: in 2024, China provided 74% ($2.7 billion) of its ODF on non-concessional terms. This matters amid growing concerns over fiscal pressures and, in some cases, debt sustainability — particularly as Southeast Asian countries contend with the broader fiscal and economic repercussions of the crisis in the Middle East. As traditional bilateral aid contracts and concessional finance grow scarcer, regional governments will have less leverage to negotiate competitive terms.