1 minute read
The West’s response to Belt and Road
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
Advertisement
In the nine years since China launched its Belt and Road Initiative (bri), a multiate and public investment in infrastructure in low and middleincome countries billiondollar spree of global infrastructurebuilding, American efforts to counter the scheme have repeatedly faltered. Barack Obama’s administration failed to persuade allies to boycott the Chineseled Asian Infrastructure Investment Bank. Mr Obama touted a freetrade deal, the TransPacific Partnership, but Donald Trump sank it in his first 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 construction contracts (many financed by Chinese loans) between 2013 and 2021, says Christoph Nedopil Wang at Shanghai’s Fudan University. And every time America criticised China’s “new Silk Road”, the riposte came: “What are you offering instead?”
Now, just as China starts to scale back its programme, America and its allies appear to have come up with an answer. On June 26th the rich democracies of the g7 unveiled a plan to mobilise $600bn of privover the next five years. It is called the Partnership for Global Infrastructure and Investment (pgii). President Joe Biden said his country would stump up $200bn. Western officials 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 connectivity, health and women’s equality. In contrast to China’s scheme, it promises to be transparent and sustainable—financially, environmentally and socially. Whereas China’s programme mainly involves loans from statecontrolled banks, the pgii will 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 headwinds, 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 recipient of Chinese loans, defaulted in May. The bri had also grown too large to manage effectively. 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 continue (it is written into the constitution), China’s president, Xi Jinping, is now promoting a new idea, the Global Development Initiative, which is expected to focus more on sustainable development.
The upshot is that China’s efforts 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 focusing 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
→ Also in this section 36 Success in dealing with floods 37 Shanghai’s police hacked 37 A crackdown on larping — Chaguan is away
