Soon after USAID was closed in February, speculation circulated that China would move quickly to fill the void left by the United States. That did not happen.
While the Chinese did step in to provide modest additional funding for a handful of programs, like demining initiatives in Cambodia and support for the Africa CDC in Addis Ababa, overall, there’s been no significant change in China’s foreign aid programs.
That did not surprise Alicia Chen, a PhD candidate at Stanford University, who noted in a recent Foreign Affairs article that Beijing is very tactical with where and how it distributes overseas development assistance. Alicia joins Eric to discuss Beijing’s foreign aid strategy and how it differs from other major donors.
📌 Key topics in this episode:
- How China defines foreign aid
- Aid versus development finance in China
- Why China’s aid budget is relatively small
- The role of Chinese development banks
- Myths about “free” Western and Chinese aid
- Aid as a tool of diplomatic influence
- China’s focus on regional organizations
- African Union and ASEAN case studies
- Donkey hide trade and AU diplomacy
- What China’s aid strategy means for the West
Show Notes:
- Foreign Affairs: Foreign Aid With Chinese Characteristics by Alicia R. Chen
- Brookings Institution: Can China fill the void in foreign aid? by Yun Sun
- Foreign Policy: Can China Replace USAID? by Henry Tugendhat
About Alicia Chen:
Alicia Chen studies international relations and political economy, with a focus on Chinese development aid. Her dissertation examines how domestic politics shape both the supply and demand for Chinese aid. In other research, she studies how aid from different donors affect conflict and development outcomes in the Global South. Her research combines quantitative and qualitative approaches, including design-based causal inference, original data collection, and elite interviews from fieldwork in China, Southeast Asia, and sub-Saharan Africa. Alicia holds an MA in International Policy from Stanford University and a BA in Political Science from the University of Southern California. Prior to doctoral studies, she was a Research Specialist with the Empirical Studies of Conflict (ESOC) project at Princeton University.
Transcript:
ERIC OLANDER: Hello, and welcome to another edition of the China Global South podcast, a proud member of the Seneca Podcast Network. I’m Eric Olander. Today, we’re going to talk about Chinese foreign aid.
Now, this is a topic that’s been on a lot of people’s minds for the, say, the past six or seven months since the demise of USAID. There’s been a lot of talk since USAID was DOGEd, you remember that it was cut unceremoniously, as Elon Musk said he put it into the wood chipper, that China would then fill the void left behind by USAID. And we got some indications that that may happen to a very, very limited extent.
China came in and backfilled with $4 million, and some demining activities in Cambodia. China and South Korea together came in to bolster the Africa CDC budget again, about $4 million. We don’t know how much was paid by China or by South Korea, but these were voids left by USAID.
It should be noted, though, that these $4 million donations are just drops in the bucket compared to the size and scale of what USAID was funding. That being said, China has been a major player in overseas development finance. This is a broader category than foreign aid.
Let me just read you some of the statistics here. In the 20- or 20-plus-year period between 2000 and 2021 or 2022, only 17 countries around the world did not receive a loan or grant from the Chinese government or a Chinese state-owned institution. During that 20-odd-year period, China extended about $68 billion in overseas development financing each year.
Again, that’s a broader category than just aid, including loans, grants, and other things. Now, consider this: the United States during that period was about $39 billion a year. Now, when it comes to aid, the calculation between the U.S. and USAID is very different today under the Trump administration. Still, before the Trump administration, China was a very, very small player in the aid business. It had an annual budget of about $3 billion for its fledgling aid agency, the China International Development Cooperation Agency (CIDCA). Again, relatively small compared to the $42 billion USAID disbursed each year in foreign assistance. So the scale is very different.
But let’s talk about what China’s doing in foreign aid. And there was a new article in the November issue of Foreign Affairs by my old friend Alicia Chen, a PhD candidate in political science at Stanford University and the winner of the 2025 Perry World House Foreign Affairs Emerging Scholars Policy Prize. And she wrote a fascinating article, Foreign Aid with Chinese Characteristics in Foreign Affairs.
Alicia, a very good afternoon to you in Palo Alto.
ALICIA CHEN: Thank you so much for having me on, Eric.
ERIC OLANDER: It’s great to have you on the show. Let’s talk about foreign aid. We’re going to dissect your article a little bit, but what is the definition that the Chinese use for foreign aid?
