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Can G7 Countries Compete With China’s Belt And Road Initiative?

From Oxford Business Group . . . . . . . . .

Following the expansion of Chinese-led projects in many emerging markets over the past decade, the G7 has unveiled its own initiative to support global infrastructure development, dubbed Build Back Better World (B3W). Announced at a G7 meeting in June, the B3W will focus on four main areas: climate, health, digital technology and gender. Its overarching goal is to catalyse hundreds of billions of dollars of infrastructure development in low- and middle-income countries.

Beyond this outline, little information has been released about how the B3W initiative will operate in practice. However, it is clear that it responds to two broad, interconnected aims.

On the one hand, the B3W will constitute “a values-driven, high-standard, and transparent infrastructure partnership”, according to a fact sheet put out by the US government. It seeks to help narrow the more than $40trn infrastructure gap in the developing world, which has been exacerbated by the Covid-19 pandemic.

On the other hand, the B3W will serve as a counterweight to China’s flagship Belt and Road Initiative (BRI), with the fact sheet highlighting that it will be a means of “strategic competition with China”.

BRI pivots away from infrastructure

Launched in 2013 and initially intended to revive ancient Silk Road trade routes between Eurasia and China, the BRI grew to become a far-reaching plan for transnational infrastructure development, linking countries and continents through land and sea corridors and industrial clusters.

The BRI caused consternation among G7 countries from the moment of its inception. This was due in part to the fact that it was widely seen as a way to expand Chinese geopolitical influence.

For example, in December 2017 Sri Lanka formally ceded 70% control of Hambantota Port to a Chinese state-owned firm on a 99-year lease after the government was unable to service Chinese loans used to build the $1.3bn strategic gateway on the Indian Ocean.

Concerns have also been raised over the lack of transparency in terms of lending, environmental and social impacts, and corruption.

However, some of these apprehensions have been eased by recent developments. As OBG has covered previously, since the Covid-19 pandemic the BRI has increasingly moved away from big-ticket infrastructure projects, with China placing a greater focus on sustainable, digital and health-related aspects – the so-called green, digital and health silk roads.

This pivot has meant that the countries participating in the BRI are receiving fewer financial resources: from a peak of more than $125bn in total spending in 2015, China spent around $47bn on BRI projects last year.

Mind the gap

China’s shift away from infrastructure projects has left a gap which the B3W is aiming to fill.

A key aspect of the B3W is the mobilisation of private sector capital through the expansion of existing development finance tools.

This reflects an awareness that what the US administration calls “status quo funding and financing approaches” are insufficient to close the vast infrastructure gap which continues to stymie development in emerging economies around the world.

According to the Global Infrastructure Hub, a G20 initiative, the world is facing a $400bn gap in infrastructure investment this year, a figure that could cumulatively grow to $15trn by 2040 if current rates of spending continue.

Another key pillar of B3W is sustainability, a term that has become a watchword globally in light of Covid-19 and escalating ecological disasters.

In this respect, the B3W’s aims dovetail with growing appetite among private sector investors for green projects – evidenced by the record $269.5bn in green bond issuance last year, according to the Climate Bonds Initiative, a figure which some expect to double in 2021.

Among other factors, this would suggest that the B3W is well placed to capitalise on investment trends.

Many emerging economies are in urgent need of funds to drive their Covid-19 recoveries, and are waiting expectantly for further details of how the initiative will operate. However, while the principles enshrined in recent announcements are certainly encouraging, more details will need to emerge promptly in order to demonstrate that the B3W is more than a memorable acronym.

Source : Oil Price

Australian Government Tears up Victoria’s Belt and Road Agreement with China

Tim Callanan wrote . . . . . . . . .

The Commonwealth has used its powers to tear up Victoria’s Belt and Road Initiative (BRI) agreements with China, along with two other, much older agreements with Iran and Syria.

The scrapping of Victoria’s BRI arrangement came before the agreements were even fully formed, and certainly before they delivered any real benefits for either party.

The Chinese Embassy described the decision as “unreasonable and provocative”, but Australia’s Foreign Minister Marise Paine said the arrangements were inconsistent with Australia’s foreign policy.

What is the Belt and Road Initiative?

China’s BRI began life in 2013 as the One Belt One Road initiative, with the goal of building a vast network of trade routes across the globe.

In early 2017, China hosted 28 world leaders, as well as representatives from another 70 countries, to a two-day summit in Beijing to spruik the initiative.

Among the delegates was Victorian Premier Daniel Andrews.

China has been involved with hundreds of projects under the BRI, ranging from hydroelectricity projects in Uganda to rail links in Malaysia.

