Connecting the dots: The G7 plan to counter China’s Belt and Road Initiative

By Robin Vandendriessche

Connectivity has become a buzzword in Brussels ever since China kicked off its flagship Belt and Road Initiative (BRI) in 2013. The strategic importance of the concept, however, is nothing new. Since the time of the Roman empire, great powers have pursued connectivity strategies, accessed markets and built infrastructure. Due to a rapidly evolving world, connectivity now includes more sectors than ever before such as energy, education and finance. The intensity, scale and impact of the concept have changed dramatically from its early 21st century variant, especially because of the digital revolution. States increasingly make strategic use of economic interdependencies and networks to exert political influence. Connectivity as a strategy should thus be distinguished from connections that are built randomly.

In response to the BRI, the United States – together with Japan and Australia – developed the Blue Dot Network in 2019 which aims to provide a globally recognized evaluation and certification system for infrastructure and development projects. The rationale behind it is that projects receiving a specific label are guaranteed to be of high quality, which helps attract private investment. However, contrary to China’s 1.3 trillion dollar program, the United States did not directly finance infrastructure projects and heavily depended on the private sector.

The EU did better in December 2021 when it launched its 300 billion euro Global Gateway funding scheme for smart, clean, and secure links in digital, energy and transport sectors, which builds on the achievements of its 2018 EU-Asia connectivity strategy. Funding will be primarily provided by development institutions of the EU and its member states, the European Investment Bank (EIB) and the Neighborhood, Development and International Cooperation Instrument (NDICI), supplemented by the mobilization of private capital.

Not only in absolute numbers is the BRI more interesting than the US and EU initiatives combined,  it also directly funds projects without demanding the same level of environmental and social standards. This seems interesting at first sight, especially for developing nations that lack the necessary funding capacity. However, such major infrastructure projects under the BRI umbrella do involve risks such as elite capture, corruption and environmental degradation. A significant number of BRI target countries also struggle with unsustainable levels of debt. For example, the construction of the Kunming-Singapore railway in Laos has an estimated cost of nearly 40 percent of the country’s GDP in 2016. Many of these projects are not profitable, which means loans are sometimes impossible to pay off.

For a long time, the United States, the EU and their allies, lacked a single infrastructure investment project to rival the BRI effectively despite having announced a global infrastructure initiative in June 2021. That initiative was considered to be the foreign version of U.S. President Biden’s domestic plan called Build Back Better to help meet the infrastructure needs in low- and middle income countries. The West, for too long, focused on addressing mere principles for quality infrastructure while China responded to the estimated 1.7 trillion dollar annual infrastructure demand across Asia with loans through the BRI.

At the G7 summit in June 2022, the world’s wealthiest democracies announced a 600 billion dollar global infrastructure plan to counter the BRI, through which China exerts political influence in strategically important states. The United States will aim to leverage a total of 200 billion dollars through a combination of public and private investments. This move supplements the 300 billion dollar Global Gateway initiative already announced by the EU, as well as several contributions from other members. The objective is to offer (developing) countries financing opportunities for sustainable and high quality infrastructure, in order to help them diversify away from Chinese debt trap programs.

With this renewed initiative, the West did go further than coordinating standards on high quality infrastructure. G7 leaders decided to integrate the EU’s Global Gateway Initiative together with British and American programs into a single infrastructure investment program called ‘the Partnership for Global Infrastructure.’ However, inflation and the war in Ukraine have made the plan increasingly more expensive than initially planned. Although better coordination has been indispensable, much of the funding behind the plan seems to fall short of its lofty goals. How and if the initiative will be a worthy alternative to the BRI remains to be seen.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: