By Wu Qiaoxi | 2025-06-02

China's aid strategy in Southeast Asia is quietly shifting from splashy infrastructure megaprojects to smaller initiatives focused on green energy, education and community livelihoods.

A decade ago, China's Belt and Road Initiative (BRI) was seen as a bold push to connect the region through ports, railroads and highways, but mounting debt, incomplete projects and rising skepticism have forced a rethink.

China was the region's largest development partner from 2015 to 2021, disbursing about $5.5 billion a year in official development finance.

That funding went mostly to large-scale infrastructure projects, according to a report published by Australia's Lowy Institute in March.

China is involved in 24 out of the region's 34 billion-dollar infrastructure megaprojects.

Yet, the overall completion rate is only 33%, and officials have canceled five projects totaling $21 billion, including railroads in Thailand and the Philippines.

Additionally, three other projects totaling $5 billion appear to be stalled or abandoned, exposing the limitations of the lavish-spending model, according to the report.

Once lauded as a grand blueprint to connect the world, the BRI has been consistently marred by abandonment, mounting debts, corruption and environmental controversies.

"The BRI has evolved from a surplus dump to a financier of big infrastructure," Zhang Junhua, a senior associate at the European Institute for Asian Studies, wrote in a report last year.

"It has scaled back its economic ambitions but remains a political tool for [Chinese President] Xi Jinping," he added.

This shift is not just international. It reflects China's economic struggles at home.

In 2024, China experienced its first net outflow of foreign capital since 1998. This, coupled with the real estate crisis, mounting local debt and weak post-pandemic economic recovery, has significantly compressed China's fiscal space.

Meanwhile, international criticism of China's "debt trap diplomacy" has grown, as observers argue that China uses infrastructure loans to gain influence when countries struggle to repay their debts.

'Small and beautiful'

In response, Beijing has recalibrated. Since 2019, it has pivoted toward what it calls "small and beautiful" projects: lower cost, less risk and a focus on community sustainability.

These projects have lower budgets and risks and are seen as more closely aligned with local community needs.

However, a focus on "small and beautiful" projects does not necessarily equate to a recovery in trust.

When the 2025 Burmese earthquake ravaged Bangkok, the sole fallen structure in town was the Audit Building, constructed by China Railway Ten Bureaus Group -- again raising concerns about the quality of Chinese engineering.

A more fundamental challenge lies in the political logic underpinning Chinese aid.

Unlike Japan's long-term, institutionalized aid to Southeast Asia, "the objectives of China's aid are often highly politicized and strategic," Taiwanese scholar Pei-Hsiu Chen told Focus.

Following the present economic downturn, its foreign aid has "shrunk in quantity and changed in quality," he said.

If China fails to establish transparent dialogue, co-construction and shared benefits with local societies, it will struggle to shake off criticism of using aid as an "image project," he said.

China's ability to alter its governance model and geopolitical operational logic in the future will determine the sustainability of its foreign aid.

The future of China's development aid in Southeast Asia hinges not only on financial resources but on its ability to build trust and adapt to shifting geopolitical terrain as well.

[Part I of IV in a series on China's Belt and Road Initiative in Southeast Asia]