Sunday, July 20, 2025

China Gains Opportunity to Expand Influence in Asia as Western Aid Decline

A recent study by Australia’s Lowy Institute, released on Sunday, suggests that China is poised to expand its influence in Southeast Asia’s development as aid from U.S. President Donald Trump and other Western donors decreases. The Sydney-based think tank highlighted that the region is currently at an “uncertain moment,” with formal development funding from Western nations declining and the U.S. imposing “particularly punitive” trade tariffs. According to a report cited by AFP from Sydney, the reduction in Western aid is likely to bolster China’s influence, although other Asian donors are also becoming significant players. In 2023, total formal development funding in Southeast Asia, including grants, concessional loans, and other financing, slightly increased to $29 billion. However, President Trump subsequently slashed nearly all U.S. foreign aid programs, amounting to $60 billion. The report further notes that seven European countries, including France and Germany, along with the European Union, have announced plans to cut aid by a combined $17.2 billion between 2025 and 2029. The United Kingdom has also declared a reduction of $7.6 billion in annual aid to redirect funds toward defense spending. Based on these measures, researchers predict that formal development funding in Southeast Asia could drop by more than $2 billion by 2026. The study warns that these cuts will be particularly challenging for the region, with poorer countries reliant on sectors like health, education, and civil society facing the greatest impact. While Southeast Asia has made economic progress, approximately 86 million people in the region still live on less than $3.65 a day. The report indicates that development funding is increasingly shifting eastward, particularly toward Beijing, with Tokyo and Seoul also playing significant roles. As trade relations with the U.S. weaken, Southeast Asia’s access to alternative development funding is shrinking, and the region lacks the capacity to negotiate favorable deals with Beijing. The report emphasizes that “China’s importance as a development partner will grow as Western nations retreat.” In 2023, China increased its development aid to the region by $1.6 billion, reaching a total of $4.9 billion, primarily for infrastructure projects such as railway construction in Indonesia and Malaysia. Additionally, China’s infrastructure commitments quadrupled to nearly $10 billion, with a significant portion allocated to restarting Myanmar’s Kyaukphyu deep-sea port project. In contrast, Western-backed alternative infrastructure initiatives have seen little progress. The report also highlights that promises to transition Southeast Asia to clean energy have not materialized into concrete projects, raising global concerns as the coal-dependent region remains a rapidly growing source of carbon emissions.


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