U.S. Aid with Chinese Characteristics

U.S. Aid with Chinese Characteristics

David Skidmore, (Professor of Political Science, Drake University; Vice Dean, Qingdao-Drake United College) 

These remarks were given at the Iowa UNA Annual Assembly held at Drake University on September 20, 2025.

A decade ago, the world paused to celebrate. After fifteen years of concerted effort, the United Nations’ Millennium Development Goals—an initiative spanning from 2000 to 2015—had delivered historic progress. One hundred and eighty-nine countries joined forces to fight extreme poverty, disease, and hunger. Together, they drove down poverty rates, improved school enrollment, and expanded access to health care in low-income nations. The results were striking. One study found that U.S. foreign aid programs alone prevented 91 million deaths over two decades—including the lives of 30 million children.

The Millennium Development Goals were succeeded by the Sustainable Development Goals, a more ambitious agenda running from 2015 to 2030. For a time, optimism was warranted. Coordinated action seemed possible. Progress, real.

But today, that optimism is evaporating. The global aid system stands at the brink of collapse.

In 2023, the United States was the single largest donor, providing 43% of humanitarian aid and 30% of all aid globally. U.S. programs funded food security, education, family planning, disaster relief, and major health campaigns—everything from COVID-19 vaccines to HIV/AIDS treatment to anti-malaria drugs. This aid was not abstract. It meant the difference between life and death for millions.

And yet, in a dramatic reversal, that lifeline has been cut. The U.S. Agency for International Development, once the centerpiece of American generosity abroad, was dismantled. Its remaining programs were folded into the State Department. Even more devastating: 83% of AID grants scheduled for 2025 were canceled, representing a 75% reduction in dollar funding.

The consequences have been swift and brutal. Already, an estimated 79 million people have been directly affected. In malaria alone, experts warn of an additional one million deaths in the first year after the cuts. By 2030, the toll of U.S. retrenchment is expected to reach 14 million lives lost.

And the U.S. is not alone. Across the G7, which historically provided three-quarters of the world’s aid, budgets are cratering. In 2025, G7 spending dropped by 28% compared with 2024. Canada and Germany have both cut by over a quarter. Britain has reduced aid by nearly 40% compared with 2023 levels.

What explains this retreat?

Part of the answer lies in politics: the rise of anti-globalist, populist movements that reject international commitments. Another part lies in economics: sluggish growth and strained budgets that make foreign spending a hard sell. And another, especially in Europe, lies in security: defense budgets are rising in response to the Russian threat, and governments are diverting aid dollars to pay for it.

But the deepest shift is strategic. Aid is no longer viewed as a moral obligation to fight poverty and disease. Increasingly, it is treated as a tool of power and profit. And here, the model comes from China.

Traditional aid—at least in principle—has been concessional. It has come as grants or low-interest loans. It has been transparent, funded by taxpayers, and designed to fight poverty directly. It has avoided “tied aid”—the practice of forcing recipients to spend money on donor-country goods.

China has charted a different course. While it provides some traditional aid, fully 90% of its development assistance is commercial in nature. Through the Belt and Road Initiative, China’s state-owned firms seek contracts to build—and sometimes operate—massive infrastructure: roads, railways, ports, power plants, digital networks, airports, and dams. These projects are funded by Chinese state banks, at commercial rates of interest. The terms are confidential. Inputs overwhelmingly come from Chinese companies.

The intent is clear: to replicate China’s own growth model, which was built on infrastructure investment.

The results, however, are mixed. In two decades, China has lent more than $1 trillion, funding hundreds, even thousands, of projects. Some have fueled growth. But many have been plagued by corruption, shoddy construction, or severe environmental damage. In several countries, grassroots resistance has erupted. Yet, leaders often welcome these projects nonetheless—because they create opportunities for graft and leave behind a visible political legacy.

Envious of China’s influence, Western nations have followed suit. Under a variety of banners—the U.S. BUILD Act, the Build Back Better World initiative, the EU’s Global Gateway, Japan’s Quality Infrastructure Investment Initiative, the Blue Dot Network, and the G7’s Partnership for Global Infrastructure and Investment—the West has pivoted toward infrastructure and commercialized development finance.

But unlike China, Western nations lack vast pools of state-controlled funds. That limitation spurred a new approach: “blended finance.” In 2015, multilateral development banks released a report called From Billions to Trillions, calling for public funds to mobilize private capital. The World Bank followed with its Maximizing Finance for Development initiative. The UN launched its Global Investors for Sustainable Development Alliance. The idea was that every public dollar could attract five or six more from private investors.

Reality has been far less promising. Private firms remain wary of the risks of investing in low-income countries. Despite public guarantees and derisking schemes, the scale of private money has fallen short.

The U.S. vehicle for this model is the International Development Finance Corporation, created by merging several smaller agencies in 2018. With a $60 billion cap, it has already committed $50 billion to loans, equity, and guarantees. Its biggest project so far—the Lobito Corridor railway, linking Congo’s mineral-rich interior to Angola’s coast—is less about poverty alleviation than securing access to cobalt and copper for Western industries.

Now, Congress is weighing proposals to double the IDFC’s funding and expand its reach even into wealthy countries. The model is shifting further and further away from fighting poverty, and closer toward strategic competition.

This is not without danger. First, it diverts resources away from concessional aid that funds health care, education, and humanitarian relief—the lifelines upon which millions depend. Second, it risks turning aid into a vehicle for crony capitalism, as governments steer investments toward politically connected firms.

Ironically, just as the West embraces China’s model, China itself has slowed the Belt and Road. Many borrowers are overextended. Beijing, facing its own economic challenges, is pulling back. But that does not mean China will step into the void left by Western retreat. For China, traditional aid is “charity” that fosters dependency. Its philosophy is different: poverty alleviation through growth, and growth through infrastructure.

There is some truth here. Traditional aid has saved lives—millions of them—but has rarely spurred long-term economic transformation. Many recipient nations remain as poor today as decades ago. Yet China’s model is not universally applicable. Unlike China, most developing nations cannot finance infrastructure through domestic savings; they must borrow, often at unsustainable levels. And infrastructure, while essential, is not the only barrier to growth.

Meanwhile, the challenges mount. COVID-19 erased years of progress against poverty and hunger. Many nations have not yet recovered. Climate change is already hitting low-income countries hardest—through droughts, floods, famines, and forced migration.

At precisely this moment of heightened need, aid is in retreat. Traditional programs are being cut. China’s Belt and Road is shrinking. Western blended finance has fallen short.

So where do we go from here?

We must craft new models of foreign aid—ones that combine the best of both traditions. Aid that saves lives in the present and fosters sustainable growth for the future. Aid that gives recipient countries more ownership over priorities, instead of imposing outside agendas. Aid that rebuilds support among Western publics by showing that global solidarity is not only a moral duty but also a matter of shared security and prosperity.

The current U.S. administration is unlikely to lead such a transformation. But the need is urgent, and the hope is real—that future leaders will recognize the stakes and recommit to building a reformed, revitalized aid system.

Because in the end, this debate is not just about budgets or policies. It is about the lives of millions. It is about whether we respond to suffering with solidarity, or with indifference. And it is about the kind of world we want to build for the next generation.