Because it seems to be different from the definition that traditional legacy donors use. We talked about in your article how the Chinese have overseas development finance, which is a very, very large category, but that’s not all aid. Let’s start with some definitions.
ALICIA CHEN: Sure. And it’s an important one. So the classic definition of foreign aid follows the OECD standards for what qualifies as official development assistance.
So it’s basically any kind of financing provided for development purposes that has a grant element above 25 percent. And a lot of the time when we talk about USAID, like aid from a lot of traditional Western donors, that often falls into that category. In some ways, China is different in that much of the financing it provides doesn’t come in the same concessional forms as Western aid.
And so there have been scholars and policymakers trying to better understand how to think about much of what China provides to developing countries. And I think that’s why we try to do a really good job separating kind of classic foreign aid from the Chinese side, from development finance more broadly, which can be provided kind of on non-concessional terms or more market-oriented terms.
ERIC OLANDER: Well, this question of CIDCA, that’s the Chinese International Development Agency. It’s relatively new. China traditionally has not been an aid donor.
It’s been a longtime aid recipient, but now it does have a multibillion-dollar budget, three billion dollars, which is relatively small for a country the size of China. Why is their traditional foreign aid budget so small, yet their overseas development finance efforts are so much more significant and larger?
ALICIA CHEN: That’s a very interesting question. And a lot of what I’m going to say is both speculation on my part and for folks that study this, what they think of as the motivations or intentions of the Chinese government when it comes to this broader development finance program. I mean, I think there are a couple of things.
There’s this lovely book from a professor at PKU who wrote about the financing structure of where a lot of this money comes from, where a lot of the banks that are fundraising or that are financing most of these activities are raising capital on markets and therefore they have their own kind of financial balance sheets to worry about. And so, you know, in some ways it might just be reflective of the kinds of main actors that are engaged in this process. And in that book, she argues that, you know, a lot of traditional aid from Western donors are fiscally raised, whereas this isn’t necessarily the case in China.
And so there might be some structural things going on there. I think more broadly, my own view of it is that part of what China is doing abroad mirrors what the way that it kind of approached development domestically. A lot of its own development was financed through these development banks domestically.
And I think it may have been a little bit of path dependence, or it just made sense to go with a similar approach, where a lot of it is going to be by these development banks, and that they’re the main players in all of this. And, you know, I think like putting a lot of your own tax revenue on the line to do a foreign aid program has repercussions. Foreign aid isn’t necessarily a very popular thing with domestic publics.
And that’s not just the case in China. That’s the case in the U.S. too. There are always concerns about why this money is- And in Europe as well.
Right, exactly. And so, you know, there are also those kinds of considerations. But I think when you hear about the Chinese government and their talks of their foreign aid, which is coming from the ministries, and this is the smaller budget that you’re talking about right now, I mean, it kind of comes in conflict with China trying to portray itself also as a developing country, right?
Developing countries typically are not the donors of foreign aid. They’re usually the recipients of foreign aid. And I think there may also be some of that element where China doesn’t really necessarily want to give away, quote unquote, free money.
There are caveats to that, whether we call it free money, but maybe they don’t necessarily want to play that role in the same way as maybe Western, more industrialized countries are willing to. And so I think there’s a mixture of all of those things happening.
ERIC OLANDER: Let’s get into your article. You focus a lot of attention on regional organizations. And I think before we dive into what China is doing with these regional organizations, it might be helpful for you to tell us what exactly is a regional organization as you framed it in your article.
ALICIA CHEN: So regional organizations, at least the ones that I’m studying, are really kind of a lot of oftentimes we think about like international government organizations. We think of institutions like the United Nations, for example, where membership is global. There are a lot of, you know, regional government organizations where membership is very much regional, where, you know, like the African Union has African states as members and ASEAN has Southeast Asian countries as members.
And so regional organizations are these regional bodies that kind of convene to coordinate and discuss regional policies and serve as a platform not dissimilar to the United Nations, but focus more specifically on regional, economic or political issues.
ERIC OLANDER: Yeah. And you wrote that, to many people, China’s aid seems rather indiscriminate and chaotic. But you said that these regional organizations actually play a very important role, can help us better understand how China allocates aid.
So tell us a little bit about the connection between Chinese aid and these regional organizations that you found in your research.
