Following the global financial crisis of 2008, China had to find ways to deploy its huge foreign exchange reserves and industrial and construction overcapacity. This led to the creation of the Belt and Road Initiative (BRI), a multi-trillion-dollar global infrastructure financing program that enabled China to provide dollar-denominated infrastructure loans to developing countries and to link these agreements to Chinese steel and cement exports.
Since then, China has financed and built infrastructure worth an estimated $1 trillion in low- and middle-income countries, becoming the world’s largest bilateral creditor. China’s position and influence have grown along with its loan portfolio, alarming Washington and its allies.
In the decade since the launch of the BRI, the United States and its allies circulated the narrative of “debt trap diplomacy,” publicly accusing China of intentionally burdening developing countries with loans they cannot repay in hopes of supporting national infrastructure in the event of an inevitable default. For developing countries facing massive infrastructure needs, however, this criticism of Chinese lending has always rang hollow, as critics have never offered credible alternatives.
This does not mean that the United States and its allies never tried. They repeatedly went to the drawing board to design a response to the BRI, with no success.
In 2018, India joined the United States and Japan in the trilateral infrastructure task force, intended to provide an alternative to BRI in the Indo-Pacific. It fizzled and died.
In 2019, the EU and Japan signed a “Partnership for Sustainable Connectivity and Quality Infrastructure” to encourage the financing of transport, infrastructure and digital projects in other countries as an alternative to the BRI. It fizzled and died.
Just last year there was the EU-India Connectivity Partnership designed to build energy, digital and transport infrastructure in Europe, Africa and Asia. It was designed to offer “better legal guarantees and less onerous debt conditions than those offered by Beijing”. It also fizzled and died.
At last year’s G7 meeting, leaders announced another initiative – Build Back Better World (B3W) – a “bold new global infrastructure initiative…a values-driven infrastructure partnership, high profile and transparent led by major democracies to help reduce the $40 trillion in infrastructure needed by developing countries.” B3W failed and delivered nothing approaching its soaring rhetoric.
Last year, the EU launched the Global Gateway, another response to China’s BRI. The Economist described the plan’s alleged $340 billion in infrastructure funding as “a mix of existing commitments, loan guarantees and heroic assumptions about the club’s ability to ‘attract’ private investment, rather than new ones actual expenditure”.
Which brings us to the latest iteration of a Western “alternative” to China. Late last month, the G7 announced the Partnership for Global Infrastructure and Investment (PGII). This successor to B3W comes with even more spectacular promises of delivering “game-changing projects”. However, neither the United States nor any other member of the G7 has committed new money. Instead, Washington promised to mobilize a total of $200 billion over the next five years through (unknown) grants, (vague) federal funding and (quite fantastic) hopes of leveraging private sector investment. .
Given this long list of disappointing “alternatives” to the BRI, policymakers in Africa and other developing regions can be excused for welcoming PGII with a “wait and see” attitude. For these leaders, there are no words more meaningless than the promise of a third party to “raise funds”. It’s a phrase specifically designed to sound like a commitment of resources when it means nothing like that.
The promise to “raise private capital” has now become a tired trope, although it started with a lot of promise. The original idea, dubbed “billions to trillions”, was to use “billions” in development finance to mobilize or pool “trillions” of private finance. This idea, while laudable, has clearly not worked but refuses to die, now forming the cornerstone of both the EU Global Gateway and the newly introduced PGII. In fact, despite their frequent anthems of the power to mobilize private capital, Europe and America have been outperformed by China even on this front, with Chinese banks providing more than twice as much financing for public-private transactions. private sector in Africa than the other major lenders combined. , according to a study.
There is therefore nothing in the past or in the specifics of the PGII that promises a more auspicious outcome than any of its unsuccessful predecessors. Outside of the right ambition in terms of scope and scale – $600 billion over five years – there is no “there”. President Joe Biden’s promise that “hundreds of billions” of funding “could come from multilateral development banks, development finance institutions and sovereign wealth funds” is simply not credible.
The only option available to the US and its allies to present a credible alternative to China’s BRI is the one that’s been there all along: fresh money in the hundreds of billions. As long as the G7 leaders conclude that neither Congress nor European parliaments are in the mood to authorize new financing, there can be no alternative to the BRI. These new funds could be channeled either through existing multilateral development banks like the World Bank, or directly through bilateral agencies.
But it has to be fresh money – no amount of fanciful repackaging of existing programs, past commitments and vague promises of future billions will close the developing world’s more than $40 trillion infrastructure gap, nor will provide a real alternative to China’s ambitious loan program. G7 leaders can change their approach, or in a year they can add PGII to the long list of failed BRI alternatives.
Gyude Moore is a Senior Policy Fellow at the Center for Global Development and former Minister of Public Works of Liberia.
The opinions expressed in this article are those of the author.