If the US Wants to Beat China, Why Is It Copying China’s Socialism?
Under the Biden administration the US continued escalating the economic and geopolitical frictions with China. At the recent G7 Summit in Carbis Bay, President Biden sought to rally a “united front” against China with traditional G7 allies and new ones such as Australia, India, South Korea, and South Africa and rebuked China on economic policies, human rights, and tensions in the East and South China Seas. The US also persuaded its G7 allies to back a massive infrastructure support package for developing countries. The so-called Build Back Better World Partnership (B3W) is a de facto rival to China’s Belt and Road Initiative (BRI). But it is far from obvious what the West stands to gain by emulating China’s exorbitant and highly controversial modern “Silk Road” venture.
The US’s Ambitious Global Infrastructure Plan
The B3W wants to mobilize “hundreds of billions of dollars of infrastructure investment,” in order to narrow an estimated infrastructure need of $40 trillion plus in the developing world. The B3W financing is expected to come from US budgetary instruments, such as the Development Finance Corporation and the United States Agency for International Development (USAID); from multilateral development banks (MDBs), such as the World Bank; and from the private sector and G7 partners. As the B3W is meant to challenge China’s project, we expect it to at least match the Chinese financial envelope, most commonly estimated at more than $1 trillion in investment and lending commitments so far.1 This is more than eight times higher than the nearly $113 billion in official development assistance and $22 billion in private sector investment provided by G7 countries for foreign infrastructure projects during 2015–19 (graph 1).
Graph 1: G7 Infrastructure Development Assistance
Source: Center for Strategic and International Studies (CSIS).
In order to surpass China, the B3W aims at having a broader geographical coverage, a wider focus, and better project governance and standards. The BRI comprises a “Silk Road Economic Belt” trying to link China with Asia, Russia, and Europe by land, and a “Maritime Silk Road,” connecting China’s coastal regions with Asia, the South Pacific, Africa, and Europe, but its Western challenger aims at being global in scope. While the Chinese initiative is focused on traditional infrastructure projects—highways, railroads, ports, and power plants, the B3W wants to invest also in climate, health and digital technology. And because Chinese projects have been heavily criticized for lack of transparency, corruption, unsustainable debt and adverse environmental and social impacts, the B3W advertises itself as “a values-driven, high-standard, and transparent infrastructure partnership led by major democracies.”
Holes in China’s “Silk Road”
From its announcement in 2013, China’s megainfrastructure project has been met with suspicion in the West. Most important, it was feared that China had geostrategic ambitions to bring smaller BRI partners under its sphere of influence. It was also claimed that China was pursuing a “debt-trap diplomacy” in order to take over key strategic assets such as electric grids and ports, while the latter could be also used for military purposes.
With time, many analysts realized that much of this criticism was exaggerated. First, almost 140 countries have signed on to the BRI as of this writing, of which eighteen are from the EU, showing that many governments find the Chinese deal beneficial. And although China has not financed in full the promised $1 trillion in projects so far, it did make $190 billion worth of investments and $390 billion in construction work (financed by Chinese loans in general) during 2014–18. This is more than the $467 billion of development loans provided by the World Bank during 2008–19. Second, while the number of requests for debt renegotiation and relief has increased, overseas asset seizures have rarely occurred. Third, many pundits concur that the BRI ports are commercially designed and almost impossible to employ militarily.
Undeniably, China has been trying to enhance its political influence through the BRI, and is now perceived as the most influential economic actor in Southeast Asia and Africa. But resentments over some onerous projects, corruption scandals, and increasing debt burdens mean that such gains could be easily reversed, and China has started to improve its lending and investment standards. The BRI focus has been wide
Article from Mises Wire