By: Andrew S. Natsios

Over the past year, four retired U.S. Agency for International Development (USAID) officers and four influential China development academics held a dialogue to accomplish several objectives: understand how the U.S. and Chinese aid programs work in practice; determine what, if any, common aid policy and program approaches might make collaboration practical; and discuss what specific areas the two sides could cooperate on at a time of heightened tensions between the two countries. The timing of the dialogue, February 2024 through January 2025, has made this effort a work in progress given the upheaval in the U.S. government—most notably the Department of Government Efficiency’s (DOGE’s) evisceration of USAID, including the massive cuts in U.S. aid funding and the cancellation of 83% of USAID programs, the transfer of remaining contracts and grants to the U.S. State Department, and the dismissal of 90% of USAID career staff.[i]

I learned a great deal over the course of the meetings about how aid programs are seen by the recipient nations, particularly in the cities of Bangkok and Nairobi. In both cases, we heard input from local academics about how they saw the U.S.-China rivalry affecting their own local development. What became clear in both Thailand and Kenya—if indicative of general attitudes in the Global South—is that working with either superpower has both upsides and downsides and that recipient countries do not wish to have to choose sides in the rivalry, even if both of the aid-dispensing countries wish to recruit them into their individual spheres of influence. Although USAID had stopped using loans to recipient countries as an instrument for funding its programs in 1982, this was not clear to local academics, particularly in Africa, who seemed suspicious that the U.S. government (USG) was owed something for its large aid programs on the continent (it was not). Thailand had already graduated from being a USAID recipient 30 years ago, although there may be some regional U.S. President’s Emergency Plan for AIDS Relief (PEPFAR) programs run out of Bangkok.[ii]  As such, the issue of owing something to USG was less pressing in Thailand. However, the debt owed China for its massive infrastructure programs is directly affecting taxpayers; as one professor in Nairobi told us, half his income went to national income taxes to pay the Chinese loans, and he would be paying this high tax for the rest of his life. He said even his mother, who lives in a rural area, knew of this tax burden, but that the people do not blame the Chinese. Instead, they blame their political leaders for not explaining to the public the cost of the Chinese projects. 

 The Chinese aid program appears to be following the same path as USAID did in its early years in the 1960s and 1970s and may be deliberately copying the U.S. experience. For example, from 1961 until 1982, USAID funded most aid programs through subsidized loans, which ultimately ended during the Reagan administration because the costs were too high and countries were having trouble repaying the loans. In the same way, Chinese aid programs—including the Belt and Road Initiative (which the Chinese argued was not an aid program but a business investment)—were, until recently, funded by loans from Chinese government banks. This has changed in the past two years, as loans for these Chinese projects virtually collapsed. Although the use of loans from government banks is only now beginning to increase again, the Chinese academics revealed that these loans will have to be substantially reduced because countries are unable to repay them.

A second example of China’s treading on a similar path as USAID is the new Chinese aid strategy announced by President Xi Jinping in a speech two years ago that is based on three pillars: small programs are beautiful, green projects addressing global warming are better, and technical assistance and training are best.[iii] In particular, he deemphasized large infrastructure projects. China’s new focus on technical assistance and training seems strikingly familiar to USAID’s large scholarship program during the Cold War. At its peak, the USAID program provided 18,000–20,000 scholarships a year to international students from allied and neutral developing countries to obtain degrees at U.S. universities, but this number declined to less than 1,000 scholarships per year by the 1990s.[iv]The purpose of the scholarships was twofold: promote American values and limit the influence of the Soviet Union. According to the Chinese Ministry of Education, in 2018 China welcomed 492,000 foreign students from 196 countries, of which 63,041 (12.81%) received a scholarship from the Chinese government.[v] However, our Chinese interlocutors did not see these scholarships as part of China’s official aid agency, the China International Development Cooperation Agency (CIDCA), which did not control the funding or management of the scholarships.

