Australia left ‘holding the line’ as US pulls back and China tightens grip on Pacific

AUSTRALIA: Australia is increasingly standing alone in pushing back against China’s growing influence in the Pacific, as the United States and other Western partners scale back their involvement, according to the 2025 Lowy Institute Pacific Aid Map released on Sunday.

The report shows that official development finance (ODF) to Pacific nations dropped by 16% in 2023 to US$3.6 billion (S4.67 billion)— marking the second straight year of record declines. Despite the downturn, Australia remains the region’s largest donor, providing 43% of all ODF — roughly four times more than New Zealand, its next biggest contributor.

Lead author Riley Duke said Australia’s steady aid spending and rising infrastructure lending had “cushioned the Pacific from the impact of major donor cuts,” helping to prevent a deeper fall in development activity.

US pullback creates “trust gap” as Beijing steps in

The report attributes much of the overall aid decline to the Trump administration’s dismantling of USAID, which disrupted long-running programmes and left communities uncertain about future support. While the study suggests that the financial impact of these cuts is often overstated, it argues that Washington’s real loss is reputational.

“In the Pacific, the real cost of US aid cuts won’t be measured in lost dollars, but in lost trust,” said Alexandre Dayant, one of the project’s leads. “While Washington steps back, Beijing is winning something far more strategic — narrative dominance.”

China, he said, has successfully repositioned itself as a “steady, non-interventionist partner” — a message that resonates deeply in a region where reliability and respect for sovereignty carry significant weight.

China’s local focus vs Australia’s expanding reach

Beijing has shifted away from large, loan-funded infrastructure projects towards smaller, grant-based community programmes that build stronger local relationships. “China now spends less than it did a decade ago, but its aid reaches far deeper into Pacific communities,” Duke noted.

Australia, meanwhile, is ramping up its presence. By 2028, the report forecasts that Canberra’s support will exceed the combined contributions of Japan, New Zealand, the United States, France, Germany, and the United Kingdom.

Beyond aid, Australia has also strengthened its defence and disaster-response ties with partners including Chile, Fiji, France, Papua New Guinea, Tonga, and New Zealand. At the 2025 South Pacific Defence Ministers’ Meeting in Chile, members agreed to establish a Pacific Response Group — a shared command structure set to be led by New Zealand from mid-2026.

As other donors retreat and China refines its regional approach, the report concludes that Australia’s leadership in the Pacific has never been more vital — or more isolated.