From China to the Gulf: The donors reshaping global development

The global landscape of donors and lenders is undergoing a profound shift. With the United States pulling back and Europe prioritizing defense spending over official development assistance, or ODA, attention is increasingly turning to nontraditional lenders such as China and the Gulf States. The key questions now: Will these players step up to fill the gaps left behind by the dismantling of the U.S. Agency for International Development and aid cuts across other historically generous donors? And whether they do or not, what does their growing role mean for least developed countries? As aid from traditional partners declines, monetary flows from other sources are rising. But across the board, these emerging donors are behaving with caution, seeking to spend judiciously and maximize returns on their development outlays. From China to the Gulf, there is a clear turn toward blended finance and more commercially oriented approaches. The rise of these donors also carries distinct implications for development goals. China’s pragmatic infrastructure emphasis, or the Gulf’s use of financing to advance geopolitical interests, illustrates how strategic priorities shape aid flows. A subtler but important distinction is how they approach localization. Unlike traditional donors, for whom working with local civil society has become a central priority, emerging partners tend to channel resources through governments and emphasize nationally led agendas. As George Mason University’s Agnieszka Paczyńska noted, their idea of localization is more about strengthening state capacity than partnering directly with local NGOs. In her study on emerging donors, Paczyńska found that the term “localization” does not appear in key documents and that aid is framed instead as “south to south” cooperation. What does this all mean in practice? Below is a closer look at what these donors are doing, how they are perceived, and the direction they may be headed. China China is hardly a new player in development assistance and finance. Still, its role continues to evolve in ways that shape the broader financing picture for low- and middle-income countries. Although Beijing has sometimes been cast by some scholars and U.S. officials as a predatory lender, the reality is more complicated. Start with aid. China hasn’t published comprehensive aid data since 2018, but a 2024 Ministry of Commerce report put total foreign aid spending across its two main institutions at $2.85 billion, covering grants, zero-interest loans, and concessional loans. That figure is down from around $7 billion it was spending annually between 2013 and 2018, reflecting the pandemic-era slowdown and budget reprioritizations. The much bigger story is development finance. China issued $6.1 billion in new sovereign and publicly guaranteed loans across 20 projects in 2024, according to China’s Overseas Development Finance Database managed by Boston University. That database captures only policy bank lending — primarily from Export–Import Bank of China and China Development Bank — and shows a shift since 2020 toward smaller loans and more financing routed through intermediaries such as national and regional development banks. China’s spending becomes staggering when commercial finance and Belt and Road Initiative engagement are included. Preliminary data for 2024 shows roughly $121.8 billion in overseas BRI deals across 149 countries — $70.7 billion in construction contracts and $51 billion in investments. For reference, USAID obligated $30.3 billion in 2024, while the U.S. International Development Finance Corporation spent $12.1 billion on new projects last year. So, what does this all mean for borrowers? On the plus side, China has been a reliable partner when it comes to funding big infrastructure projects necessary to spur long-term growth: In 2018, China was financing 1 in 5 African infrastructure projects and 1 in 3 constructing projects, according to Deloitte. “China is an extremely critical and valuable player in the ecosystem, the international ecosystem that Africa plays in, not only because they offer competition to the U.S., but because a lot of African countries genuinely believe that watching the Chinese trajectory on the international stage is an inspiration,” Bright Simons, president of mPedigree said at a recent Devex Pro Briefing. “And therefore, having some player like that in the mix is extremely important from a psychological point of view, you know. And I think the psychological aspects are often underplayed.” On the downside, critics argue that too much of the value from these projects stays with China — whether through Chinese firms winning most of the contracts or Chinese workers being brought in to carry out much of the labor — leaving limited opportunities for local skill transfer and curtailing the broader development impact. And there remains