By Eric Vandenbroeck and co-workers

Foreign Aid with Chinese Characteristics

Earlier this year, after U.S. President Donald Trump effectively shut down the U.S. Agency for International Development, the world’s largest bilateral aid program, many observers raised fears that China would step in to fill the geopolitical vacuum. USAID, after all, had served as a key tool of U.S. diplomacy for more than six decades, and the American retreat has created an opportunity for China to expand its economic statecraft and win influence in many parts of the world.

Over the last two decades, China has vastly expanded the amount and types of foreign aid it administers. Between 2000 and 2023, only 17 countries in the world did not receive a loan or grant from the Chinese government or a Chinese state-owned institution. The Belt and Road Initiative, which was launched by Chinese President Xi Jinping in 2013, has accounted for more than $1 trillion in total spending. This increasingly global footprint has piqued Western policymakers’ concerns about Beijing’s ambitions, but many observers still don’t fully comprehend Beijing’s strategy.

On the surface, China’s development program appears to be a largely indiscriminate apparatus. But a close review of how China deploys its vast financial resources reveals that its support is strategically targeted to countries that are leading regional organizations. When countries chair groups such as the Association of Southeast Asian Nations (ASEAN) or the African Union (AU), for instance, their governments receive a sharp uptick in aid from Chinese government agencies. This pattern doesn’t hold for global platforms such as the UN Security Council. In other words, China is not attempting to dominate every forum. It is choosing its venues carefully, selecting those that matter most for its long-term strategic goals.

Policymakers seeking to reform their own foreign aid programs or forge an effective response to China’s efforts need to better understand this strategy—and with it, how to cultivate influence in a multipolar world.

 

All Hail the Chair

Although China has provided foreign aid since the 1950s, its global development program accelerated significantly after the 2008 financial crisis. Between 2000 and 2021, China extended about $68 billion per year in overseas development financing. The U.S. average over this period, by contrast, was about $39 billion per year.

Although China’s development program is global in scope, my research has shown that Beijing gives more aid to countries when they have leadership roles within regional organizations. For example, by looking at Chinese economic assistance to countries in Southeast Asia and Africa from 2000 to 2017, I found that when a country chaired ASEAN or the AU, it received seven times as much financing from Chinese government agencies as it did during the years when it did not chair the organization. This surge translates to an average of $90 million in additional funding. In contrast, when a country took on a rotating role on the UN Security Council, which typically increases aid from Western countries, China’s aid remained stagnant. This suggests Beijing is pursuing a deliberate, regionally focused strategy.

To many observers in Washington, regional organizations may seem marginal compared with global heavyweights such as the UN. But Beijing sees these institutions as critical platforms for diplomacy and economic coordination, especially in the so-called global South. China has long positioned itself as the leader of the global South, and it often criticizes the inequities of the Western-led order. As one senior Chinese diplomat described it in 2016, the U.S.-dominated system was like “a suit that no longer fits.” By investing in regional blocs such as ASEAN and the AU, Beijing is further cultivating this identity and presenting itself as the leader of a new order.

Securing influence in regional forums also helps China deflect criticism and advance its preferred norms, which often contravene Western priorities. By rewarding the chair—which plays a central role in setting the organization’s agenda—Beijing can steer regional conversations away from contentious issues and toward topics that favor its geopolitical objectives. With ASEAN, for example, the chair shapes how the organization responds to regional flash points such as disputes in the South China Sea. When Cambodia chaired ASEAN in 2012, it blocked the passage of a joint statement from an ASEAN summit because a section criticized Chinese aggression in the South China Sea. This was the first time in the organization’s history that ASEAN failed to issue a summit communiqué. Two months later, Chinese Prime Minister Wen Jiabao pledged $500 million in new loans and grants to Phnom Penh. In announcing the agreements, Cambodia’s finance minister even acknowledged that Beijing “voiced high appreciation” for Cambodia’s role as ASEAN chair in maintaining “good cooperation between China and ASEAN.”

More recently, at the 2024 AU summit in Addis Ababa, member states agreed to an Africa-wide ban on the controversial trade of donkey hides. Donkey hides are used in traditional Chinese medicine, and demand from China had resulted in a spike in trade, which disproportionately affected women in rural African farming communities who rely on the donkeys for transport. Notably, however, the AU—which was being chaired by Mauritania—avoided blaming China for the issue and framed the ban strictly as one of protecting African resources. Later that year, during the 2024 Forum on China-Africa Cooperation summit, Xi elevated China’s relationship with Mauritania to a strategic partnership and commended President Mohamed Ould Ghazouani for his leadership as the AU’s rotating chair. On the sidelines of the summit, China also expanded economic support to Mauritania, including a $281 million currency-swap agreement.

 

All Hail the Chair

Although China has provided foreign aid since the 1950s, its global development program accelerated significantly after the 2008 financial crisis. Between 2000 and 2021, China extended about $68 billion per year in overseas development financing. The U.S. average over this period, by contrast, was about $39 billion per year.

Although China’s development program is global in scope, my research has shown that Beijing gives more aid to countries when they have leadership roles within regional organizations. For example, by looking at Chinese economic assistance to countries in Southeast Asia and Africa from 2000 to 2017, I found that when a country chaired ASEAN or the AU, it received seven times as much financing from Chinese government agencies as it did during the years when it did not chair the organization. This surge translates to an average of $90 million in additional funding. In contrast, when a country took on a rotating role on the UN Security Council, which typically increases aid from Western countries, China’s aid remained stagnant. This suggests Beijing is pursuing a deliberate, regionally focused strategy.