ALICIA CHEN: Yeah. So there’s a lot of old research on how donors have used foreign aid to cultivate influence in international organizations. And a lot of that obviously focuses on traditional donors like the U.S., or, oftentimes, Japan or Germany. And they find that oftentimes when countries rotate onto or voted into the United Nations Security Council, where they play a more active role in kind of approving these or in voting a lot out of UNSC resolutions, that they receive more aid from these donors, which suggests that there might be some attempt to kind of either buy their votes or cultivate influence with them to push kind of their preferred policies.
And when I first started this article, I tried to see whether that was also the case with Chinese aid. And I didn’t find this, this effect that we typically, this pattern that we typically see with Western aid. And that kind of got me to think about why that might be the case.
And if you look at China’s diplomatic efforts, it’s the way that it conducts its diplomacy, some of its diplomatic rhetoric, a lot of it is focused on regional cooperation, which really pushed me to think about whether or not there was a little bit more targeted use of its aid for influence in ways that maybe is similar to Western donors, but not exactly the same. And so I looked at whether countries that assume leadership roles in these regional organizations receive more aid from China. And I find that they do.
But that effect and that pattern is only limited to the small subset of kind of Chinese finance that comes from its ministries, which the Chinese government would classify as actual foreign aid rather than development finance.
ERIC OLANDER: And why do you think they focus on these regional organizations and less, say, on the multinational organization, let’s say the United Nations, but even the IMF or the World Bank or any of these major international organizations where other countries do have some influence, but the Chinese don’t seem to be using aid as a way to persuade them to align with their policies?
ALICIA CHEN: These regional organizations are really important for China’s own diplomatic goals, if you will. A lot of, if you think about like the Belt and Road, for example, a lot of these big infrastructure projects that the Chinese government kind of envisioned crosses a lot of borders. It requires a good amount of coordination across multiple members.
Many of these development plans are coordinated, monitored, and enforced by these regional bodies. And that’s the case, both across the world. And many developing countries now coordinate much of their development policy, especially large railway networks that cross multiple countries.
And so in some ways, I think there is a real reason why these regional bodies may play a more important role in the kinds of outcomes that the Chinese government might be seeking. And I think that that is kind of on the more concrete policy-oriented outcome side of things that gives a reason why these regional organizations are important to China. I think the other thing is, you know, China has a really kind of it likes to portray itself as the leader of developing countries.
And it says this a lot in the way that they justify a lot of their behaviors. And it really seeks kind of legitimacy from the developing world. It seeks kind of approval or alignment from the developing world to validate a lot of its foreign policy or even its domestic policy.
And so I think there is a way in which kind of cultivating influence in these organizations such that they align with China’s stance on certain issues or forego criticism of China in other cases might align with the kind of international image that China is trying to cultivate here. And I think those are very specific to China reasons why China might have an interest in these regional organizations. That said, the article isn’t meant to suggest that China isn’t trying to influence matters in international organizations.
There’s plenty of research and strong evidence that it really cares about influence at institutions like the United Nations. But in terms of maybe vote buying, the kind of traditional mechanism that we think of as playing at the U.N. Security Council, maybe China just has less need for that. It has been, at least in recent years, more willing to use its veto to kind of not to kill certain resolutions.
And so maybe that dimension of it just simply isn’t worthwhile for China to spend money in the same way that maybe traditional donors are willing to.
ERIC OLANDER: And is what China’s doing in regional organizations and as pointed out also in international organizations like the U.N. to some extent, is this exceptional? Are they pioneering something new, or is this the way that power has been exercised for a long time, and the Chinese are just doing it differently, but still in the mold of what others have done long before them?
ALICIA CHEN: Yeah, this is not new or exceptional. And, in fact, I’m not aware of any research that looks at how many Western donors engage with regional organizations. But if we were to find an effect, especially in Africa, where there are many European donors with significant economic and political interests, I wouldn’t be surprised if similar activities were underway.
But certainly, I think in just like, and this is maybe a function of the way that academics produce work, the traditional mechanism of buying votes at the U.N. Security Council, maybe China just isn’t necessarily doing that.
ERIC OLANDER: And it should be noted now that in the Trump administration, the current Trump administration, they have openly said that they’re going to use aid as part of a transactional process, that if countries do what they want them to do, they will turn back the aid back on again. And if they don’t, then they don’t get the aid. So in some senses, again, we’re all kind of seeing the aid being used now as a very explicit tool of power.