Victoria signed a Memorandum of Understanding (MOU) with China in October 2018 to be part of the BRI which, by that stage, already involved more than 100 countries and international organisations.

What was in Victoria’s Belt and Road deal?

The initial MOU in 2018 was short on detail, but promised trade, financial and policy cooperation.

The framework was laid out in more detail in October 2019, with a working group formed to be co-chaired by Daniel Andrews and China’s National Development and Reform Commission Vice Chairman Ning Jizhe.

Infrastructure was a key part of the agreement, which promised to “increase the participation of Chinese infrastructure companies in Victoria’s infrastructure construction program.”

That involved encouraging Chinese infrastructure firms to establish a presence in Victoria and bid for major projects.

Victoria agreed to send regular delegations of Victorian Infrastructure firms to China to “better understand opportunities”.

The agreement also raised other potential areas of cooperation, including manufacturing, biotechnology, and agriculture.

There was also an agreement to develop trade and market access “especially for agricultural products, food, nutraceuticals and cosmetics”.

None of the agreements under the BRI are legally binding.

What stage was the agreement at?

Victoria and China were yet to agree on a ‘Cooperation Road Map’ which would have further fleshed out the BRI deal.

This was supposed to have been signed by March 2020, but the COVID pandemic led to delays in finalising the plan.

Daniel Andrews last year defended the agreement, saying it was important for Victorian jobs.

The Victorian Premier came under more pressure to cancel the deal, amid escalating tensions between China in 2020.

Mr Andrews condemned an inflammatory tweet by a Chinese government delegate in the wake of a landmark war crimes inquiry, but refused to back out of the BRI arrangement.

“This relationship is far too important to farmers, to manufacturers, to workers, to profits for Victorian companies and therefore prosperity for our state,” he said.

How can the federal government cancel a state deal?

The deals were quashed under the federal government’s Foreign Arrangements Scheme, which came into force in December, 2020.

The scheme gives the Commonwealth the power to veto deals between states and territories and foreign entities which “are not consistent with Australia’s foreign policy.”

Foreign Minister Marise Paine said the move was not intended to target China.

“It’s about ensuring that we have a consistent approach to foreign policy across all levels of government, and it isn’t about any one country, most certainly not intended to harm Australia’s relationship with any countries,” she said.

There have been concerns about China potentially using the BRI to gain power and influence across the world, in what’s been dubbed “debt-trap diplomacy.”

The most striking example of this was in Sri Lanka, where China took control of the country’s second-largest port on a 99-year lease after the country failed to pay off a $1 billion debt linked to its BRI agreement.

What exactly were the deals that were cancelled?

The federal government cancelled four arrangements, of which two were related to Victoria’s BRI agreement with China.

They include:

  • The Memorandum of Understanding between Victoria and China which was signed on October 8, 2018.
  • The Framework Agreement between Victoria and China signed on October 23, 2019.

The two other agreements that were cancelled relate to the Kennett and Bracks governments, and include:

  • A Memorandum of Understanding between the Victorian Education Department and Iran’s Ministry of Labour and Social Affairs, signed on November 25, 2004.
  • A Protocol of Scientific Cooperation between Victoria’s Ministry of Tertiary Education and Training and Syria’s Ministry of Higher Education, signed on March 31, 1999.

Source : ABC News

The Belt and Road Has Moved China to Center Stage in World Affairs

David Arase wrote . . . . . . . . .

When Xi Jinping unveiled the Silk Road Economic Belt and the 21st Century Maritime Silk Road programs of China-financed and -built economic connectivity infrastructure in 2013, the Chinese leader sold it to the world as a public good that would benefit not only those developing countries that signed on as partners in what became known as the Belt and Road Initiative (BRI) but also the entire world by promoting more trade- and foreign investment-driven growth and development to advance globalization further.

Since then, it has been fashionable in the West to criticize China for using the BRI to push onto developing countries excessively large loans to finance inappropriately large infrastructure projects that all too often are socially, environmentally, financially, or technically unsustainable in their local settings. It has not been difficult to identify many high-profile projects across the BRI’s global footprint that arguably illustrate one or more of these shortcomings. But to say that the BRI has been a failure because it has not lived up to the rhetoric that sold it would be the wrong way to evaluate BRI from a realpolitik foreign-policy perspective.

China sold the BRI as a public good, but it always intended the BRI to serve its own national interests and ambitions as a rising great power positioning itself to be dominant in Asia and assume the leading role in global governance by 2049-50 in accordance with Xi Jinping’s “Chinese Dream” of the “great rejuvenation of the Chinese nation”. So rather than judge the BRI by whether or not it has always provided affordable, appropriate and well functioning, infrastructure that directly benefits surrounding communities, it is worth looking at how the BRI has supported China’s larger agenda of reshaping regional and global governance where its own interests are actively engaged.