a pervasive narrative that China traps loan recipients by lending unsustainably large sums under opaque terms, although many experts argue that this concern is overblown. “There's a lot of hyperbole around Chinese predatory lending. When you break it down, borrowing from China is just one component of this boom in borrowing that African sovereigns have engaged in, a lot of which has come from commercial banks, from international bond markets,” said Yunnan Chen, research fellow in ODI Global’s development and public finance program. That broader surge, she noted, took place in the 2000s and early 2010s, when interest rates were historically low and commodity revenues gave governments space to borrow. “I don't think that the terms of the loans themselves are predatory,” said Fergus Kell, research fellow with the Africa program at Chatham House — though he noted there have been instances in which loans portrayed by the Chinese lenders as being concessional were in fact more like commercial ones based on their terms. In recent years, the nature of Chinese lending has started to change from purely state-backed to more commercial lending and blended finance models. “Around 2017, qualitatively, the nature of lending starts to shift,” Chen explained. “Commercial banks start to play a bigger role in the overseas lending portfolio.” Whereas before, lending was dominated by the China Export-Import Bank, Chen explained, there are now more active players financing projects on the continent, such as Industrial and Commercial Bank of China, Bank of China, and China Construction Bank. Going forward, she expects “a lot less of that kind of old BRI-style, state-driven lending towards something a little bit more commercially oriented and more use, perhaps more blended finance structures. I think we're going to see more of these kinds of risk-sharing approaches become commonplace.” But one risk, Chen cautioned, is that infrastructure that is necessary and positive for a country isn’t necessarily commercially viable, which means some good projects may be left behind. And while China will remain a major player, “we're not going to see China return to the sort of peak BRI era of financing for development. … China’s not going to substitute for” the pullback in Western aid. The Gulf Newer on the block are the donor countries of the Persian Gulf. The United Arab Emirates provided $1.7 billion in ODA in 2024, Kuwait provided $1 billion, and Qatar provided $656.3 million. Saudi Arabia’s ODA totaled $5.2 billion in 2023, the most recent year for which figures were available. Most of these countries' investment flows go to other countries in the region: for the UAE, for example, the biggest donor of the group, about two-thirds of its aid went to Asia, with Palestine and Syria the biggest recipients, while 20% flowed to Africa. Africa is increasingly central to the Gulf’s playbook. Gulf states have invested more than $100 billion there over the past decade, with UAE leading at $59.4 billion — making it the continent’s fourth-largest foreign investor after China, the European Union and the U.S. Geography drives much of this: The regions are tightly linked through trade, especially in agriculture, with Gulf states heavily reliant on African food and livestock imports. That dependence has fueled Emirati land acquisitions, making the UAE one of the largest foreign land buyers on the continent, with Sudan alone drawing $10.2 billion in Emirati agricultural investment. But Sudan has also become a flashpoint. The UAE — long one of Khartoum’s biggest donors — has been accused of backing the Rapid Support Forces with arms shipments funneled through Chad, where it is also a major aid provider and alleged to operate military bases. Abu Dhabi denied the allegations, but analysts said its interests in Sudan run deep, from securing gold and farmland to curbing Islamism, making the country both an investment hub and a battleground for its regional strategy. Alongside traditional aid and investment, Gulf states have also developed a distinct practice researchers call “bailout diplomacy” — rescuing countries from economic crisis while advancing their own strategic and commercial interests. Sometimes these bailouts overlap with humanitarian goals, but not always, said Hasan Alhasan, senior fellow for Middle East policy at International Institute for Strategic Studies. “Sometimes they converge, sometimes they diverge, sometimes they overlap and are pretty much the same thing. … It just really depends. But I think a clear difference is that with bailout aid, there is a clear correlation with geopolitical interests. With humanitarian aid, that's not necessarily the case.” Bailout packages, often in the form of central bank deposits, concessional loans, or in-kind fuel deliveries, flow directly into state coffers and can stabilize currencies or offset import bills almost overnight. Unlike the International