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China
The Economist July 9th 2022
Global infrastructure investment
Building blocs Having watched China’s Belt and Road Initiative for nearly a decade, the G7 has at last come up with an alternative
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n the nine years since China launched its Belt and Road Initiative (bri), a multi billiondollar spree of global infrastruc turebuilding, American eff orts to counter the scheme have repeatedly faltered. Ba rack Obama’s administration failed to per suade allies to boycott the Chineseled Asian Infrastructure Investment Bank. Mr Obama touted a freetrade deal, the Trans Pacifi c Partnership, but Donald Trump sank it in his fi rst week in the White House. As some countries struggled to repay Chinese loans, the Trump administration got some traction calling the bri “debttrap diplomacy”. The scheme still accounted for about $890bn in investment and construc tion contracts (many fi nanced by Chinese loans) between 2013 and 2021, says Chris toph Nedopil Wang at Shanghai’s Fudan University. And every time America criti cised China’s “new Silk Road”, the riposte came: “What are you off ering instead?” Now, just as China starts to scale back its programme, America and its allies ap pear to have come up with an answer. On June 26th the rich democracies of the g7 unveiled a plan to mobilise $600bn of priv
ate and public investment in infrastruc ture in low and middleincome countries over the next fi ve years. It is called the Part nership for Global Infrastructure and In vestment (pgii). President Joe Biden said his country would stump up $200bn. Western offi cials say the scheme will not compete directly with the bri, which has focused on ports, railways and other “hard” infrastructure. Instead, it will try to play to the g7’s strengths by prioritising climate and energy security, digital con nectivity, health and women’s equality. In contrast to China’s scheme, it promises to be transparent and sustainable—fi nancial ly, environmentally and socially. Whereas China’s programme mainly involves loans from statecontrolled banks, the pgii will → Also in this section
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aim to use limited government resources to catalyse larger private investments. “This isn’t aid or charity,” Mr Biden said on the plan’s launch. “It’s an investment that will deliver returns for everyone.” On the face of it, the plan is bad news for China. The bri was already facing head winds, owing partly to excessive lending to commercially dubious projects and partly to the impact of covid19. Pakistan, once hailed as the bri’s centrepiece, is on the brink of default. Sri Lanka, another big re cipient of Chinese loans, defaulted in May. The bri had also grown too large to man age eff ectively. Those problems, combined with an economic slowdown at home, have prompted a scaling back, and the steering of funds towards smaller, higherquality projects and into “soft” infrastructure such as health care. Although the bri will con tinue (it is written into the constitution), China’s president, Xi Jinping, is now pro moting a new idea, the Global Develop ment Initiative, which is expected to focus more on sustainable development. The upshot is that China’s eff orts will increasingly come into direct competition with the g7’s. Some Chinese experts warn this will complicate Chinese strategic goals. Wang Yongzhong of the Chinese Academy of Social Sciences says that by fo cusing on “soft” infrastructure where they have comparative advantages, Western countries aim to boost exports of their own technology and services in areas such as 5g telecoms, blockchain and clean energy. That would allow them to “reap rich geo
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