The United States and its allies are scrambling to establish a global infrastructure financing mechanism to counteract China’s use of what US officials call Beijing’s “merchantism” and “predatory” Belt and Road development loans to build projects and buy influence around the world. Trillion dollar initiative.
Although the Biden administration has designated its efforts as an effort to tackle global climate change, it has generally run its momentum in response to the massive infrastructure loans China provided to low- and middle-income countries by President Trump in the past ten years. New roads, bridges, ports and railway lines are built around the world.
The current White House stated that the future of the U.S. economy will depend to a large extent on the huge global demand for infrastructure development, and Washington’s ability to direct funds to such infrastructure will determine the United States’ role as a global superpower in the coming decades. How influential is.
The White House National Committee stated that if Washington wants to ensure the security of the US global supply chain and public health infrastructure, it must play a more active role by raising an estimated US$40 trillion in infrastructure projects for developing countries by 2035. Brian Diss, director of the Economic Committee.
In a speech at the Peterson Institute for International Economics event last week, Mr. Diss said that U.S. participation abroad can create new economic and export opportunities for U.S. companies that ultimately create jobs at home.He claimed that the opportunity is right now, “to establish a field with industrial strength and manufacturing capabilities. [and] The potential for innovation in the United States also provides another option for the Chinese government’s mercantilist approach. “
So far, the Biden administration’s efforts have been attributed to a new support for transparent infrastructure financing model announced by the United States and other industrial democracies of the Group of Seven countries four months ago, called “Rebuilding a Better World” or ” B3W” initiative.
“This is not just about confronting or accepting China,” a senior White House official told reporters when the initiative was announced in June. “It’s about providing a positive, positive, alternative vision for the world, not about [being] Presented in similar ways by China and Russia, but also presented in some different ways. “
The United States and other democracies have been trying to figure out a way to counter China’s “One Belt One Road” initiative, which was launched by the Communist Party government in Beijing nearly a decade ago as a springboard for its rising global influence.
Xi Jinping described the plan he first proposed in 2013 as an important part of the “Chinese Dream” of his rise to an economic superpower. Many in Beijing also see it as an update of ancient, China-centric trade routes, such as the Silk Road that traverses Asia and the Middle East, which were cut off when Europe and the United States dominated world trade flows.
A survey conducted by the Foreign Relations Committee earlier this year has detailed the “Belt and Road” project: “39 countries in sub-Saharan Africa have joined the initiative, 34 countries in Europe and Central Asia, and 25 in East Asia and Africa. Countries. Pacific, 18 in Latin America and the Caribbean, 17 in the Middle East and North Africa, and 6 in South Asia. These 139 members [the Belt and Road Initiative]Including China, it accounts for 40% of global GDP. “
The Belt and Road Initiative revolves around the International Monetary Fund and the World Bank. They are the bastions of the Western post-war economic order. They have long been the standard bearers of global infrastructure financing before China took the stage.
Chinese officials said that these projects are a win-win proposition, winning goodwill in Southeast Asia, Europe, Africa and Latin America countries, while creating new trade routes and export opportunities for Chinese companies and infrastructure construction projects. The largest projects include roads and bridges, power plants, railway lines, fiber optic networks, and port overhauls.
US officials and some private analysts believe that the “Belt and Road” involves “predatory” loans designed to deceive poorer countries so that China can use political and natural resource concessions in exchange for debt relief in the future. Critics even accuse China of using the initiative as a cover for a decades-old strategy to lay the foundation for overseas military bases.
Beijing firmly denies these allegations and often asserts that the United States, not China, has a history of militarization of foreign aid.
However, with regard to financial uncertainty, a recent study by AidData, a research institution at the College of William and Mary in Virginia, found that the “Belt and Road Initiative” is based on a “secret overseas development financing plan” that has allowed dozens of developments China has assumed responsibility. A country with nearly $400 billion in “hidden debt”.
According to the study, about 35% of more than 13,000 projects funded by Chinese government loans also have “significant implementation issues”, including corruption scandals, environmental hazards, labor violations, and public protests. It added that the basis of the “Belt and Road” is loans, which usually have heavy conditional debts, which are not disclosed to borrowing countries in Africa, Southeast Asia and other corners of the world.
In addition, it stated that Beijing “contracts to require overseas borrowers to purchase project inputs (such as steel and cement) from China” and “allows countries to use the funds they obtain from exporting natural resources to China to guarantee and repay loans.”
AidData’s research also stated that the United States and its allies are now “joining together” around their own “B3W” infrastructure initiative to “sustainable and transparent financing, good governance, public sector mobilization of private capital, negotiation and partnerships. The principle is the guide”. Cooperate with local communities and strictly abide by social and environmental safeguards. “
The G7 countries — the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom — announced the B3W initiative in June, whose name comes from Mr. Biden’s core economic plan in the 2020 presidential campaign.
But it remains to be seen whether the Biden administration has geopolitical capital to guide it to achieve practical results. It is also unclear to what extent B3W will coordinate with other measures aimed at countering China, including the so-called “four countries”-the United States, India, Japan and Australia-diplomatic and security alliances.
Two years ago, the United States, Japan, and Australia announced the so-called “Blue Dot Network”, a transparency initiative designed to evaluate and certify infrastructure development projects in the Indo-Pacific and other regions. The Trump era also ushered in the reorganized U.S. International Development Finance Corporation, aimed at stimulating greater private investment in foreign development projects. After the COVID-19 pandemic, Mr. Trump alone established the so-called “economic prosperity network” to reduce the dependence of the global supply chain on China.
Biden administration officials suggested that B3W will integrate all previously announced measures into a coherent and complementary whole.
“We are seeking to transform our US government’s financing tools to make full use of private capital to participate in this work,” Mr. Diss said last week. “For example, the Development Finance Corporation-the newly restructured DFC-has just innovated in entering new tools this year, trying to release private capital.”
He pointed to the role of DFC in the recent “debt swap” in Latin America, which led to a US$250 million investment in Brazil’s “smart city infrastructure” company.
However, Mr. Diss seems to be eager to regard B3W as being as important as responding to climate change as responding to China. He said the goal is to promote a “multilateral” approach that encourages influential countries to “compete first” and “invest in a high-speed, low-carbon approach centered on workers and workers’ rights.” effort. ”
He said that B3W’s promotion has played a role in China’s recent announcement that it will no longer build or fund coal-fired power plants internationally. “This is a welcome sign, which also appeared shortly after South Korea and Japan made equal commitments. If you take a step back, these two countries, together with China, already account for more than 95% of total foreign investment in coal-since Power plants have been used since 2013,” said Mr. Diss. “Part of the effort to rebuild a better world with a multilateral approach is to encourage more active and active activities from other countries.”
“None of this will be easy. If this were the case, many things would have already been done,” he said.
Some observers believe that, in the long run, the promotion of the United States and the West may eventually compete actively with China’s development spending, and even cooperate.
“The idea is to clearly oppose Beijing-not positively, to promote development financing in the United States and the West,” Keith Johnson, a long-time geoeconomic reporter, wrote recently in Foreign Policy.
“As we all know, B3W focuses on several core areas-climate change, health and safety, digital connectivity, and gender equality-which are not exactly the same as China’s dredging ports or building highways on mountainsides,” Mr. Johnson wrote.
“…As Washington and Brussels are now fully mobilized to counter Chinese overseas investment, the question becomes: whether the West-infrastructure projects with different themes and priorities-can cooperate, or whether there will be an incoordination The label team faces China?”