Australia is by far the largest provider of development finance to the Pacific, accounting for more than a third of all spending in the region and having overtaken China as the dominant lender — yet a significant share of Australians still believe Beijing holds more sway in the region than Canberra does. That striking disconnect is among the key findings of the Lowy Institute's latest Pacific Aid Map, released this week.
Australia's Pacific Aid Dominance by the Numbers
The data is unambiguous: Australia spent $2.15 billion on Pacific aid in 2024, representing 37 per cent of all development finance flowing into the region. That is three times more than the next largest contributor, New Zealand, which accounts for 11 per cent of total spending. The United States contributes 8 per cent, China just 6 per cent, and Japan 3 per cent.
Beyond grants and aid, Australia has also cemented its position as the region's biggest lender. Since 2021, Canberra has signed new loan agreements worth $3.4 billion, a dramatic shift from the 2010s when China was the dominant source of Pacific lending. Between 2010 and 2019, Beijing signed roughly $5.2 billion in loans to Pacific nations — more than one-third of all lending deals in the region over that decade. Since 2020, China has committed just $558 million in new loan deals.
Much of Australia's new infrastructure funding has been channelled through the Australian Infrastructure Financing Facility for the Pacific, which has committed more than $1 billion in loans and over $850 million in grants since its establishment in 2019.
The report's lead author, Riley Duke, described the lending shift as "striking." "Historically this has been an area very much dominated by China," he said. "So it's significant that Australia seems to have crowded out China in this space."
China's Smaller but Smarter Strategy
Despite being outspent by a wide margin, China has proved adept at converting limited expenditure into outsized influence. Beijing has concentrated its funding on highly visible, community-facing projects — school upgrades, sports stadiums, medical clinics and port terminals — that resonate directly with local populations in ways that larger, more diffuse Australian programs may not.
Chinese state-owned enterprises have also retained a firm grip on construction contracts across the Pacific, remaining the dominant builders of regional infrastructure even as Australian lending has surged. That means that while Australia is writing the cheques for many new projects, Chinese companies are often the ones on the ground doing the work — and reaping the commercial and diplomatic goodwill that comes with it.
The consequence is a notable gap between perception and reality. The most recent Lowy Poll found that 39 per cent of Australians believe China is the most influential country in the Pacific, compared with just 33 per cent who nominated Australia — a remarkable result given the vast disparity in spending.
Australia's Push Into Strategic Infrastructure
The Albanese government has moved aggressively to reshape Australia's Pacific footprint, striking a series of military and economic partnership agreements across the region. A new alliance and sweeping economic deal with Fiji was finalised earlier this month, following similar agreements with Papua New Guinea, Vanuatu, Nauru and Tuvalu. You can read more about the Fiji agreement and its strategic context in our earlier coverage of Australia's Pacific security push.
The timing of the Fiji deal was particularly pointed: on the same day the agreements were signed, China test-fired a missile from a nuclear-powered submarine into the Pacific, with the projectile landing near the Solomon Islands — a move that drew alarm from Australia and several Pacific neighbours.
Papua New Guinea has emerged as a particularly significant recipient of Australian funds, reflecting Canberra's deepening strategic interest in its closest Pacific neighbour.
Duke said Australia's expanded role as a lender and infrastructure investor was "reshaping the regional aid picture," but cautioned that success was far from guaranteed. "Everything hinges on the quality," he said. "If a project is well-built and it contributes to economic growth, then it pays itself off." He noted it was still too early to assess Australia's track record in the infrastructure space, given how recently it had entered that arena at scale.
China's Ambassador Departs as Relationship Stabilises
The release of the Pacific Aid Map coincided with the farewell of Chinese Ambassador Xiao Qian, who bid goodbye to associates at a ceremony in Canberra on Tuesday after a four-and-a-half-year posting. His tenure spanned a period of significant turbulence — including years of outright diplomatic hostility — before a gradual thaw, particularly on trade.
Speaking at the Chinese embassy, Xiao told guests including senior Australian government officials that the bilateral relationship had "emerged from a low point and regained stability," achieving what he described as a "comprehensive turnaround." He will be replaced by Liu Jinsong, a veteran diplomat currently heading the Chinese foreign ministry's department for Asian affairs.
Despite the warmer tone, friction has not entirely disappeared. Xiao's posting ended with a degree of controversy, including a pointed opinion piece in which he accused Australian and other Western intelligence agencies of exaggerating espionage claims against China.
As Australia continues to scale up its Pacific commitments, the central challenge identified by the Lowy Institute is clear: spending more is not enough. Delivering projects that are well-built, economically productive and visible to Pacific communities will ultimately determine whether Canberra's financial dominance translates into the kind of lasting influence Beijing has punched well above its weight to achieve.