Well, let’s talk about an example that you brought up in terms of how the Chinese exercise this. And you brought up the example of the 2024 African Union Summit in Addis Ababa and the question of donkey hide. Donkey hides is a very sensitive issue in many parts of the global south.
Donkeys, you know, are these animals which are absolutely essential for subsistence farmers. But there’s a huge demand in China for a traditional medicine known as that uses donkey hides to manufacture this medicine. And so as a result, we’ve seen poachers from Pakistan to Kenya to all throughout South America, literally stealing donkeys from farmers, skinning them and then selling the skins back to China.
This has caused a lot of problems. This issue came up at the African Union Summit last year. Tell us a little bit about what happened.
ALICIA CHEN: Yeah. So the donkey hide issue has been, as you mentioned, very important. And, at least as far as I can tell from the anecdotes I’ve heard, this was definitely an issue that was raised bilaterally with many countries toward China, and, as a group, African countries would raise it with China.
But basically, the African Union decided to proceed with a ban on the trade in donkey hide. But in discussing this issue, they didn’t really make it about China. And they were very careful to craft a justification for this ban that really supports African rural communities.
It’s really about supporting farming communities in Africa rather than making it seem like anything anti-China or a criticism of China’s demand side, which was perhaps a major driver of this issue. And I think this is in the vein of the kind of rhetorical alignment that may be, or the lack of rhetorical criticism that I think China definitely cares about. China tends to be very sensitive about being criticized, especially publicly and openly in other countries ‘ speeches.
And so, yeah, I think there was definitely a conscious effort to avoid naming China as the problem of this issue.
ERIC OLANDER: Mauritania, in particular, was the chair of the African Union at that time. And you said that they played a role in all of this and China rewarded them for or it seems and appears that they got rewarded for their role in this discourse. Tell us about what happened with Mauritania.
ALICIA CHEN: Yeah, so later on, there was the FOCAC meeting in China, and obviously there’s a lot of deals that happened during FOCAC. A lot of them packages ongoing agreements and it also signals a willingness to do more deals. But one thing that did happen on the sidelines of FOCAC was that they elevated China and its relationship with the chair of the African Union that year.
And these, whether or not that’s meaningful, I think is interesting. There are many kinds of China, with different layers of partnerships with different countries, signaling how much it wants to cooperate, both economically and politically, with each country. And one of the things that did happen that same year that they served as chair was that they upgraded their relationship to the next level on China’s hierarchy.
ERIC OLANDER: And the supposition is that because Mauritania did something for China, China returned the favor to upgrade ties. We have no hard evidence that links the two. It’s just the association that’s there; we suppose that’s what happened.
ALICIA CHEN: Yeah, I think there was a little bit of rewarding that was going on. I think the other example that I wrote about in article with Cambodia, I think there was a little maybe more direct, clearer evidence that it was a reward where after they kind of killed this joint communique coming from ASEAN criticizing China’s behavior in the South China Sea, that there was a lot more aid that was given to who was the chair of ASEAN that year. And it was named specifically for the reward.
I think the exact quote was something along the lines of be supportive towards China and helping China in its relationship with ASEAN. So maybe that was a little bit more of a direct evidence. But oftentimes these deals are going to have this kind of direct naming that that is for that.
ERIC OLANDER: Yeah, there’s no straight line that links the two together, but it is you just start piecing it all together. And you found that, again, there was a pattern that emerged that countries that led these regional organizations tended to see their aid and development finance initiatives from China increase. That is the takeaway.
ALICIA CHEN: Yes.
ERIC OLANDER: OK. And that we can actually look at empirically.
ALICIA CHEN: Yes, that’s right. Although again, as I mentioned, it was very much limited to the financing that was coming from the Chinese government. So not coming from China’s development banks or its commercial banks or even its state-owned enterprises.
Very much specific to the subset of assistance coming from Chinese government agencies and specifically that was going to recipient government agencies or ministries.
ERIC OLANDER: Foreign Affairs, the publication that you published this fascinating article in, is very much a D.C. Beltway type of publication that American policymakers and scholars tend to look at very closely. And you said, yeah, I have some advice for you. What were some of the takeaways, specifically, that you had for the U.S. and for other G7 countries in how they should understand China’s approach to foreign aid?
