The Financial Outlook for Southeast Asia: The Power Struggle Between China and the United States

Ladies and gentlemen, since 2000, China has poured $261.7 billion into Southeast Asia—8.8 times as much as the United States—but was this money actually worth spending? Let’s hear what others have to say. Let’s start with the AidData report. These think tank bigwigs plowed through 103 pages and finally reached one conclusion: the locals don’t really care about us. That’s truly explosive news. When it comes down to it, our influence in Southeast Asia doesn’t even measure up to Finland’s. I can put up with the U.S., but falling short of Finland really gets under my skin. Actually, this report hides two major secrets. The first is how China, the U.S., and Japan spend their money. The second is how this money is perceived by people in Southeast Asia. Let’s start with these two secrets. First, how is the money being spent? China is the most generous, spending a total of $261.7 billion—68% of the combined total for the three countries. The U.S. spent $29.7 billion, and Japan spent $95.8 billion. Loans make up the lion’s share of China’s spending—98 percent. The U.S. provides few loans, at just 5 percent, while grants total $27.8 billion. Japan falls somewhere between China and the U.S., with $78.5 billion in loans and $16.4 billion in grants. Where did we spend our money? Commercial projects accounted for the largest share, with energy leading the way at 26.7%, followed by industry, minerals, and construction at 22.7%, banking and finance at 17.7%, and transportation and warehousing at 17.4%. Other areas included digital infrastructure, industrial parks, and government projects. What about projects that don’t generate a profit? Healthcare at 0.85%, education at 0.13%, and civil society organizations at 0.19%. The U.S. is quite different: 19.5% went to civil society organizations, 12.4% to health, 8.5% to disaster relief, and 6.4% to education. Japan, on the other hand, allocated 44.2% to transportation and warehousing and 9.8% to energy. How effective has this spending been? According to AidData, we rank 24th in terms of impact and 42nd in terms of effectiveness. This represents a rather sharp decline from our all-time high of a top-10 ranking in 2020, but we still rank highest among non-traditional aid partners outside the OECD. Now let’s look at how people in Southeast Asia view this. What do they feel they lack most? Education, peace and justice, the economy, climate action, innovative infrastructure, and health and well-being. What about our projects? They’re concentrated on “hardware”—we rarely touch on “soft” elements like policy recommendations and institutional development. Consequently, in the eyes of Southeast Asians, our projects are seen as mere tools rather than emotional connections. What about the U.S.? It achieves big results with small investments. The American model involves disbursing numerous small grants without expecting immediate returns, creating countless points of engagement. This approach makes it easier to establish long-term ties with local communities. The problem, however, is that too much of this funding can actually foster corruption—after all, money isn’t given for free. How do we solve this problem? We need a two-pronged approach. We need to take a high-profile, top-down approach with large-scale projects, and a steady, bottom-up approach with small-scale projects. In short, we need to make progress on all fronts. Finally, we must acknowledge that the U.S. has exerted significant influence in Southeast Asia in recent years. Especially in areas like education, healthcare, gender equality, and human rights, they’ve done a better job than we have. And what about us? We’ve been fixated on hard infrastructure and neglected soft services. To sum up, if we want to gain a firm foothold in Southeast Asia, we must balance hard and soft power—we can’t just focus on the hardware. After all, people’s hearts are made of flesh, not iron.