INTRODUCTION
Geopolitical and global economic realities are not what
they once were 30 years ago. China is now a competitor—a
“near-peer soft power” that is willing and able to ll the
void left by the United States and its allies. In addition
to maintaining military superiority in pursuit of peace
through strength, competition with China exists on
two other fronts. One consists of economic competition
through strategic technological and industrial sectors,
such as port infrastructure, articial intelligence (AI), the
extraction and processing of critical minerals, telecom-
munications, subsea beroptic cables, and microchips.
A related front of great power competition involves the
Global South and the development aspirations of low- and
middle-income countries.
China recognizes the reality of these three fronts of great
power competition and has invested accordingly. With its
Belt and Road Initiative (BRI) and subsequent Digital Silk
Road and Maritime Silk Road, China is building and operat-
ing the enery, digital, and transportation infrastructure of
the developing world. In this way, Beijing seeks to link the
Global South back to the Middle Kingdom—a term derived
from the concept of China being the cultural, political, and
economic center of the world.
CHINESE VS. U.S. APPROACHES
China’s approach in the Global South diers greatly from
that of the United States. Although development nance
data is not transparent, China primarily provides debt
nancing instead of grants. According to AidData, China
committed $3.4 billion worth of grants in 2021. The Organi-
sation for Economic Cooperation and Development (OECD)
estimates that China allocated only $3.1billion in the form
of grants in 2022. Beijing’s preferred method of meeting
the development aspirations of the Global South has been
a forward-looking investment stratey. From 2013 to 2021,
THE ISSUE
The global development landscape has undergone profound changes over the past 30 years, with new players providing fund-
ing, the deployment of a variety of nancing tools, and growing human needs and challenges in the Global South. However,
nearly the entirety of U.S. foreign assistance is still disbursed via grants—that is, money provided for development purposes
without an obligation of repayment. The U.S. soft power toolbox has not yet fully adapted to this changed global reality and, as
a result, remains behind the times. The development priorities of the Global South demand a level of resources that far exceed
what grant funding can provide. The United States can be a better partner to developing countries by using non-grant tools
to help unlock private capital and build up nancial sectors, putting nations on a path toward self-suciency and away from
dependency on China.
DECEMBER 2024By Daniel F. Runde, Rafael Romeu, and Austin Hardman
Thinking Outside the Toolbox
Equipping U.S. Development Assistance for Modern Times
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