Major infrastructure projects have been an emblem of Chinese global influence. Now the US and its allies are working to fund climate-sensitive plans.
Fresh from the passage of the $1 trillion domestic infrastructure bill, the Biden administration is globalizing its infrastructure policy with plans to fund major projects around the world. Unstated but inescapable, is the challenge to China’s enormous infrastructure initiative, the Belt and Road Initiative (BRI.)
White House officials have been traveling the world to identify as many as 50 major infrastructure investments for its Build Back Better World initiative, a program supported by G-7 allies, which is claimed to be an environmentally and socially sensitive program to deliver sustainable projects, better governance, and greater transparency in the public-private partnering needed to address a “$40 trillion-plus” infrastructure spending gap. This conjuncture of infrastructure development with democracy and human rights is a centerpiece of Biden’s foreign policy, something likely to be extensively referenced at this month’s Summit for Democracy (from which China and Russia have been excluded and which they have jointly denounced.)
Last month’s COP26 climate change summit in Glasgow underlined that environmental goals will now form the heart of major projects. That is because measures to confront global climate change will happen on a state level and require top-down regulation, especially in sectors where policymakers see a strong crossover on the environment. Right now, that means infrastructure programs. The UN’s Sustainable Development Goals also need private and public groups to consider what’s best for the planet.
Infrastructure means more than programs that bring services to people, like railways: it also means sustainable energy, like solar or other transport like electric cars, to ensure that countries can decarbonize their economies and guarantee the well-being of their citizens. Infrastructure is connectivity — anything from roads to internet browsing. The ability to facilitate that connection represents power.
China is already streets ahead. Its BRI, which began in 2013-2014, is the biggest, most ambitious, and most expensive infrastructure plan to date. It has run into significant headwinds caused by Western suspicion of China’s political agenda; accusations of debt-trap diplomacy and, more recently, the absence of stringent environmental standards. Most BRI projects did not properly account for sustainability goals and have had to evolve to fast-changing standards, and the same is true for social and financial benefits. While some might claim that Chinese investments come without conditions (usually cast in contrast to Western investment, which comes with strings of reform attached), this ignores the bigger picture. As early as 2012, analysts pointed to the conditionality in China’s models, namely, that countries receiving aid do not recognize Taiwan, that the recipient should use Chinese labor, and that Chinese enterprises have priority in taking on the projects that come from the aid. Still, more recent examples show that host countries can push back against this conditionality. While Belt and Road is extraordinarily well-known and widely discussed, it is declining in scope and ambition, particularly following the coronavirus pandemic. (It is nonetheless huge — one estimate suggests that collectively, BRI countries owe China some $385bn.)
The West’s response has been slow but is now gathering some momentum. One of the furthest advanced is the Blue Dot Network (BDN), the creation of a trifecta of countries — the United States, Australia, and Japan — which have come together to propose a new set of sustainable infrastructure standards.
The “whollistic” BDN aims to address financial, social, and environmental sustainability, and to “operationalize” high-end climate, sustainability, and infrastructure goals agreed at Glasgow and elsewhere. These include targets to reduce emissions and offer support to developing countries from richer nations through large amounts of climate finance. But how to fund this? The Blue Dot Network offers a framework for sustainability at the project level and aims to help fund projects through a coalition of institutional, private-sector investors. This link between private and public investment is key to the new frontier of infrastructure financing.
The US frames the BDN as inclusive, and the Biden Administration has prioritized the environmental aspects. This means that BDN is not presented as inherently “anti-China” (although it is hard not to read it that way, when project standards so clearly hit at points where China has come up short, like transparency, corruption, and suffocating debt burdens.)
The BDN is far from the only plan out there: there is the FAST-Infra project, a private-sector tool to create that sustainable investment framework; the European Union (EU) has recently announced its own Global Gateway project, which is expressly described as a BRI alternative; while the UK launched its Clean Green Initiative at COP26.
A skeptic’s take is that all these projects and initiatives are mere posturing compared with China's investments. The US would of course deny that. A more optimistic assessment would suggest the projects are genuinely useful and can help the transition towards more sustainable infrastructure, while creating a framework that can tap into the trillions of dollars in the hands of private investors, putting that money to good use.
Either way, the gathering number of plans has generated a hostile response from China. Chinese state media recently ran a piece dismissing US initiatives as “bound to fail” and trumpeting the strength and “high quality” of Chinese infrastructure, some of which have been criticized expressly for its lack of resilience and sustainability. Still, there have not been any clear public statements from Chinese officials specifically on the Blue Dot Network.
While this rivalry is undeniable between the two economic superpowers, more positive signals also emerged: at COP26, where Chinese and US climate envoys, speaking separately, made statements acknowledging the need for the two countries to work together on climate change.
It will be interesting to see how far these climate-focused initiatives will be politicized. At their core, these are not — or should not be — political alliances (though it's not yet very clear what some, like the EU Global Gateway, represent). Rather, these ought to be understood as technical tools to translate high-level commitments and political declarations into real projects. If these become seen as merely, or primarily, weaponry in a new cold war, there is a danger that desperately needed programs will become too controversial to succeed. In this scenario, everyone loses.
These are places for cooperation, not competition. Though competition can push us to find better solutions, it should be balanced with the need for cooperation to ensure longer-term success.
Cordelia Buchanan Ponczek is a Clarendon Scholar and doctoral candidate at the University of Oxford, where she is researching public-private investment into extractive industries.
Photo: Construction of the new Moracica bridge on the Bar-Boljare highway, near Podgorica, Montenegro. Credit: Miomir Magdevski
December 2, 2021