Competing with China's Belt and Road Initiative

Unveiled at the G7 summit last weekend (June 11-13), the “Build Back Better World” (B3W) partnership has been framed by President Joe Biden as an alternative, democratic infrastructure initiative to China’s Belt and Road Initiative (BRI).

For now, the initiative remains largely rhetoric, with the only concrete action being the creation of a taskforce that will “develop practical proposals” and report back to the heads of government in autumn. Reference to the BRI is missing from the G7 communiqué,²  but in his closing remarks at the G7 summit, President Joe Biden made the comparison clear. “China has its Belt and Road Initiative,” Biden said, “and we think there’s a much more equitable way to provide for the needs of countries around the world.”³

Of course, addressing the global infrastructure deficit in the wake of the Covid-19 pandemic is a worthy and necessary goal, but how exactly does this relate to the BRI?

Given the increasingly tense relationship with China, the reasons for competing with the BRI would appear self-explanatory, but the logic of competition is not so straightforward, especially given that the sprawling BRI is poorly defined.

In this edition’s focus topic, we look at existing strategies on competing with the BRI in the EU and United States and ask several questions about the logic of competing with the BRI.

How do we mitigate the BRI’s negative impacts?

The BRI, or the “New Silk Road,” is often viewed as a successful manifestation of China leveraging economic power into political influence. Unsurprisingly, therefore, the BRI has attracted a backlash.

However, problems with the transparency and sustainability of projects have also undermined the BRI by generating political fallout and public hostility in host countries.

The European Union and the United States both articulate their responses to the BRI as stemming from the initiative’s less desirable impacts. The United States has called China out directly for “predatory economic practices.” The EU has been less blunt. However, the EU’s own connectivity strategy implicitly questions BRI projects’ transparency, market efficiency, and social, environmental, and economic sustainability, so there is considerable common ground on both sides of the Atlantic.

The BRI is a vast and heterogeneous phenomenon, so it is hard to generalize about the projects under its auspices. However, China typically delegates much of the responsibility for oversight and regulation of BRI projects to host countries. This approach is part of the BRI’s appeal to host governments, especially when contrasted to more prescriptive terms and conditions for project funding from Western governments and international agencies. However, China’s approach can contribute to problems in countries where corruption is endemic and poor practices prevail.

The best solution to mitigating the negative impacts of BRI projects is thus to increase project oversight and negotiating capacity in host countries.

Recent developments in the United States and the EU suggest that politicians recognize this fact. The EU Parliament’s resolution on expanding the EU Connectivity Strategy calls for “capacity-building for sustainability.”

Meanwhile in the United States, the Senate has recently passed legislation that authorizes⁴  USD 75 million per year for the Infrastructure Transaction and Assistance Network – an initiative tasked with advancing “sustainable, transparent, and high-quality infrastructure” in the Indo-Pacific by providing project related services to host countries (see exhibit 1).⁵

What is the BRI doing that the West is not?

Calls for alternatives to the BRI are not just prompted by the initiative’s failures. After all, if the only concern were to mitigate the BRI’s negative impacts then capacity building would be a sufficient response, which is not the current mood.

The appetite for competitive connectivity is driven by widespread perceptions of China’s success: the BRI is seen as advancing Beijing’s strategic interests or contributing something to the cause of global development that is missing from the status quo.

It remains far from clear whether the BRI is effective, either in delivering for China’s strategic interests or public good terms. Even so, the question must be asked as it is an essential departure point for any alternative to counter the BRI.

The BRI itself originated as China’s alternative to status quo development models.

Since at least the 1990s, “traditional donor” countries and their institutions had prioritized poverty reduction, and “soft” infrastructure over big physical infrastructure projects. For instance, the World Bank decreased lending for infrastructure to below 30 percent of its total lending in the early 2000s. Instead, it opted to expand antipoverty and rural development programs.

China, meanwhile, has emerged as a heavyweight in financing global infrastructure and providing the engineering know-how.

The BRI is about more than infrastructure – it is branding for China’s vision of what it thinks it can offer the world, for what Beijing refers to as “global public goods.” This expansive vision straddles the financial, trade, regulatory, and cultural realms. However, the provision of physical economic infrastructure has attracted the most attention, whether that is measured in finance from Beijing or international scrutiny.

