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US, China and Japan cut foreign aid to Southeast Asia, report finds

Development finance flows to the region hit decade low as traditional donors retreat

By LineZotpaper
Published
Read Time2 min
Official development finance to Southeast Asia fell by nearly 10 percent to $US26 billion in 2024, the lowest level in a decade, according to new research from the Lowy Institute. The latest Southeast Asia Aid Map shows that Japan, China and the United States all reduced funding, with deeper cuts from Washington expected to hit future flows.

The Lowy Institute's Southeast Asia Aid Map, released on Saturday, reveals that official development finance to the region dropped to $US26 billion ($37 billion) in 2024, down almost 10 percent from the previous year. Japan cut its funding by $US1.5 billion, partly because COVID-era lending had been fully disbursed and large infrastructure projects were winding down.

China's official development finance fell by nearly a quarter to $US5.3 billion. Rahul Nath, one of the map's lead authors, told the ABC that Beijing had learned from its "exuberance" in the last decade, when it lent heavily for infrastructure. "They've had a lot of losses from debt relief which likely makes them a bit more cautious," he said, adding that slower domestic growth was also a factor.

The United States, which had already reduced aid under the Biden administration, made deeper cuts in 2025 under President Donald Trump. Dr Nath said the full impact was not yet visible in the data but a significant proportion of projected spending cuts was driven by the US. He noted an OECD projection of a 23 percent decline in aid from developed countries.

With bilateral donors retreating, multilateral institutions such as the World Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank are stepping in. They provided almost half of all development finance to the region in 2024. Dr Nath said these organisations "don't move with political cycles" and could act as a provider of last resort.

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Analysis

Why This Matters

  • The funding gap threatens infrastructure projects and development programs across Southeast Asia, a region of strategic importance for trade, security and supply chains.
  • The retreat of major donors may create a vacuum that other actors, such as multilateral banks or smaller donors, will struggle to fill completely.
  • The trend signals a broader shift in global development finance, with major powers reassessing their foreign aid priorities amid domestic economic pressures and geopolitical recalibration.

Background

Foreign aid to Southeast Asia has long been a tool of influence for the United States, China and Japan. China's Belt and Road Initiative drove a surge in infrastructure lending in the 2010s, but some projects faced domestic backlash over labour practices and environmental damage. Japan and the US have competed with their own financing initiatives. The latest data suggest all three are now scaling back, with China becoming more selective and the US slashing budgets after the Trump administration took office in 2025.

Key Perspectives

Southeast Asian governments: They face reduced access to concessional finance and may need to turn to more expensive commercial borrowing or accept tighter terms from multilateral institutions. Some are becoming more careful about taking large Chinese loans after past projects drew criticism. China: Beijing is shifting from mega-projects to smaller grants and loans, possibly to reduce risk exposure and improve the reputation of its aid programme. Slower domestic growth and losses from debt relief are making it more cautious. United States: The Trump administration's aid cuts, while not fully reflected in the 2024 data, are projected to deepen the decline. Critics argue this reduces US soft power and opens the door for other actors, while supporters say it refocuses spending on domestic priorities. Multilateral institutions: The World Bank, Asian Development Bank and Asian Infrastructure Investment Bank are becoming the backbone of development finance in the region, offering a more stable but often slower alternative to bilateral donors.

What to Watch

  • Future editions of the Southeast Asia Aid Map for the full effects of US cuts from 2025 onwards.
  • China's loan terms and project selection as it becomes more selective, and whether it steps back into the region if geopolitical competition intensifies.
  • The response from Southeast Asian governments, including possible efforts to mobilise domestic resources or seek alternative partners such as South Korea, India or the European Union.

Sources

Zotpaper

Written by software from the reporting listed above, scored by an automated standards desk, and published without a person reading it first. If something here is wrong, tell the editor and it will be put right.

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