Southeast Asian states are increasingly asserting agency over Chinese development finance, with demand not solely driven by infrastructure needs but by the range of options available and their ability to navigate foreign policy dynamics, as China's official development finance to the region declined sharply from over $9 billion in 2015 to $3 billion in 2022.
The Lowy Institute analysis categorizes regional approaches into three typologies: constrained states like Cambodia, Laos, and Myanmar remain heavily reliant on China due to acute development needs and limited alternatives, while restrained countries including the Philippines and Vietnam have become far more cautious in accepting Chinese largesse over the last decade.
Upper-middle income countries such as Indonesia, Malaysia, and Thailand are playing the field of development partners most opportunistically, leveraging their stronger governance scores and moderate development needs to maintain autonomy while engaging pragmatically with Beijing.
China has responded by recalibrating its offering toward fewer, smaller, and more targeted projects under the new "small is beautiful" mantra, transitioning away from infrastructure megaprojects that previously attracted scrutiny and generated public debate.
However, the region's success in reshaping development ties with China could be undermined if Western cuts to development budgets lead to drastic reductions in financing, potentially forcing Southeast Asian countries back toward greater dependence on Chinese support despite their efforts to diversify partnerships.