It is often said that China lacks soft power, and what Western audiences tend to hear about it would seem to confirm this. In October 2020, the Pew Research Center published an opinion survey which reported that “unfavorable views of China reach historic highs in many countries” including the US and 11 of its major European and Asian allies and partners.

The BRI does not target the people or governments of these advanced Western nations. Instead, it seeks to attract lower- and middle-income country partners and then influence their beliefs, attitudes and opinions in ways that favor China and its economic, political and security aims. So, to assess China’s soft-power success using BRI, it would be better to look in this direction. Of critical importance are developing Eurasia and contiguous Africa, whose overall support could make the realization of the Chinese Dream a foregone conclusion. When we look here, mostly due to BRI diplomacy and cooperation since 2013, China’s capacity for soft power and prospects for playing a key role in global governance look somewhat better.

Consider these polls. In Sub-Saharan Africa, the 2020 Afrobarometer opinion survey found that 59 percent of Africans believed that top-ranked China’s influence was “somewhat/mostly positive,” edging out the US at 58 percent.

In the Middle East/North Africa, the Arab Barometer research network opinion survey done in October 2020 in six countries (Algeria, Jordan, Lebanon, Libya, Morocco and Tunisia) found that China was favorably viewed by a majority of the population in three and by at least one-third of the population in the others. By contrast, the US was favorably viewed by less than one-third of the population (ranging from 14-28 percent) across all six countries. A survey of 12 countries earlier in 2020 found that China was the most popular global power, ahead of the US or Russia, with on average 13 percent more people favoring closer ties with the Chinese than with the Americans. Meanwhile, in Turkey, a pivotal regional power that is a NATO member, a Turkish news portal reported that 46 percent of the population viewed China favorably in November 2018, according to a US State Department internal survey. Germany was at 36 percent, while the US registered only 15 percent.

In Europe, strongly negative attitudes toward China prevail due to its abuse of democracy and human rights as well as its disregard for liberal global governance norms. Nevertheless, 18 EU members are Chinese BRI partners, and in Central and Eastern Europe 16 countries (not all are EU members) joined by Greece have attended the BRI-focused 17-Plus-1 annual leaders forum convened by Beijing. In 2020, the Pew Research Center found that in Western European countries, 51 percent of the population see China as the world’s dominant economic power, compared to only 34 percent that see the US in this role.

Thus, the EU faces internal political divisions and conceptual dilemmas as it confronts the conflicting imperatives of an interest-based versus a values-based geostrategic orientation going forward. The heated debate over the EU-China Comprehensive Agreement on Investment (CAI), which was concluded in principle in December 2020, demonstrates the divergence of opinions. In this case, economic interests trumped values as well as a longstanding geopolitical commitment to transatlantic policy coordination.

In Central Asia, a Wilson Center study using public opinion data gathered from 2017-2019 by Central Asia Barometer and the Eurasian Development Bank compared population attitudes toward the US, China and Russia. It found that Russia is most favored by far while “China is in a relatively well regarded second place, and the US comes in decidedly last.”

The situation in South Asia is conflicted. On the one hand, India is hostile to the BRI and China’s presence in South Asia and the Indian Ocean region because China is viewed as an outright strategic threat to India’s economic, political and territorial sovereignty. A January 2021 poll by India Today found that 82 percent favored a ban on Chinese imports and mobile phone apps. An August 2020 poll soon after Sino-Indian border clashes in Ladakh that led to the deaths of 20 Indian troops found that 84 percent believed that Xi Jinping had betrayed promises he had made to Indian Prime Minister Narendra Modi.

On the other hand, China is Pakistan’s “all-weather friend” who supports Islamabad’s military-strategic confrontation with New Delhi and is financing the US$62 billion China-Pakistan Economic Corridor (CPEC) that connects China to the strategically situated port of Gwadar on the Arabian Sea near the Persian Gulf.

On India’s Bay of Bengal eastern flank, China has been Bangladesh’s main trading partner and arms supplier for over a decade, and in 2016 Xi paid a visit and pledged $24 billion in BRI financing, making China an indispensable strategic partner for Bangladesh. Nepal on India’s northern border is ruled by a communist party close to the Chinese Communist Party, and in 2017, its government agreed to BRI cooperation to escape almost total dependence on India for trade, investment, and land connectivity to the other countries.