To many observers in Washington, regional organizations may seem marginal compared with global heavyweights such as the UN. But Beijing sees these institutions as critical platforms for diplomacy and economic coordination, especially in the so-called global South. China has long positioned itself as the leader of the global South, and it often criticizes the inequities of the Western-led order. As one senior Chinese diplomat described it in 2016, the U.S.-dominated system was like “a suit that no longer fits.” By investing in regional blocs such as ASEAN and the AU, Beijing is further cultivating this identity and presenting itself as the leader of a new order.

Securing influence in regional forums also helps China deflect criticism and advance its preferred norms, which often contravene Western priorities. By rewarding the chair—which plays a central role in setting the organization’s agenda—Beijing can steer regional conversations away from contentious issues and toward topics that favor its geopolitical objectives. With ASEAN, for example, the chair shapes how the organization responds to regional flash points such as disputes in the South China Sea. When Cambodia chaired ASEAN in 2012, it blocked passage of a joint statement from an ASEAN summit because a section criticized Chinese aggression in the South China Sea. This was the first time in the organization’s history that ASEAN failed to issue a summit communiqué. Two months later, Chinese Prime Minister Wen Jiabao pledged $500 million in new loans and grants to Phnom Penh. In announcing the agreements, Cambodia’s finance minister even acknowledged that Beijing “voiced high appreciation” for Cambodia’s role as ASEAN chair in maintaining “good cooperation between China and ASEAN.”

More recently, at the 2024 AU summit in Addis Ababa, member states agreed to an Africa-wide ban on the controversial trade of donkey hides. Donkey hides are used in traditional Chinese medicine, and demand from China has resulted in a spike in trade, which disproportionately affected women in rural African farming communities who rely on the donkeys for transport. Notably, however, the AU—which was being chaired by Mauritania—avoided blaming China for the issue and framed the ban strictly as one of protecting African resources. Later that year, during the 2024 Forum on China-Africa Cooperation summit, Xi elevated China’s relationship with Mauritania to a strategic partnership and commended President Mohamed Ould Ghazouani for his leadership as the AU’s rotating chair. On the sidelines of the summit, China also expanded economic support to Mauritania, including a $281 million currency-swap agreement.

 

Peeling Back the Onion

The spike in China’s support to regional chairs, however, is limited to government-to-government aid—suggesting that not all Chinese money is equally political. This may come as a surprise to some observers. Many Western countries primarily deliver aid through government agencies such as USAID, but in China’s case, assistance from government agencies makes up only about ten percent of its total foreign aid portfolio. China’s closest analog to USAID, the China International Development Cooperation Agency, together with other ministries involved in aid delivery, most notably the Ministry of Commerce, had a combined annual budget of roughly $3 billion in 2023, a fraction of USAID’s $42 billion budget that same year. The bulk of Chinese financing comes instead from state-owned policy banks and commercial banks that must balance strategic mandates with the imperative to recover loans. Because these banks are state-owned, many observers have assumed that all Chinese financing reflects government strategy.

But loans from Chinese policy banks and commercial banks did not follow the same pattern as Chinese government agency assistance, nor did Chinese funds that were directed to foreign non-government recipients. This finding suggests that attention to the specific entities that are granting and receiving such support is important. Chinese government agencies are most likely to deploy aid in ways designed to deliver geopolitical returns, such as regional support. These political transactions occur between government actors because government agencies offer leaders greater discretionary control, making it easier to use these funds to secure diplomatic support or political concessions. China’s policy and commercial banks, in contrast, behave much like their Western counterparts, making lending decisions based on creditworthiness and financial viability. The bottom line is that the most politically consequential forms of Chinese assistance come from its government agencies—which account for only a small share of China’s overall portfolio—suggesting that not all Chinese financing functions as a tool of Beijing’s economic statecraft.

 

Late to the Party

The United States and other liberal democracies seeking to compete with China on the global stage should take several lessons from these findings. They must first recognize that the geopolitical battleground is shifting. While many Western countries have continued to focus on defending liberal norms in global institutions, China has been quietly gaining traction in regional bodies. Regional organizations play a meaningful role in international affairs: they help design and monitor national plans for sustainable development and are increasingly central to managing crises and preventing conflict. These bodies often provide early signs of dissent and help set the norms that guide international responses. The UN has deepened its engagement and partnerships with such forums recently, recognizing their importance to both development and peace. And many Western officials are rethinking how to rebuild trust with such organizations after being confronted by the global South’s fragmented response to Russia’s invasion of Ukraine.

In other words, leaders can no longer afford to treat regional organizations as peripheral forums. In a multipolar world, ASEAN, the AU, and other such bodies are emerging as critical nodes for diplomatic and economic coordination. The regions they represent account for a growing share of the world’s population and are often flash points on issues of trade and security. The decisions of regional organizations are increasingly consequential to policymakers. Engaging with these institutions on their own terms and investing in their capacity and credibility is essential to ensuring they remain open, inclusive, and rules-based.

A more nuanced understanding of China’s aid programs is also in order. Not all Chinese financing is problematic or indicative of Beijing’s involvement, and not all aid is a political ploy. Distinguishing between types of funders and recipients can indicate where Beijing is more likely to be seeking influence and where it is not, helping policymakers understand where to counter China’s efforts and where development cooperation remains possible.

The post–Cold War era of unchallenged American primacy is over, and a new period of global competition has taken its place. As the United States withdraws its foreign aid, understanding the subtleties of China’s economic statecraft is more important than ever. Policymakers must analyze where and how Chinese money flows. Doing so will allow the United States and its allies to gain valuable insights into Beijing’s strategic focus—and perhaps even begin building a more targeted and effective response.

 

 

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