China is Southeast Asia’s leading development financier, but is facing rising competition for regional sway, according to Lowy Institute research.
The region received about $28 billion a year in official development finance between 2015 and 2021, with around $5.5 billion coming annually from China, the world’s second-biggest economy, according to the Southeast Asia Aid Map released by the Australian think tank on Sunday. Still, Beijing’s financial assistance has been shrinking in recent years as key regional players like Japan and South Korea step up funding.
China has focused its disbursements on neighbors Laos and Cambodia, as well as in Southeast Asia’s largest economy, Indonesia, the Lowy Institute said. Beijing has also concentrated on infrastructure projects and is the top financier for that sector. On average, it provided about $4 billion of the $11 billion in infrastructure funding given to the region each year.
“Intensifying geostrategic tensions between China and Western governments have also seen a growing focus on using development finance, particularly in infrastructure, as a means of competing for influence,” Lowy Institute lead economist Roland Rajah said.
The report comes as global defense chiefs met in Singapore this weekend at the Shangri-La Dialogue, Asia’s largest security conference, to discuss threats such as US-China tensions.
Implementation issues have reduced the scale of China’s aid more recently, with several traditional development partners — members of the OECD Development Assistance Committee and the multilateral institutions primarily financed by them — overtaking the nation as Southeast Asia’s top financiers in 2020 and 2021, according to the data from Lowy.
Collectively, traditional development partners dominate development aid in the region, contributing 80% of total funding. Multilateral development banks are the biggest donors among the group, followed by Japan, Europe and South Korea.
The Southeast Asia Aid Map covers all 11 nations in the region. It includes data on more than 100,000 projects carried out by 97 development partners and worth about $200 billion in development finance.