Meanwhile, in Sri Lanka to India’s south, the government has maintained its resentment of New Delhi’s role in putting down the Tamil Tiger insurgency. Today, Colombo has become heavily dependent on Beijing and BRI not only due to accumulated past debt but also because China is the only likely source of generous official lending going forward. In February Sri Lanka terminated a joint port development project with India and Japan, signaling a renewed tilt toward China notwithstanding the controversial Hambantota port experience with China.

Thus, in South Asia, India’s neighbors are all tilting toward China, while India in its defiance of Chinese ambition to dominate the region is very much on the defensive. After only seven years of BRI, China has won enough political and strategic influence in South Asia to threaten India’s position as the region’s dominant power.

In Southeast Asia, we have again a situation in which the BRI has propelled Chinese trade and investment to make the fate of many member states of the Association of Southeast Asian Nations (ASEAN) inextricably dependent on China. Beijing is in a position to use these levers to exert its influence across the region, rewarding those aligned with Beijing’s political and strategic interests or punishing those choosing not to cooperate or to challenge China.

Special circumstances make Southeast Asia distinct, however. There is no resident major power that dominates in the region in the way that India does in South Asia. But China has great-power ambitions in the region, posing a threat to the US as the guarantor of prosperity, security and governance norms. While it lacks the military capacity to force this change, it is working to build its capacity to challenge American might. Meanwhile, China has used the BRI to undermine the economic and political influence of the US. And it has wielded gray-zone aggression and hybrid warfare to intimidate US allies and friends. Should there be a big showdown, China hopes that discouraged and traumatized countries will be resigned to align with Beijing and withhold the regional access and support they have traditionally given the US, which allows America to maintain its regional strategic dominance and support maritime governance norms that all but China are willing to support.

Southeast Asian countries face even more difficult dilemmas than Europe in managing relations with China. On the one hand, even authoritarian countries much prefer the existing rules-based order because it prohibits unlawful aggression, maintains maritime security with freedom of navigation, and underwrites the equality of rights and privileges that states enjoy under the international rule of law. For this reason, they support a continuing presence by the US to safeguard this order. They understand all too well what it would mean if they and their region were governed according to the norms and interests of the Chinese Communist Party (CCP).

On the other hand, China is by far their most important economic partner, and they are compelled by their economic interests to continue deepening economic engagement with China because the US simply cannot offer comparable new trade and investment opportunities. This deepening economic dependence on China pushed forward by the BRI works against their geopolitical freedom to support a US regional presence that defends the current rules-based governance system.

This dilemma explains regional perceptions of China and the US. The 2021 State of Southeast Asia opinion survey published by the Yusof Ishak Institute of Southeast Asian Studies (ISEAS) found that among the elite opinion leaders surveyed in the 10 members of ASEAN, 76.3 percent named China as the most influential economic power in the region, while only 7.4 percent saw the US in this light. Moreover, 48.7 percent saw China as the region’s most influential strategic-political influence; only 30.4 percent gave the US this status.

Nevertheless, 63.1 percent welcomed US strategic influence and 61.5 percent would choose the US, while only 38.5 percent would choose China if they were forced to align with one or the other power. In the South China Sea, 62.4 percent are concerned by China’s militarization and assertive actions. In measuring trust toward major external powers, 63 percent had no confidence in China, putting it in last place, while only 16.5 percent indicated confidence. Japan ranked first in trust, earning the vote of 67.1 percent of respondents, while the US received 48.3 percent to rank third.

Around the world today, 140 countries have signed a bilateral agreement with China to participate in BRI cooperation. As mentioned above, among them are 18 European Union members including Italy, Greece, Portugal and Luxembourg. This collection of BRI partners creates a sizeable grouping for diplomatic and economic cooperation centered on China. This could well be described by the words of Xi Jinping: “a community of shared fate for humankind”. Having used the BRI to gather and consolidate this community under Chinese leadership, China is now expanding the scope of its BRI governance into cultural, political, legal, scientific, technological, and military spheres using associated party-state actors to advance China’s interests across the BRI geostrategic footprint.

BRI may have been sold to the world as a win-win initiative to provide developing countries with infrastructure financing and development opportunities. But Xi will likely measure its success by whether it creates a China-centered “community of shared human fate” and renders to Beijing the ability to reshape regional and global relations to serve China’s great-power ambitions. It would seem that after only seven years, and with many more to go before Xi’s retirement, the BRI has delivered a fair bit of success to China. Now that the fuller meaning of BRI has come into view, the challenge for those wishing to maintain liberal multilateral governance in Asia and the world is to mount an adequate defense against the heretofore successful effort through the BRI to set forth an alternative China-centered global vision.

Source : Asia Global Online