After USAID exit, China hasn't moved to fill Asia’s funding gap

In the wake of the Trump administration’s sweeping foreign aid cuts, commentators were quick to predict that China would use the moment to exert and expand its soft power, especially in its Asian backyard. But nearly a year after the dismantling of the U.S. Agency for International Development, that prediction has not materialized.

“Overall, we don’t see, at this stage, a systemic replacement of the USAID program by the Chinese one,” said Alexandre Dayant, deputy director of the Lowy Institute's Indo-Pacific Development Centre. “And we can't see a really big trend of China shifting the sectors in which it does its development financing.”

China’s development financing has historically been channeled into infrastructure projects in countries such as Thailand, Laos, Malaysia, and Indonesia, with a smaller portion directed toward health and other “small and beautiful” livelihood projects. By contrast, USAID supported a wider array of work in the region in education, health, human rights, and gender equality. In 2024, it provided roughly $9 billion to South, Central, and East Asia and Oceania. Its abrupt withdrawal — alongside reductions from other donors — means Southeast Asia is projected to lose more than $2 billion in development financing in the coming years.

Of the 10 experts Devex interviewed, no one could identify a project in Asia where China has directly replaced USAID funding. The deadly earthquake in Myanmar in March 2025 was one notable exception to China’s otherwise cautious posture; Beijing deployed the largest number of rescue teams and provided $137 million in support — a role the U.S. traditionally would have played. Chinese officials also told Nepalese counterparts they would be willing to support “humanitarian aid, health, and education” in the United States’ absence. Still, these gestures fall far short of the anticipated surge in development aid.

Development practitioners and researchers have varied responses to China’s lack of enthusiasm to wrest more influence from the U.S. in the region by way of aid.

“I'm particularly surprised … that China isn't using this as a win the way I expected,” said Melissa Conley Tyler, executive director of the Asia-Pacific Development, Diplomacy and Defence Dialogue.

Others, like Shahar Hameiri, professor at the University of Queensland’s School of Political Science and International Studies, are less surprised: “There’s no doubt that the withdrawal of U.S. aid has allowed China to win some points in the narrative battle as a more reliable aid partner, but this doesn’t mean China is replacing the U.S. per se,” he said in an email.

China’s foreign aid budget — $3.5 billion in 2024 — remains only a fraction of USAID’s former $65 billion portfolio, Hameiri noted. And as China grapples with a slowing economy, the country isn’t best placed to increase that figure. “The overall volume of Chinese development financing, which was largely made up of commercial-rate sovereign loans, has collapsed since 2019, and China has shifted to smaller aid projects that look more like the ones traditional donors, like the U.S., have carried out, but China’s aid spending is not going up significantly,” Hameiri shared.

Aid data shows that China’s development finance in Southeast Asia peaked in 2016 and 2017, mostly through the Belt and Road Initiative, but has since declined. “It looks like there's more appetite to spend money domestically rather than internationally,” Dayant said.

Even if China wanted to increase development finance, it would be “a hard sell” to its own citizens, said Felix Brender, project associate at LSE Ideas, given persistent domestic poverty. China is also unlikely to take over projects it did not design itself, he said.

Conley Tyler posited that China may be investing in small projects but doing so quietly. “It could be that there's an embassy slush fund, which can give small grants with pretty much no accountability,” she said.

Several NGOs contacted by Devex did not respond to requests for comment on their relationship with China. Brender, however, believes that it is unlikely that Beijing is quietly funding former USAID projects as the country would want its “flag or stamp on it.” “I'm not saying it's impossible, but I don't find that particularly probable,” he said.

China’s opaque governance makes it hard to truly know what it’s funding in real time, said Hameiri. “It’ll take a little while to get a more precise picture.”

The soft power question

Many analysts expected China to fill the void left by the U.S. because aid is often framed as a soft power tool — something Washington explicitly leveraged. But Beijing employs other techniques, said Brender, such as funding overseas media outlets. “It makes much more sense for China to actually invest in this than to have to invest in something that wasn't designed by them,” he said. “It also benefits much more from using the case of U.S. unreliability… It's much easier, in terms of impact, for China [to let] the remnants of USAID sit there as a memorial.”

Most recently, Siena Cicarelli, program director of the Nexus25 project, a transatlantic initiative focused on sustainable multilateralism at the Council on Strategic Risks, believes China has capitalized on America’s absence at the 30th United Nations Climate Change Conference, or COP30. “If the U.S. doesn't show up to COP, and all of a sudden you can be the star pavilion with your massive banners highlighting clean energy investments and solar power companies, the U.S. stepping back has just given you room to maneuver in a way that didn't necessarily exist in the past,” she said.

Still, comparing the two countries isn't very helpful, said Dr. Ruby Wang, physician and managing director of LINTRIS Health, a consultancy bridging health and life sciences across East and West. Western aid is donor-led and milestone-driven, while China is “more aligned bilaterally with political, societal, [and] financial incentives,” she said. Oftentimes, it’s faster and easier to work with China, be it China International Development Cooperation Agency or the private sector, than the likes of the U.N. “It's two completely different mechanisms, so I do think the ‘filling the void’ argument doesn't really work,” she said.

For NGOs that thought Chinese funding might offer a lifeline after USAID’s exit, those hopes have faded. In the absence of funding from either superpower, several formerly U.S.-funded projects — such as the Andaman Friendship Association in Thailand, which supported the rights of Burmese migrants, a civil society strengthening project in Timor-Leste, and support for people living with disabilities in Vietnam — are folding, exacerbating the development divide in the region, Dayant said.

“Larger economies, such as Indonesia, Thailand, [and] Vietnam, continue to receive non-concessional financing for large infrastructure projects from China, but … the smaller economies are the ones that rely the most on aid and development for social, human development sectors, and this funding is reducing,” Dayant said.

China now directs more than 75% of its overseas lending to upper-middle-income and high-income countries. This means that as certain economies in the region advance, backed by China’s support, the likes of Laos, Myanmar, Timor-Leste, and Cambodia, abandoned by the U.S., said Dayant, “will really feel the burn.”