The BRI itself originated as China’s alternative to status quo development models.
Since at least the 1990s, “traditional donor” countries and their institutions had prioritized poverty reduction, and “soft” infrastructure over big physical infrastructure projects. For instance, the World Bank decreased lending for infrastructure to below 30 percent of its total lending in the early 2000s. Instead, it opted to expand antipoverty and rural development programs.
China, meanwhile, has emerged as a heavyweight in financing global infrastructure and providing the engineering know-how.
The BRI is about more than infrastructure – it is branding for China’s vision of what it thinks it can offer the world, for what Beijing refers to as “global public goods.” This expansive vision straddles the financial, trade, regulatory, and cultural realms. However, the provision of physical economic infrastructure has attracted the most attention, whether that is measured in finance from Beijing or international scrutiny.
Enabled by a state mercantilist approach to development finance, Beijing has invested in big-ticket infrastructure projects that would be deemed too risky and unprofitable for private investors.
LEVERAGING PRIVATE CAPITAL TO COMPETE WITH THE BRI
The BRI’s positive contribution to the world’s infrastructure deficit is worth acknowledging. Yet, the difficulty for Europe and the United States is that they cannot respond in kind – not easily without systemic change and certainly not without undermining the market principles they espouse.
The Euro-American answer to the state-led BRI model is to leverage private capital by lessening the risk and increasing the attractiveness of infrastructure projects, but this is a holy grail that development finance experts have been chasing for some time.
The world is facing an extreme infrastructure deficit, but there is no shortage of capital looking for returns. The problem is a lack of bankable projects. Following on from pioneering Japanese efforts and building on the “G20 Roadmap to Infrastructure as an Asset Class,” the US-led response to the BRI hinges on leveraging private capital for investment in global infrastructure. This is the logic behind the Blue Dot Network launched in 2019 – a proposed certification system that would boost confidence to invest in developing country infrastructure.
The approach is a neat contrast with the state-led BRI, but the road to infrastructure as an asset class remains a long one. According to a 2020 report from the G20’s Global Infrastructure Hub, private investment in developing country infrastructure has actually declined by 36 percent over the past 10 years.
Is now the right time to challenge the BRI?
Ironically, the West’s appetite for a response to the BRI has reached an all-time high at the moment that enthusiasm for the BRI in its familiar form has diminished in China. Loans from Chinese policy banks have been drying up since 2016, with Beijing attempting to rein in lending for risky projects. At the same time, Beijing is emphasizing private public partnerships (PPP) projects and “high quality development.”6
Despite institutionalizing some distinctly Chinese concepts, the latest Chinese white paper on international development cooperation, released in January 2021, signals a desired direction of travel toward international norms, at least on points of sustainability.7
Soon after the BRI’s launch in 2013, Beijing began to reconsider risky lending practices for the same reasons that trimmed the appetite for big-ticket infrastructure projects in Japan and other status quo stakeholders.
It is possible that China, the United States, and Europe may actually find themselves aligned in trying to mitigate risks associated with building infrastructure in developing countries.
Ordinarily, Beijing’s focus on “high quality development” would signal opportunity for cooperation with experienced stakeholders like the EU. However, cooperation with China on connectivity has fallen out of fashion even in Europe, let alone in the United States.
In formulating alternatives, the United States and the EU should keep in mind the changing nature of the BRI and be wary of responding to yesterday’s initiative.
Have we got our narrative right?
Both the United States and the EU acknowledge to some degree that the BRI’s success may be a question of optics. The Innovation and Competition Act that recently passed the Senate in the United States authorizes several tranches of new funds for competing with China overseas, but the largest is for “countering malign CCP influence” – i.e., media and influence work.
Meanwhile, the EU’s connectivity strategy is underwritten by a sense of dismay that the BRI has become so much more visible than the EU’s already significant contributions to global connectivity.
The EU strategy is partly about introducing a strategic mindset to EU connectivity planning, but it is also a call for a more effective communications strategy. The EU already does a huge amount of work in connectivity, but this work is fragmented across member states and various institutions. The feeling in Brussels is that the EU must copy the BRI’s success in unifying these efforts under a single brand.
In establishing a new fund for external development, the EU has done exactly that. It has streamlined a bundle of incoherent financial instruments under a single recognizable label: “Global Europe.”8
However, on both sides of the Atlantic there is a tendency to overestimate the degree to which Beijing’s propaganda machinery is responsible for the BRI’s narrative success. The BRI has gained narrative currency in large part due to the compelling story of China’s rise. In many countries, China attracts attention simply because it is the newest great power on the scene.
China also has an advantage in much of the Global South, where resentment towards former colonial powers runs deep. China styles itself as a developing country. In contrast to “donor-recipient” dynamics in Western aid relationships, Beijing approaches developing countries as partners in “development cooperation.”
While the EU insists on doing things the European way, China is for now more agnostic on issues of economic reform and governance.
Officials and commentators in Washington and Brussels tend to project their own sentiments toward the BRI onto the rest of the world, while overestimating their own popularity. There is no easy answer to how the EU can promote its values while avoiding the impression of a hectoring colonial power, but the solution is not simply to shout the same message louder.