A latest report by Australian think tank the Lowy Institute found that Australia remains the largest development aid provider in the Pacific region. In 2024, Australia provided around A$2.14 billion in aid to the region, accounting for about 37% of total development financing. For the first time, Australia also surpassed China to become the region’s largest lender, reflecting Canberra’s efforts in recent years to deepen cooperation with Pacific island nations and gradually reduce China’s previous influence in the region.
The report found that China’s lending to the Pacific has declined significantly since 2019, mainly due to concerns among island nations over rising debt burdens, declining lending capacity among Chinese banks, and increasing competition from other aid providers.
In recent years, China has shifted towards the “small but beautiful” strategy proposed by President Xi Jinping, focusing on grassroots projects such as healthcare, education, police equipment, scholarships and professional training to maintain and expand ties with Pacific countries.
Some of China’s major recent aid projects include road and bridge construction in Fiji, the national stadium in Nauru, post-earthquake reconstruction in Vanuatu, and a high school sports centre in Tonga. The report also noted that Chinese aid often aligns with diplomatic developments. For example, after Nauru established diplomatic relations with Beijing in 2024, China quickly increased several aid projects in the country.
Meanwhile, Australia has not only increased infrastructure and loan support in recent years but has also actively invested in climate change and renewable energy projects, including solar and energy storage facilities in Palau and renewable energy stability projects in Tonga. Australia has also signed multiple security cooperation agreements with Fiji, Vanuatu, Papua New Guinea and Tuvalu, further strengthening its position as a key partner in the Pacific region.
Commentary:
The Pacific region has become an important strategic arena for Australia and China to compete for influence. However, the competition has gradually shifted from traditional infrastructure and loans towards longer-term areas such as security cooperation, climate assistance and talent development.
Rather than simply increasing aid amounts, the key may be whether countries can build long-term trust and genuine partnerships.
For Pacific island nations, they are not necessarily choosing between Australia and China. Instead, they are seeking to make use of resources brought by major power competition to address urgent challenges, including climate change, energy security, infrastructure and economic development.
Competition between Australia and China in the Pacific is likely to continue. The most important question is whether aid truly meets local needs, respects the independent development paths of Pacific nations, and avoids turning them into pieces in a broader geopolitical contest.