ALICIA CHEN: Yeah, I think one thing is that, well, a couple of things. I think in terms of like the importance of regional organizations, I think a lot of times the Global South is an afterthought for a lot of U.S. policymaking. And I think you kind of see that in some ways, like not having a sustained relationship with them really can be problematic when you need their support.
You saw this with what was happening in terms of enforcement of sanctions towards Ukraine, where the Global South just really didn’t want to get on board in the same way. And the U.S. had to kind of get more countries to be supportive of this. And I think in some ways, China sees the value of the Global South, which oftentimes a lot of policymaking is organized around these regional bodies.
And you see them having sustained engagement with them. And that sustained engagement matters when it comes to moments of crises where you need their support. And I think that is an important difference between how China conducts its foreign policy and its diplomacy than the way that the West does.
And then in terms of dealing with China, I think a couple of things. The research finds ways in which China is using aid for influence, but it also finds that the portion of that is very small. A lot of China’s development finance is not about cultivating influence.
And I think that’s important because the amount of financing that China has provided is massive. It’s solved a lot of real development need in these places. And I think the geopolitics of it all, the wrong outcome would be to get rid of much needed financing.
And so I think recognizing the differences across the various forms of Chinese finance and their overall roles helps us better understand where there is actual competition we need to worry about and what forms of cooperation still exist in development. And in some ways, I hope that even amid geopolitical competition with China, we’re still able to maintain high levels of development finance that are very much needed in the global South by doing more concrete research into what this money actually serves and what its purpose is.
ERIC OLANDER: Right. But the U.S. in particular has cut all of that away right now. It doesn’t really fundamentally believe in development finance as a government.
And more importantly, just in the past few weeks, Donald Trump has become even more outspoken on what he calls third-world countries and how derisive he is towards Africa and Latin America. And he sees these again. He welcomes rich countries.
So he loves the Qataris. He loves the Emiratis. He loves the Saudis.
But he despises poorer countries. And so I wonder if this kind of dismissiveness, this dismissive attitude towards, you know, he calls the third world again, that’s an outdated way of looking at it. But the global South or other people call the global majority is going to give China more room to move and that I don’t envision that the U.S. is going to be more enthusiastic to participate in ASEAN, to participate in the African Development Bank, at the African Union, at the Inter-American Dialogue, you know, all of these these regional bodies that the Chinese are very, very active and present in. So it seems like the Chinese are going to have a lot more uncontested space in the global South during the Trump administration.
ALICIA CHEN: I think that’s true in terms of the U.S. I mean, the U.S. is not the only donor and neither is China. There are many other donors. And, you know, there is also efforts to try to get more private sector investment in financing to kind of fill a lot of this gap.
But exactly how this gap will be filled remains a critical policy and development question. And in some ways it’s it’s unfortunate because a lot of this financing, as we talked about earlier in the podcast, oftentimes there are donor interests kind of at stake and you need this financing to also benefit the donor for them to find it worthwhile to give this money. And so in some ways, let’s hope that there are enough kinds of selfish interests at stake on both the China and the U.S. side, such that there are high levels of development finance that are sustained over time.
ERIC OLANDER: Well, let’s leave a note on a selfish note. Hopefully, there is a lot of selfishness out there that will drive more foreign assistance, even though the trend lines do seem to be pointing down. Most of the wealthy countries are cutting back their foreign assistance right now, particularly in Europe, as they spend more money on weapons.
So the trend lines don’t look encouraging. That being said, here in Southeast Asia, we see a lot of activity from South Korea and Japan in particular. So as you’ve pointed out, there are more players than just the Americans, the Chinese, and the Europeans.
So, Alicia, thank you so much for your time today. Congratulations on the article. It was absolutely fascinating.
The article is Foreign Aid with Chinese Characteristics, written by Alicia Chen, who is a Ph.D. candidate at Stanford and the winner of the 2025 Perry World House Foreign Affairs Emerging Scholars Policy Prize. Thank you so much for joining us today.
ALICIA CHEN: Thank you so much, Eric.
ERIC OLANDER: And I’ll be back again next week with another episode of the China Global South Podcast. Cobus is going to join me as well. We’re getting to our year-end wrap-up show, where we’re going to look at the top stories of the year and then look ahead to 2026.
So until then, I’m Eric Olander. Thank you so much for listening and for watching.
