Aid & development, explained.
The Marcos government is now carefully accepting Chinese funding when it fits the country’s needs, while pushing back hard on strategic and security issues (ethan/Unsplash)
Pragmatism, not ideology, is driving development finance decisions.
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The Philippines walks a tightrope with Chinese aidThe Philippines walks a tightrope with Chinese aid
At last week’s Raisina Dialogue in New Delhi, the Philippines’ Armed Forces Chief didn’t mince words, calling on India and South Korea to join an Indo-Pacific “Squad” to push back against China’s aggressive tactics in the South China Sea.
But while Manila hardens its security posture, it’s also receiving more development money from Beijing than ever before. So, what gives?
For most of the past decade, the Philippines has been one of Southeast Asia’s most cautious players when it comes to Chinese development finance, even as its infrastructure, education, and healthcare sectors cry out for investment.
From 2015 to 2022, China accounted for just 1% of total official development finance (ODF) to the country, the lowest share among Southeast Asian nations. Unlike neighbours such as Laos or Cambodia, Manila has long preferred traditional partners including Japan, the Asian Development Bank, and the World Bank. But as president, Rodrigo Duterte sought to flip the script. Elected in 2016, Duterte cast aside decades of wariness and steered the Philippines closer to China, hoping to trade diplomacy for development. In just six years, he signed more than US$28 billion in aid commitments with Beijing, more than triple Japan’s total over the same period. At the height of this pivot, Chinese development finance made up 40% of all new aid commitments to the country.
It could have marked a turning point. Yet, in practice, the grand promises of China-backed megaprojects faltered, mostly because Filipino society and institutions pushed back. Concerns over environmental impacts, governance standards, and sovereignty fuelled resistance to Chinese projects. And with the South China Sea dispute simmering in the background, public trust in Beijing remained low. Despite the flashy numbers, only 1.5% of China’s promised funds were ever delivered – the lowest in ASEAN – largely due to prolonged negotiations and concerns over several megaprojects.
Chinese disbursements have gradually increased under Marcos compared to his predecessor – albeit from a low base.
This gap between promise and delivery highlights something crucial: development finance isn’t just about the supply of the money, it’s about trust, capacity, and choice – which together form demand. In our latest Lowy Institute Analysis, Hedging bets: Southeast Asia’s approach to China’s aid, we identify three distinct Southeast Asian modes of engagement with Chinese development finance: constrained, restrained, and opportunistic.
The Philippines straddles the line between restrained and carefully opportunistic, actively diversifying its development partners to avoid overreliance on China, especially amid ongoing territorial disputes, but also remaining cautiously open to Chinese funding when it aligns with interests.
Under President Ferdinand Marcos Jr, the pendulum initially swung further away from Beijing. In 2022, his administration cancelled three major railway projects backed by China, citing implementation delays and rising tensions in the South China Sea, signalling a return towards a more defensive and restrained stance that echoed his strong public criticism of Beijing over the maritime disputes.
But that’s not the full story. Preliminary data from the upcoming 2025 Lowy Institute Southeast Asia Aid Map shows Chinese disbursements have gradually increased under Marcos compared to his predecessor – albeit from a low base – driven by new China Eximbank infrastructure loans supporting Marcos’ “Build Better More” agenda, totalling around US$200 million so far, with more potentially on the horizon.
This suggests the Marcos government is now cautiously steering towards a more selective, opportunistic approach: carefully accepting Chinese funding when it fits the country’s needs, while pushing back hard on strategic and security issues.
It’s a tightrope walk. As China becomes more assertive in the region and the West cuts back on global aid spending, the Philippines finds itself with fewer alternatives. Manila wants to assert its sovereignty, but it also needs roads, bridges, and power plants. Pragmatism, not ideology, is driving development finance decisions.
The Philippines’ future will hinge on its ability to continue walking this fine line: benefiting from China’s development support without being boxed in by Beijing’s strategic agenda. That’s no easy task. But in a region increasingly defined by economic opportunity and geopolitical tension, it may be the only option left.
Read the Lowy Institute Analysis “Hedging bets: Southeast Asia’s approach to China’s aid”.
About the authors
Alexandre Dayant
Alexandre Dayant is a senior economist and former Deputy Director of the Indo-Pacific Development Centre, a dedicated policy research centre within the Lowy Institute.
Grace Stanhope
Grace Stanhope is a former Research Fellow in the Indo-Pacific Development Centre at the Lowy Institute, working on the Southeast Asia Aid Map. Her work focused on tracking and analysing foreign aid and development finance flows to Southeast Asia.
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