- When it comes to infrastructure, the world does not need competing schemes. It just needs more funding
- Moreover, Joe Biden is facing a congressional battle over his domestic infrastructure plan and is unlikely to win support for infrastructure building overseas
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Among several landmark declarations from the G7 summit was US President Joe Biden’s proposal to “build back better for the world” – or B3W – to provide a counterweight to China’s global influence and to contest its 126-country Belt and Road Initiative.
US officials said B3W was “about providing an affirmative, positive, alternative vision for the world” which “reflects our values, our standards, and our way of doing business”.
Of the numerous cleverly curated Group of Seven proposals – more theatre than substance – this was clearly the most vacuous. Like several previous global infrastructure plans proposed by the United States, it is likely to amount to next to nothing. Moreover, the US needs to recognise that the last thing we need is a “rival” plan. For infrastructure, we just need more.
It is perhaps helpful that the G7 leaders acknowledged the urgent need for more infrastructure spending worldwide. The Organisation for Economic Cooperation and Development said the world would need US$95 trillion between 2016-2030 – about US$6.3 trillion a year. The Asian Development Bank said Asia would need US$26 trillion until 2030. All recognised a large annual shortfall. Research group Refinitiv, referencing the Global Infrastructure Hub database, talks of an infrastructure gap of US$15 trillion up to 2040.
It is also noteworthy that G7 leaders acknowledged the dominant global role China is playing: Refinitiv estimates that since the Belt and Road Initiative was launched by Chinese President Xi Jinping in 2013, it has supported over 2,600 projects valued at over US$3.7 trillion.
Why am I so sceptical about Biden’s high-minded B3W? First, the US has in recent years made several proposals to counter China’s ambitious infrastructure-building investment. Most preposterous was the offer from Mike Pompeo, then US secretary of state, to create a US$113 million fund for infrastructure building in developing economies. Perhaps he missed the memo about global needs of US$6.3 trillion a year.
Then there is the US’ long-standing neglect of its own infrastructure. The US has on average spent 2.4 per cent of its GDP on infrastructure (it peaked in the mid-1960s at around 5.8 per cent), while China averages over 8 per cent a year.
It is true that Biden’s proposed US$2 trillion infrastructure plan aims to be an ambitious corrective, but the odds of it winning congressional approval in the teeth of Republican opposition must surely be small.
If Biden is going to struggle to get congressional support for infrastructure building at home, the likelihood of him winning congressional support for infrastructure building in developing countries must be minute.
The idea that the US and G7 allies will provide a “positive, alternative vision for the world” also lacks credibility, not least because no such shared vision exists.
In contrast, infrastructure building has been an important part of China’s development plans for decades, and sits at the heart of national policy.
How China is looking beyond borders
The Belt and Road Initiative is not a grab bag of random, big infrastructure projects, but part of a 100-year vision of China’s place in the world. In conceiving the strategy, Xi was clear that infrastructure building was a critical stabiliser in deeply unstable parts of the world that from China’s point of view are too poor and close for comfort.
As Jin Liqun, head of the China-led Asia Infrastructure Investment Bank once said: “The Chinese experience illustrates that infrastructure investment paves the way for broad-based economic social development, and poverty alleviation comes as a natural consequence of that.”
Also, according to Jin, infrastructure building is “really an opportunity for China to show it can work with other countries and to international practice – not just Western practice – so people can be convinced China is a force for peace and prosperity in the world”.
Moving from dismissing the Belt and Road Initiative to criticising it, the US has warned many developing countries of unique China-related risks. In 2018, then US vice-president Mike Pence warned that China’s infrastructure loans are “often opaque at best, projects they support are often unsustainable and poor quality. Too often they come with strings attached and lead to staggering debt … Know that the US offers a better option.”
These attacks have been robustly debunked by Western academics, like Deborah Brautigam at Johns Hopkins University and Meg Rithmire at Harvard University, and by the Peterson Institute in Washington in its new report “How China lends”.
Brautigam and her team noted that the opacity of China-led infrastructure projects “fuels suspicion about Chinese intentions”, but concluded that “despite critics’ worries that China could seize its borrower’s assets, we do not see China attempting to take advantage of countries in debt distress”.
Rather than take aim at China, the US and its G7 allies should be working together with China to tackle the challenges linked to big infrastructure projects with long gestation periods: most need massive funding up front, with returns slowly recovered over three or four decades. They need to be able to survive political risks linked to numerous changes in governments. By their nature, they are concentrated in poor and unstable economies.
China is right to thank successful infrastructure-building at home for its own strong economic development, and right to believe that infrastructure investment in the world’s poor economies is the best possible aid. The US is wrong to see this investment as a threat, and myopic not to cooperate and add momentum.
The world does not need “rival” schemes. It just needs more of them. Instead of framing B3W as a challenge to China, the US should frame it as a valuable complement to other infrastructure-focused initiatives worldwide. And it could start by investing more in its crumbling infrastructure at home.
