No, China Won’t Swoop Into The Void USAID Leaves Behind

Democrats and some Republicans in Congress are warning the Trump administration against shutting down the United States Agency for International Development (USAID). They argue that this move would allow China to fill the economic and geopolitical void left behind. However, this concern is overstated and reflects a misunderstanding of China’s true motives in distributing foreign aid.

Under Xi Jinping’s leadership, the Chinese Communist Party has deftly expanded China’s economic and geopolitical reach across the globe, primarily through initiatives like the Belt and Road Initiative (BRI), which invests in vital infrastructure projects. This expansion, while impressive, raises crucial concerns as China’s foreign aid is strategically designed to achieve three main goals: securing essential natural resources (particularly oil and gas), gaining access to critical locations such as ports, and creating new markets for its goods and services. It is no wonder that the majority of China’s foreign aid is directed toward energy and transportation projects that serve these strategic interests.

Yet Elon Musk’s Department of Government Efficiency (DOGE) team has revealed that USAID had been misallocating millions of dollars in areas that hold little interest for China. For instance, $2.5 million was spent on electric vehicles in Vietnam, $1.5 million on a Pro-LGBT group in Serbia, and $70,000 on a DEI musical in Ireland. This misuse of funds has essentially turned USAID into a slush fund for Democrats and nongovernment organizations (NGOs) to finance leftist ideological programs. These programs neither advance America’s interests nor counter China’s influence. It’s unlikely that China would step in if USAID stops funding these programs, as they do not align with China’s foreign aid goals. Furthermore, the Communist Party, in fact, is known for suppressing feminist and LGBT groups.

There is no doubt that China is keen to take advantage of U.S. withdrawal in certain strategic areas. For example, officials in the Cook Islands, situated in the Indo-Pacific, have voiced concerns that a withdrawal of USAID could open the door for China. Beijing is actively looking to enhance its presence on crucial islands in the Pacific.

However, it is essential to recognize that China’s desire to fill this void may not always materialize. Many countries continue to prefer partnering with the U.S. over China, largely due to the nature of USAID’s assistance, which is primarily provided in the form of grants. This type of aid is highly valued by recipient countries because it doesn’t require repayment. In contrast, China rarely offers aid without strings attached; it typically insists on some form of repayment. Loans from Chinese banks and investments made by Chinese firms abroad are often categorized by Beijing as foreign aid, making them less attractive to nations seeking genuine support.

A typical project under the BRI reveals a strategy that can lead to long-term challenges for participating countries. The Chinese government approaches foreign nations with offers of zero-interest or low-interest loans designed to fund ambitious infrastructure projects that may otherwise be beyond their means. Unlike Western lenders, Chinese state-run banks impose minimal conditions, sidestepping requirements for transparent governance or thorough environmental assessments. However, the price of this financial assistance is steep: Foreign governments must award contracts to Chinese companies and pledge strategically significant assets as collateral.

While these projects may create the illusion of opportunity, they often provide few jobs for locals since Chinese firms mainly bring in their own workers. In essence, China uses these projects mainly to employ Chinese laborers and utilize China’s excess industrial output.

When debt repayment becomes difficult for countries with BRI loans, the repercussions can be severe. Sri Lanka’s experience highlights this risk: After borrowing $1.1 billion for building the Hambantota port, the Sri Lankan government struggled with interest payments. Consequently, a Chinese state-owned enterprise took control of the port on a 99-year lease with a reported option for renewing the lease for another 99 years. This allowed China to secure a strategically vital position in the Indian Ocean, significantly expanding its commercial and military presence. This serves as a critical reminder of the potential drawbacks of engaging with the BRI without fully understanding the long-term consequences.

Sri Lanka illustrates the growing problem of countries that are heavily indebted to China due to loans from the Belt and Road Initiative (BRI). In response to criticism, China has reportedly “restructured BRI loans, extended deadlines and forked out an estimated $240 [billion] to help borrowers make payments on time. But it has refused to cancel the debt.”

It’s important to note that China’s “debt trap diplomacy” did not yield the expected soft power benefits for the Communist Party. Instead, it has led some countries to reconsider their participation in the BRI. For example, Italy withdrew from the initiative in 2023, and recently, Panama announced its departure in an effort to mitigate the Trump administration’s concern about China’s presence in the Panama Canal.

It is also important to note that China’s economic growth has significantly slowed since the Covid-19 pandemic. The Chinese economy is facing multiple challenges, including a persistent “deflationary crisis,” “sluggish domestic consumption,” an unusual “slump” in production, and the headwinds of tariffs imposed by the Trump administration. Consequently, Beijing’s capacity to expand foreign aid to new areas because the U.S. pulls back is likely to be limited.

There remains a crucial need for foreign aid to help countries navigate humanitarian crises and counter China’s growing economic and geopolitical influence. However, USAID, in its current setup, has strayed from these essential missions. The Trump administration’s decision to eliminate wasteful expenditures and integrate foreign aid under the State Department is a prudent step forward.

Fears that China will swiftly assume the role USAID has vacated are greatly overstated. Marco Rubio, as secretary of state, understands the vital role foreign aid plays in diplomacy and national security. Under his guidance, the United States will continue its commitment to foreign assistance, directing funds toward more strategically significant areas with a targeted and fiscally responsible approach. This shift represents a sound investment for taxpayers and reinforces America’s leadership on the global stage.