US and EU up the ante on China in a game of loans
Washington and Brussels aim to untangle Beijing’s New Silk Roads with sustainable funding for global development
Breathtaking in scale but mired in controversy, China’s New Silk Roads snake across the planet like red threads.
At least US$1 trillion in loans underpin the Belt and Road Initiative, the flagship of President Xi Jinping’s foreign policy. It is where soft power collides with hard power in a massive global building boom.
Mixed, of course, with millions of tons of cement.
Alarmed by Beijing’s growing influence across four continents and allegations of “debt-trap diplomacy,” the United States and the European Union have entered the dragon’s domain.
Up to Є300 billion euros, or $340 billion, will bankroll the EU’s Global Gateway strategy to counter China’s Belt and Road program. Another alternative will be the multi-billion-dollar Build Back Better World blueprint, unveiled by US President Joe Biden earlier this year.
“Transparency” will be at the heart of both ventures in this geopolitical game of loans.
“Build Back Better and Global Gateway represent a long overdue, and desperately needed, international recognition of China’s threat to the global architecture – and Beijing’s weaponization of commercial, diplomatic, and other non-military engagement,” Emily de La Bruyere, of Horizon Advisory, told China Factor in an email.
“China’s network of international investments and acquisitions constitute parts of an overall strategic [move] to sow international dependence on [Beijing] and to lock in China’s control over emerging international [development],” de La Bruyere, a co-founder of the consultancy that is based in Washington and New York, said.
Rolled out in 2013, the BRI is crucial to Xi’s global ambitions. Strands of these New Silk Road superhighways connect China with 70 countries and 4.4 billion people across Asia, Africa, parts of Europe and South America in a maze of infrastructure projects, including a web of digital links.
Beijing loans have funded 13,427 developments in the past 18 years, according to a major study by AidData. A vast array of them includes cutting-edge surveillance technology and big data with a tentacle-like reach.
There are other concerns. At least half of the country’s overseas lending is for the construction of roads, railways, power plants and dams.
In turn, this has kept China’s sprawling industrial sector humming.
“A growing number of policymakers in low- and middle-income countries are mothballing high profile BRI projects because of overpricing, corruption, and debt sustainability concerns,” Brad Parks, one of the AidData authors of the September study by the research lab at the elite College of William and Mary, said about China’s signature program.
“The developing world is helping fix China’s problems,” he added, referring to an overcapacity crisis in the world’s second-largest economy.
Against this backdrop, the EU last week announced its Global Gateway plan, a fusion of public and private infrastructure investment.
Ursula von der Leyen, the head of the executive arm known as the European Commission, spelled out the goals and “global scope” of the strategy behind the decision.
“We want to make Global Gateway a trusted brand that stands out because of high quality, reliable standards and a high level of transparency and good governance,” she told a media briefing in a reference that appeared to target Beijing’s cloak of secrecy approach before pulling back on the issue.
“It does not have to crowd out Chinese investments. I very much hope that it does not aim to, or is perceived as an attempt to displace China in one way or another,” von der Leyen told Deutsche Welle, the German public broadcaster.
Others are not so sure.
Jonathan Holslag, of the Free University of Brussels, stressed that the “main objective” was to respond to the Belt and Road Initiative. He told the media that “European companies have seen” BRI countries slide “into China’s orbit.”
His views are likely to resonant in the corridors of power in Washington and Brussels. They were also echoed by Horizon Advisory’s de La Bruyere.
“Historically, the challenge has been overlooked. For example, the US has over-emphasized military tools to what is a competition over industrial chains and technological networks. Or, has focused on tactical risks like corruption or espionage, rather than the larger, strategic question of the global architecture,” she said.
“As a result, the US and its partners have failed to provide a positive alternative to Beijing’s [version of] international development,” de La Bruyere added.
For the US and its allies, it appears they have finally woken from their slumber and found themselves in a real-life nightmare.
Rising tension across a spectrum of issues has helped inspire the Build Back Better World project. During his short African tour last week, US Secretary of State Antony Blinken touched on the subject of “sustained” funding.
“We recognize that robust, meaningful partnerships, long-term focus, and sustained investment will be critical to ensure that Build Back Better World,” he told a media conference.
“When it comes to infrastructure investment, again, this is not about China or anyone else, it is about a race to the top when it comes to those investments. [But countries should not be left with] tremendous debt that they cannot repay,” he added.
In response, Beijing has dismissed claims of “hidden debt,” lurking beneath the surface of the BRI.
AidDate research has shown that Xi’s ruling Communist Party has saddled lower- and middle-income nations with liabilities of $385 billion.
Figures that have been brushed aside by the Party as it concentrates on “ideological” differences between the East and the West. Short-hand for democracy.
“The plan [Build Back Better World] has strong ideological overtones, is open only to ‘democracies,’ is guided by Western values and is allegedly in compliance with the rules-based international system. It is therefore called the Western democracies’ version of an infrastructure plan,” He Wenping, of the Charhar Institute and the China Academy of Social Sciences, said last month.
“Blinken attacked China’s infrastructure projects in Africa for creating ‘debt traps,’ even as the US is busy signing infrastructure investment agreements with Africa,” she wrote in a commentary for China-US Focus, an academic website.
Horizon Advisory’s de La Bruyere has a different take.
While major democracies have arrived late on the scene, they can still offer an alternative to Beijing’s blueprint. But to make inroads they will need to “form a united” front.
“It will require the US and Europe [to] work together. The Build Back Better World and the Global Gateway programs [should] be mutually reinforcing not disjointed or competitive. Neither the US nor the EU can rival [China] on their own. They need to form a united front,” de La Bruyere said.
In the end, democracies must prove they can deliver and transform those red Silk Road threads into red, white and blue, with yellow EU stars.