Monetary Fund programs, they are leader-driven, opaque, and rarely tied to governance reforms. Where terms are disclosed, they tend to be concessional and rolled over for years. Egypt offers a clear example, according to Hasan: its $12 billion IMF loan in 2016 was enabled by complementary Gulf financing, and in return, Gulf sovereign wealth funds secured first rights to buy privatized Egyptian assets, acquiring stakes in ports, petrochemicals, finance, and retail. Increasingly, Gulf states are extending this model beyond their immediate neighborhood. Kenya turned to the UAE last year for a $1.5 billion loan at 8.25% interest to manage Eurobond and syndicated debt, while Ethiopia received $3 billion in aid and investments in 2018 and signed a currency swap with the UAE in 2024. With Chinese lending slowing and global markets costly, Gulf financing has become an appealing alternative for governments reluctant to accept IMF terms because of the economic reforms that they demand. But this approach may not last indefinitely. “There's a realization in the Gulf that oil is a finite resource, and that the proceeds of oil have to be dealt with and used judiciously. So there are now competing demands on those resources,” said Alhasan of IISS. Gulf leaders have already signaled a shift: Saudi Arabia’s finance minister said in 2023 that the country was moving away from no-strings aid and that there would be no more “free handouts.” Instead, Gulf states are experimenting with new models such as debt-for-equity swaps — canceling portions of debt, particularly with Egypt, in exchange for land concessions or stakes in state-owned enterprises — which we may see more of, according to Alhasan. BRIC by brick While China commands most attention in discussions of emerging development partners, other BRICS members are also recalibrating their roles. Both Brazil and India have historically concentrated foreign assistance in their own direct regions, but are extending their reach in Africa and beyond, albeit in different ways. For Brazil, foreign policy rhetoric increasingly emphasizes south-south cooperation, particularly with Africa. Brazil has opened or reactivated more than 15 African embassies since the start of President Luiz Inácio Lula da Silva’s first term in 2003, and since the start of his second term in January 2023, Lula has already visited six African countries. Brazil’s cooperation with the continent seems to be escalating in terms of its technical assistance and knowledge sharing, especially on issues related to agriculture: 44 African countries attended meetings in Brazil in May to strengthen ties and cooperation on food security and rural development. On the commercial front, activity has picked up, particularly between Nigeria and Brazil. In 2018, the two countries launched the $1.1 billion Green Imperative Project, or GIP, to boost agricultural productivity and spur private investment in Nigeria. Last year, the partnership expanded with GIP’s $4.3 billion second phase, alongside a $2.5 billion deal between Brazilian meat processor JBS and Nigeria. But the financial footprint remains modest. Lula has pledged around $1.8 billion in investment across defense, pharmaceuticals, construction, and agribusiness during his Africa visits, while trade between Brazil and Africa actually declined from $28 billion in 2013 to $21 billion in 2023. Since 2000, India has provided more than $48 billion in assistance to over 65 countries, mostly through grants and lines of credit. While much of this support still goes to South Asia, Africa has emerged as a key partner, receiving more than a third of India’s credit lines. Like Brazil, India leans heavily on technical cooperation and knowledge sharing, particularly in agriculture and health. Indian companies are also expanding into Africa’s health sector, with some analysts suggesting that credit lines could be used more strategically to strengthen health systems through public-private partnerships. The way forward The rise of emerging donors is reshaping the global development finance landscape, bringing both new opportunities and fresh risks. Their growing emphasis on commercially oriented models and state-led approaches may change the kinds of projects that get funded and the priorities that drive them. For Bright Simons, this shifting reality makes it urgent for African countries to adapt. Rather than relying on old patterns of engagement, governments should be proactive in building the kind of lobbying and policy infrastructure that has long shaped relations with Western donors. That means working with think tanks in India or China, partnering with private corporations in the Gulf, and creating new channels of influence. As he put it, African countries must seize the chance to “build our own complexes” with emerging donors — and do so in ways that avoid replicating the exploitative dynamics often criticized in dealings with the West.