A Western alternative to Belt and Road is a great idea, but will it fly?
You might have thought that Joe Biden’s $2trillion (£1.45trillion) plan for upgrading the US’s dilapidated national infrastructure, and greening it to boot, would be enough to be getting on with, but no; he wants to do the same for the rest of the world too. While on a phone call with Boris Johnson, the US president recently disclosed he had discussed plans for bringing like-minded democracies together to form a rival to China’s Belt and Road Initiative (BRI).
“I suggested we should have, essentially, a similar initiative, pulling from the democratic states, helping those communities around the world that, in fact, need help,” Biden said.
Whether this was actually Biden’s suggestion or Johnson’s seems to have become the object of some dispute, a kind of ownership tussle if you like. Not sure why, because it is scarcely a new idea.
A number of similar initiatives – including the so-called “Blue Dot Network”, bringing together the US, Japan and Australia to provide assessment and certification of infrastructure projects in the developing world with the goal of mobilising private capital behind them – have been launched in the past, only to come to nothing.
This time, however, there seems to be a real head of steam behind the concept, which is seen as serving a dual purpose. One is the geopolitical aim of countering growing Chinese influence in the developing world and instead furthering the West’s own, liberal economic and political world view. The other is pursuit of now pretty much globally shared climate change goals. In some respects, the one contradicts the other.
For all the West’s efforts to isolate and contain China, on climate change at least, billed by many as the great challenge of the age, the two are more or less obliged to co-operate or the whole endeavour goes nowhere. Already, China accounts for about 30pc of global emissions, against about 15pc for the US and an almost imperceptible 1pc for the UK. On a per capita basis, of course, the league table of “offenders” looks a lot different.
All the same, unless China and the rest of the developing world are on board, all efforts to reach a net zero world are doomed. It matters not a jot what America and Europe do to reduce their emissions if the rest of the world isn’t doing the same.
Fortunately, China does seem fully to buy into the climate change narrative, if only for self-interested reasons. Beyond the rhetoric, there are admittedly few signs of this as things stand; last year, for instance, China authorised the construction of a record number of new coal-fired power stations.
Nonetheless, there are few countries more immediately threatened by climate change than China, which in any case is under intense pressure from its own citizens to deliver cleaner air. Never mind the outside world, environmental issues have leapt up China’s own domestic list of priorities.
Investment in renewables, which promise long-sought energy self sufficiency, is off the scale. As on so much else, China ruthlessly pursues world leadership when it comes to the cutting edges of green technology, from batteries, to solar and wind.
That environmental agenda is also showing early signs of being rolled out into Belt and Road. Bangladesh, which had plans for nearly 30 new coal power stations, was recently told that there would be no new Chinese funding for such projects under the BRI.
On green issues at least, then, the US and China seem increasingly to be singing from the same hymn sheet. But they are also fierce commercial and geopolitical rivals, so it would perhaps be naive to expect them to co-operate in bringing their funding and knowhow to the rest of the world.
Who knows, perhaps there is merit in having competing constructs to help the developing world do its bit for climate change, as in “my initiative is greener and less demanding than yours”. Competition for the developing world’s hand may result in better outcomes than grudging coordination.
Be that as it may, China can at least now claim some vindication for its Belt and Road Initiative, much derided in the West as no more than an imperialist ruse to ensnare Asia, Africa and beyond in Beijing’s sphere of influence.
Now it seems that Biden, Johnson, et al, want to do exactly the same. What’s more, they seem to accept that there is much more to it than the grubby purpose of land grab ambition. As today’s pandemic is once again demonstrating, global threats cannot be extinguished nationally unless they are also extinguished internationally. We can make a start at home, but unless solutions are applied globally, they are unlikely to succeed.
What are the chances of establishing a credible rival to China’s Belt and Road? Three major difficulties occur – funding, price and expertise. Starting with the third of these issues, China has spent more on infrastructure over the past 20 years than the rest of the world put together. Unmatched expertise combines with a dramatically lower cost of delivery than is common in advanced economies, and lavish state-backed funding for the required investment.
Since the start of the pandemic, Western economies have rediscovered the delights of central bank money printing, making cheap funding for infrastructure spending more of a possibility than it used to be.
But even if these magic money tree attributes were sustainable (spoiler alert: they are not), is it really politically feasible for Western governments to be, say, funding carbon-free power in Somalia when they are still struggling to find the money for reliable broadband at home? I would suggest not.
For authoritarian China, on the other hand, this is not a problem. Whatever they might think, Chinese citizens are obliged to accept that it’s all for the greater good. In any case, most BRI projects tend to be government-to-government contracts, and therefore either explicitly or implicitly underwritten by the Chinese state. Most Western economies still struggle with soft loans of this type. Even if done by stealth through multilateral development banks, it’s going to be a hard sell to voters.
Financing such spending privately will be equally fraught with difficulty. Cost of capital in the developing world is far higher, access to the hard currency Western contractors require (dollars, euros, yen and sterling) is often very limited, and the political risk of default is considerable, as China has already discovered to its detriment in a number of BRI projects.
Our Western economic and political models may simply not be cut out for this kind of investment. The UK Government has failed to stay loyal even to its overseas aid budget. What chance pursuing soft power by putting huge amounts of taxpayers’ cash at risk helping the rest of the world go green?
A Western rival to China’s Belt and Road is a great idea in principle. Making it fly is another matter altogether.
‘The UK Government has failed to stay loyal even to its overseas aid budget ... what chance helping the rest of the world go green?’