For nearly a decade, Beijing’s sprawling foreign development initiative known as the “Belt and Road” has poured billions of dollars a year into infrastructure projects — paving highways from Papua New Guinea to Kenya, building ports from Sri Lanka to West Africa, and more Providing electricity and telecommunications infrastructure to people from Latin America to Southeast Asia.
In June, Biden and leaders of the Group of Seven advanced economies pledged to unlock $600 billion in investment through 2027 — including $200 billion from the US alone — to support “groundbreaking projects to bridge the infrastructure gap” between the United States to deliver countries.
“We have seen the consequences when international infrastructure deals are corrupt and enforced, when they are poorly built or environmentally destructive, when they import or abuse workers, or burden countries with crushing debts,” Blinken said during a visit to Pretoria, where he unveiled the new White House Sub-Saharan Africa Strategy.
“That’s why it’s so important that countries have choices, to be able to weigh them transparently, with the input of local communities without pressure or coercion,” he said, in an apparent reference to widespread criticism of China-funded projects.
All can Creating an opportunity for Washington to step forward and work with willing partners in need of funding. But there are big questions about how far the US can deliver, both in terms of mobilizing billions and building out infrastructure – areas where China has long excelled.
boom or bust?
Since its official launch in 2013, at the beginning of Chinese leader Xi Jinping’s first term in office, funds under the initiative have fueled the construction of bridges, ports, highways, energy and telecommunications projects across Asia, Latin America, Africa and parts of Europe .
China has relied on lending to do this, with capital often coming not only from its development banks but also from state-run commercial lenders – a marked contrast to the American model, which relies largely on official aid.
And while countries around the world welcomed the funding, it also came with problems.
“We find that 35% of the projects (Belt and Road) suffer from some kind of implementation problem,” said research scientist Ammar A. Malik, who leads AidData’s China Development Finance Program. He said that these issues include environmental incidents, corruption scandals and labor rights violations, and the figure of 35% refers specifically to projects that are exclusively carried out by a Chinese company.
AidData has also reported on so-called “hidden debt,” which refers to cases where the recipients of Chinese loans are corporate entities such as private or project companies, not the governments themselves, but the terms of the loan require the host country government to guarantee it . This can ultimately shift liability for repayment to them if borrowers fall short, the researchers say.
Beijing has said it remains committed to the initiative, with its top diplomat Yang Jiechi at a trade forum on Aug. 14 calls for “Belt and Road” to “promote early recovery and growth of the world economy”.
But while tracking investments is difficult with a variety of players and without a centralized, public Belt and Road data source, there are signs that China’s efforts, particularly large-scale projects, have flagged in recent years and since the pandemic.
“Possible reasons for this decline include the deterioration of economic conditions in host countries due to the Covid-19 pandemic and a lack of demand from the host country due to budgetary constraints and debt problems. Limited travel and the suspension of several projects (Belt and Road) may also have contributed to preventing financial deals from being completed,” said data analyst Oyintarelado Moses of the center’s Global China Initiative.
“Before the pandemic, Chinese policy banks’ funding was already in decline. The pandemic appears to have accelerated this trend,” she said, adding that Chinese institutions are now “taking stock” of their policies.
More time may be needed to observe whether funding for Belt and Road infrastructure has peaked and to assess the initiative’s overall performance, others say.
“The (initiative) is not even a decade old. It would be premature and simplistic to call it a failure because of delayed or ailing projects, just as it would be a success for China’s global influence,” said Austin Strange, assistant professor of international relations at the University of Hong Kong.
Better to rebuild?
In addition to the US pledge of $200 billion in grants, federal funding and private sector investment, the White House pledged the project would “show how millions of dollars can mobilize tens or hundreds of millions of more investments, and tens or hundreds of millions can.” mobilize billions.”
But unlike Beijing’s model, in which state-run companies play a key role, analysts say the US has no such ability to dictate the size and scope of private sector investment.
The US also doesn’t have the same kind of internal dynamics, such as overcapacity in the industrial sector, that made the Belt and Road an ideal outlet for the Chinese economy and allowed it to launch projects quickly.
“This isn’t the first time expectations have been built, but getting private companies to fund (projects) will be quite a challenge because ultimately they are accountable to their shareholders and want projects that are bankable.” , said Malik of AidData.
But while US private companies will seek to turn a profit, the plan has the potential to open up opportunities for the US and partners in developing countries, particularly in certain sectors, analysts say.
One reason is that the US seems willing not to compete with China on the type of signature big ticket objects like bridges and railroads it’s known for, or trying to push countries into choosing China or China – a choice likely few would be willing to make.
Instead, it could use its own public-private financing model and focus on areas where it could have competitive advantages, analysts say, with Biden laying out projects in energy security and climate resilience, information and communications technology, and infrastructure to advance gender equality and empowerment of health systems as priority areas.
However, the US and its partners must do more than in the past to become “strong alternative sources of investment” that partner governments prefer to China, according to Boston University’s Moses, who highlighted US strengths in regulatory standards, transparency and environmental protection added or social safeguards might appeal to some partners.
The US may also have to face the perception that it withdrew from Africa after the end of the Cold War, only to return when another great-power rivalry is at play, according to Christopher Isike, director of the African Center for the Study of Africa the United States at the University of Pretoria in South Africa.
“When these initiatives like (the new US ‘sub-Saharan Africa’ strategy) come along, people are skeptical,” he said.
However, governments on the continent would welcome more sources of funding to cover deficits, and there is a perception that the US is more transparent and has an edge when it comes to soft power, Isike said.
As this great power competition returns to Africa, the question should not be whether or how countries would choose between the US or China, but whether African governments “would be willing to take advantage of this type of competition.”