US aid cuts are a soft power surrender to China

After months of uncertainty about its future, US Secretary of State Marco Rubio last week confirmed the near-total gutting of USAID. With some 83 per cent of programs officially cut, the announcement signals the end of seven decades of US global leadership on development.

The aid freeze-turned-purge has caused intense disruption to people, programs and American soft power. But while the human costs are being tallied, the soft power effects are harder to grasp.

China is widely assumed to be the biggest beneficiary, although the full extent of the impact remains unquantified. A back-of-the-envelope calculation, however, offers some insight into the upheaval underway. It shows that the aid cuts will restore China as the world’s largest bilateral development partner, with the United States ceding larger partner status to China in more than 40 countries.

By piecing together five datasets tracking China’s largely opaque aid and development financing from 2000–22 – including research from AidData, Boston University, and the Lowy Institute’s work on Southeast Asia and the Pacific – a global picture emerges. The combined dataset captures both traditional aid and state-backed development financing, enabling the closest possible apple-to-apples comparison with official US development assistance data.

China rapidly emerged as a major global development financier in the 2000s, surpassing the United States in total bilateral commitments in 2009 (see chart). Driven by the rapid expansion of its Belt and Road Initiative, in the mid-2010s China was firmly established as the world’s largest bilateral creditor and infrastructure partner. At its high point in 2016, China’s development assistance had grown beyond US support levels in 66 countries, up from just 18 in 2000.

However, China’s financing momentum shifted in 2017 amid mounting concerns over debt sustainability, project quality, intensified competition from traditional donors, and its own domestic economic challenges. The pandemic accelerated this decline, with border closures and supply chain disruptions hastening the contraction. By 2020, the United States had reclaimed its position as the world’s largest bilateral development partner.

Over this period, China primarily delivered development assistance through concessional and semi-concessional loans, which have, on average, accounted for about three-quarters of its total program. In contrast, the United States has historically provided more than 90 per cent of its development assistance as grants.

What effect will the cuts have on this picture?

By backdating the Trump administration’s freeze and signalled cuts to the 2021–22 US aid budget, the most recent year with comparable Chinese data, the freefall can be visualised. As the specific details of the US aid program’s downsizing remain uncertain, this calculation estimates cuts in line with announced waivers, which exempt staff expenses, emergency food assistance, and select humanitarian initiatives deemed “life-saving”.

The exercise shows the cuts re-establishing China as the world’s largest bilateral development partner by commitment volume. At the country level, US development support falls behind China in 40 countries. The number of states where Chinese development finance exceeds that of the United States jumps from 44 to 84, with America’s larger partner status shrinking from 98 to 52 countries. In sum, the cuts will mean China surpasses the United States as a bilateral development partner in both volume and spread for the first time.

What remains of the US development budget is now heavily concentrated in the Middle East and Eastern Africa. In contrast, resource-rich states in Southern and West Africa – long a focus of Chinese development assistance – shift towards Beijing. The US development presence in Southeast Asia dwindles to negligible levels, and in the Pacific, America's aid footprint now hinges entirely on the uncertain status of its Compact of Free Association agreements. In the Americas and the Caribbean, China’s financing overtakes US levels in five additional states, leaving the region split.

Notably, if the same comparison were possible using 2025 data, the shift would likely be much starker. Pandemic-related disruptions depressed China’s project commitments from 2020–22, but Beijing’s program has since rebounded. On the US side, reports suggest that the waiver system is not working due to staff shortages, indicating that the cuts might be more severe than the official policy. Leaked contract termination documents tell a similar story.

What are the flow-on effects?

Foreign aid is not a binary contest, but it often leads to binary outcomes. Aid programs, and the relationships they foster, influence everything from regulatory alignment and technology adoption to trade partnerships and voting patterns in international forums. In this context, aid serves as a potent foreign policy tool and a means of shaping global order.

Beyond the immediate effects caused by programs grinding to a halt and local staff being cut loose, governments will be more likely to turn to Beijing to meet their development needs. Such dynamics are already playing out in Cambodia, Colombia and Nepal.

The timing of America’s aid withdrawal is fortuitous for China, which has spent recent years repairing the reputation and strategy of its aid program. Beijing has long promoted its South–South cooperation model as an alternative to Western aid, and the US rug-pull only strengthens China’s rhetoric around its dependability as a partner and the unreliability of democratic regimes.

Gutting USAID has not just disrupted global aid; it has undermined a pillar of US foreign policy. Even a static China will see its influence fill the vacuum left by the US withdrawal. As for the frozen remnants of America’s aid program, there looks to be little left to thaw – leaving a pillar of American soft power in permafrost.