China tops development finance in Southeast Asia, faces more competition for regional influence: report

China provided less infrastructure investment in 2020 and 2021 amid the pandemic and as many projects, like those in its Belt and Road Initiative, did not deliver

While China has out-signed traditional donors in terms of investment value, partners like the US, Europe, Japan typically do better with actual delivery

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Cambodia also receives development aid from Chin. Photo: Xinhua

Published: 9:24pm, 4 Jun 2023

China has been Southeast Asia’s largest development partner and its biggest source of official development finance but faces increasing competition from other financiers, according to a new report by the Lowy Institute.

Infrastructure funding accounted for the majority of development finance but China’s contribution in this aspect slowed in 2020 and 2021 when many projects, including those in the Belt and Road Initiative, did not deliver and the pandemic reduced China’s funding to Southeast Asia.

Between 2015 and 2021, China disbursed about US$5 billion a year in development finance to Southeast Asia, with infrastructure development accounting for about 75 per cent. Infrastructure typically includes projects in transport and storage, energy, communications, and water and sanitation.

Transparency in aid going to regions like Southeast Asia is increasingly important amid geopolitical competition for influence, the report said.

“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’s Indo-Pacific Development Centre director Roland Rajah said.