US, China and Japan cut foreign aid to South-East Asia

New research shows that China, Japan and the United States are all cutting foreign aid to South-East Asia, with development finance flows to the region falling to their lowest level in a decade.

The latest South-East Asia Aid Map, produced by the Lowy Institute, shows that official development finance to the region dropped by nearly 10 per cent to $US26 billion ($37 billion) in 2024, even before the full impact of the Trump administration's aid cuts from 2025.

One of the Aid Map's lead authors, Rahul Nath, told the ABC that the map painted "a pretty grim picture" which was "not getting any rosier".

"Traditional donors are in retreat [from South-East Asia] and China is cutting aid rather than stepping in to fill the gap," he said.

The map shows that Japan cut finance to the region by $US1.5 billion ($2.15 billion) in 2024, partly because some of its COVID-era lending to South-East Asia had been fully disbursed and major infrastructure projects were winding down.

China's funding to the region also dropped by nearly a quarter that same year, with Beijing's official development finance falling to $US5.3 billion ($7.59 billion) in 2024.

Dr Nath said that China had learnt from some of its "exuberance" in the last decade, when it lent heavily to fund South-East Asian infrastructure, and that Beijing was shifting to smaller projects, while becoming more selective about what it funds.

"They've had a lot of losses from debt relief which likely makes them a bit more cautious," he said.

"And China has had slower domestic growth too — so we're seeing that come through in Chinese behaviour."

He said South-East Asian governments were also becoming more "selective" about taking up large Chinese loans, particularly after some of them faced domestic political pushback over major infrastructure projects which neglected local labour, or had damaging environmental consequences.

US aid cuts not yet fully seen

The Aid Map also shows the US development finance to the region was already declining under the Biden administration, before President Donald Trump introduced savage cuts in 2025.

Dr Nath said the full consequences of those cuts would become clearer in future iterations of the Aid Map, but it was clear they were having a serious effect.

"We're not seeing the full impact of Trump (aid cuts) here, but a significant proportion of that spending cut that we're projecting is driven by the US," he said.

"The OECD has a projection showing a 23 per cent decline in aid (from developed countries) so that will flow through."

With bilateral donors in retreat, multilateral institutions are becoming increasingly critical in South-East Asia, providing almost half of all development finance to the region in 2024.

He said organisations like the World Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank "don't move with political cycles" so could "always come in as a provider of last resort and provide stable finance".

But he said the "risk" was that multilateral organisations were "increasingly being asked to do a lot more, with the same institutional capacity".

"As aid shrinks and as geopolitical pressures intensify it's going to come down to how much support they give — whether they get stretched too far," he said.

He warned that as the US and other donors continued to cut aid, the region was increasingly vulnerable to shocks from climate change, and from crises like the energy shocks caused by the war in Iran.

"What's going to be interesting is to see where aid goes from here. We believe traditional donors will continue to cut their spending, and it's hard to say what Beijing will do next," he said.

"But it looks like South-East Asia's aid flows are going to fall more (and) … that is going to put a lot of pressure on the social protection systems and budgets of some of the poorest and most vulnerable countries."