Enabled by a state mercantilist approach to development finance, Beijing has invested in big-ticket infrastructure projects that would be deemed too risky and unprofitable for private investors.

Is now the right time to challenge the BRI?

Ironically, the West’s appetite for a response to the BRI has reached an all-time high at the moment that enthusiasm for the BRI in its familiar form has diminished in China. Loans from Chinese policy banks have been drying up since 2016, with Beijing attempting to rein in lending for risky projects. At the same time, Beijing is emphasizing private public partnerships (PPP) projects and “high quality development.”⁶

Despite institutionalizing some distinctly Chinese concepts, the latest Chinese white paper on international development cooperation, released in January 2021, signals a desired direction of travel toward international norms, at least on points of sustainability.⁷

Soon after the BRI’s launch in 2013, Beijing began to reconsider risky lending practices for the same reasons that trimmed the appetite for big-ticket infrastructure projects in Japan and other status quo stakeholders.

It is possible that China, the United States, and Europe may actually find themselves aligned in trying to mitigate risks associated with building infrastructure in developing countries.

Ordinarily, Beijing’s focus on “high quality development” would signal opportunity for cooperation with experienced stakeholders like the EU. However, cooperation with China on connectivity has fallen out of fashion even in Europe, let alone in the United States.

In formulating alternatives, the United States and the EU should keep in mind the changing nature of the BRI and be wary of responding to yesterday’s initiative.

Have we got our narrative right?

Both the United States and the EU acknowledge to some degree that the BRI’s success may be a question of optics. The Innovation and Competition Act that recently passed the Senate in the United States authorizes several tranches of new funds for competing with China overseas, but the largest is for “countering malign CCP influence” – i.e., media and influence work.

Meanwhile, the EU’s connectivity strategy is underwritten by a sense of dismay that the BRI has become so much more visible than the EU’s already significant contributions to global connectivity.

The EU strategy is partly about introducing a strategic mindset to EU connectivity planning, but it is also a call for a more effective communications strategy. The EU already does a huge amount of work in connectivity, but this work is fragmented across member states and various institutions. The feeling in Brussels is that the EU must copy the BRI’s success in unifying these efforts under a single brand.

In establishing a new fund for external development, the EU has done exactly that. It has streamlined a bundle of incoherent financial instruments under a single recognizable label: “Global Europe.”⁸

However, on both sides of the Atlantic there is a tendency to overestimate the degree to which Beijing’s propaganda machinery is responsible for the BRI’s narrative success. The BRI has gained narrative currency in large part due to the compelling story of China’s rise. In many countries, China attracts attention simply because it is the newest great power on the scene.

China also has an advantage in much of the Global South, where resentment towards former colonial powers runs deep. China styles itself as a developing country. In contrast to “donor-recipient” dynamics in Western aid relationships, Beijing approaches developing countries as partners in “development cooperation.”

While the EU insists on doing things the European way, China is for now more agnostic on issues of economic reform and governance.

Officials and commentators in Washington and Brussels tend to project their own sentiments toward the BRI onto the rest of the world, while overestimating their own popularity. There is no easy answer to how the EU can promote its values while avoiding the impression of a hectoring colonial power, but the solution is not simply to shout the same message louder.

Endnotes

2    https://www.g7uk.org/
3    https://www.rev.com/blog/transcripts/joe-biden-g7-summit-2021-speech-transcript
4    https://www.cnbc.com/2021/06/08/senate-passes-bipartisan-tech-and-manufacturing-bill-aimed-at-china.html
5    https://www.rpc.senate.gov/legislative-notices/s1260_the-united-states-innovation-and-competition-act
6    https://merics.org/en/tracker/merics-global-china-inc-tracker
7    http://english.www.gov.cn/archive/whitepaper/202101/10/content_WS5ffa6bbbc6d0f72576943922.html. http://english.www.gov.cn/archive/whitepaper/202101/10/content_WS5ffa6bbbc6d0f72576943922.html
8    https://www.cgdev.org/blog/redesigning-global-europe-eus-neighbourhood-development-and-international-cooperation