Third, USAID was created by President John Kennedy by merging three U.S. government aid agencies—the International Cooperation Administration, the Development Loan Fund, and the Export-Import Bank’s technical assistance functions—that began under Presidents Harry Truman and Dwight Eisenhower, plus the Food for Peace program that began under the latter in 1954.[vi] In 2018, China also created its own independent aid agency, CIDCA, by combining certain functions of ministries responsible for aid activities, including the Ministry of Commerce, Ministry of Foreign Affairs, and Ministry of Finance, to streamline and coordinate the planning and formulation of China’s foreign aid policy under one agency, just as the United States had done with USAID under Kennedy.[vii]

Despite these similarities, the organizational structure of the Chinese aid program is profoundly different from that of USAID until it was virtually abolished by the Trump administration in January and February 2025. This structural dissimilarity concerns where and how program management takes place. Under the Chinese system, all decision-making and all management are centralized in Beijing, with no Chinese aid staff in Chinese embassies or independent Chinese aid agency field offices. At least two-thirds of the 13,000 USAID staff were in U.S. missions in 60 countries of the Global South, managing programs in 130 countries.[viii] About 5,000 of these staff are not Americans but local nationals who had worked for USAID for decades in many cases.[ix]

The Chinese aid agency appears to have no oversight mechanisms to ensure programs are monitored and evaluated on a continuous basis and no audit functions to make sure no money is diverted locally. All Chinese aid programs are run through the governments of the countries, which is how USAID programs were run until the 1990s, when international NGOs, U.S. universities, and USAID contractors took over the management of aid projects. Virtually no USG money was then spent through local governments because of past accountability problems and the inability of local governments to comply with federal program management requirements (required by Congress and U.S. law of all federal agencies—a requirement outside the control of USAID or the State Department).

Relating to the issue of on-the-ground oversight and coordination with other aid donors, I asked the Chinese delegation why Chinese diplomats and officials did not attend donor coordination meetings (which are held by traditional donor governments on a regular basis) in recipient countries; their response was fascinating. They said there is no one in their embassies in these countries who knew anything about their aid programs and could attend these coordination meetings. I asked why their aid spending seems to be a closely guarded secret. Again, their response was intriguing. China’s aid agency does not have an annual aid budget; it has a sinking fund that gets replenished by the Ministry of Finance when it runs out of money. The agency does not know how much it spends each year until the projects are completed. Thus, their budgeting systems appear to be profoundly different from those of traditional donor governments. To further elaborate on the internal confusion within China’s aid agency, the book Banking on Beijing—the most comprehensive study of the Chinese aid program in scholarly literature—tells how senior Chinese aid staff wanted a copy of the comprehensive list of Chinese aid projects that was developed by U.S. scholars because they did not have such a list.[x]

Overall, I found the exchange with the Chinese scholars helpful in correcting some suspicions about their aid programs. The delegation made clear their government was very much interested in collaboration with U.S. aid program managers as a way of improving working relations in at least this narrow area of development policy and planning. This interest by Beijing in collaborating with the United States had not been the case in the past and grew more pronounced after the election of President Trump in November 2024.

End Notes

[i] Christina Lu, “USAID purge ends with 83 percent of programs canceled,” Foreign Policy (March 10, 2025), https://foreignpolicy.com/2025/03/10/trump-rubio-usaid-cuts-foreign-aid/

[ii] “United States Agency for International Development (Thailand), “DevelopmentAid,” https://www.developmentaid.org/donors/view/145386/usaid-thailand

[iii] “Full text of Xi Jinping's keynote speech at 3rd Belt and Road Forum for Int'l Cooperation,” China Daily (October 18, 2023), https://www.chinadaily.com.cn/a/202310/18/WS652fa59aa31090682a5e94e1.ht…

[iv] Andrew S. Natsios, "Foreign aid in an era of great power competition," PRISM 8, no. 4 (2020): 101–119, https://ndupress.ndu.edu/Portals/68/Documents/prism/prism_8-4/prism_8-4…

[v] “Statistical report on international students in China for 2018,” Ministry of Education (April 17, 2019), http://en.moe.gov.cn/documents/reports/201904/t20190418_378692.html

[vi] National Archives, “RG-286: Records of the U.S. Agency for International Development,” https://www.archives.gov/research/foreign-policy/related-records/rg-286

[vii] Marina Rudyak, “The ins and outs of China’s International Development Agency,” Carnegie Endowment for International Peace (September 2, 2019), https://carnegieendowment.org/2019/09/03/ins-and-outs-of-china-s-intern…

[viii] Emily M. McCabe, “U.S. Agency for International Development: An overview,” Congressional Research Service (March 14, 2025), https://www.congress.gov/crs-product/IF10261

[ix] “Stand up for aid situation report #7,” USAID Alumni Association (April 4, 2025), https://usaidalumni.org/wp-content/uploads/2025/04/Stand-Up-for-Aid-Sit…

[x] “Banking on Beijing: The aims and impacts of China's overseas development program,” (Cambridge: Cambridge University Press, 2022), https://www.cambridge.org/core/books/banking-on-beijing/ED897623B19C117…