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Global China Inc. Tracker.
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MERICS Global China Inc. Tracker

No. 4, December 2021

The Belt and Road evolves as competing Western initiatives gather speed

China is changing the Belt and Road Initiative’s (BRI) focus while the EU rebrands its connectivity work to compete with China. At the same time, the US is pitting democracy against authoritarianism, attempting to recover its image as leader of the free world. In this contest of narratives, all sides are pushing the concept of sustainability. In this edition of the Global China Inc. Tracker, we explore what sustainability and the green transition mean in terms of China’s overseas investments.

President Xi told the third high-level symposium on the BRI in Beijing on November 19 that the BRI should “serve a new development pattern” characterized by “high-quality” and “green” development. The linkage between the BRI and sustainability is not new. However, Beijing has started to set out guidelines that could enact genuine change.

President Xi spoke of the need for a project risk assessment platform, indicating a new level of risk aversion. He also called for the prioritization of “small and beautiful” projects, breaking with the BRI’s established pattern of financing megaprojects in transport and energy sectors.

A scaled-down BRI was also evident at the triennial summit that plays a central agenda-setting role in China’s policy towards Africa. The 8th ministerial conference of the Forum on China-Africa Cooperation (FOCAC) was held in Dakar from November 29-30.

At this year’s summit, President Xi trimmed China’s funding commitment to Africa for the first time. The amount of pledged credit was cut from USD 20 billion to USD 10 billion, and rather than supply African governments with the credit for Chinese-built projects, the initiative will give African financial institutions the credit to develop African companies.  

This movement away from big ticket infrastructure items reflects a more cautious approach and brings Beijing closer to Western norms of smaller scale funding for private enterprise. Echoing sustainability focused Western initiatives, President Xi also stressed the “green,” “digital,” and “health” aspects of cooperation, promising to lead Africa in its clean energy transition. China’s new “Global Development Initiative,” which was launched in September and mentioned in President Xi’s FOCAC speech, is also intended to signal Beijing’s commitment to the United Nation’s 2030 Sustainable Development Agenda.

The shift in China’s approach comes while Western challenges to the BRI have been picking up speed. On December 1, the European Commission revealed its plan for the EU’s renewed connectivity agenda, known as the “Global Gateway,” which is seen as a response to China’s BRI funding for infrastructure in developing countries.  

The 14-page document gives fresh details about the initiative’s institutional structure: the Vice President of the European Commission will be responsible for implementation and a Global Gateway Board will provide strategic guidance. It also puts an ambitious price tag on Global Gateway – EUR 300 billion between 2021-2027, including EUR 26.7 billion of new funding in partnership with the European Investment Bank (EIB).

The document includes several sections called “Global Gateway on the ground,” however it names no new specific projects and leaves out concrete details about the initiative’s implementation. It shows that Global Gateway, like China’s BRI, is largely a repackaging and branding of existing funding mechanisms.

On the other side of the Atlantic, US President Joe Biden convened the first of two virtual “Summits for Democracy” on December 9. In his opening remarks,1  President Biden announced USD 424 million of funding to support independent media and anti-corruption work around the world. He claimed that the world stands at an “inflection point” that will determine the course of democracy in the coming decades, positioning the United States as leader of a global democratic revival.

The inclusion of Taiwan at the summit was particularly irksome to Beijing, which fears that the platform might pave the way toward international recognition of Taipei. Other countries have also expressed displeasure at the summit or sidestepped invitations. Hungary, the only EU nation not invited, tried to block President von der Leyen from speaking at the summit.

Tensions between China and the West are increasingly reflected in competing initiatives and attempts to carve out spheres of geopolitical allegiance. In his speech at the BRI symposium in November, President Xi recognized these tensions, positing “cooperation and struggle” as a central theme of the new BRI. Moving forward, competition with Western initiatives like the US’ Build Back Better World (B3W) and the EU’s Global Gateway, will be a principal concern of the BRI.

In this edition of the Global China Inc. Tracker, the “Regional Spotlight” section looks at competition between China and the EU in green technologies, focusing on Chinese wind sector investments within Europe. Aiming to diversify their portfolios and gain expertise in offshore wind technology, China’s state-owned enterprises have acquired a substantial portfolio of wind projects in Europe since 2016.

The “Key Player” focuses on the investments in mineral resources that will underwrite the clean energy transition. It describes Chinese overseas acquisitions of four key battery minerals: Cobalt, Copper, Lithium, and Nickel. China’s footprint in these four mineral markets is the result of efforts to address its own strategic vulnerabilities, and a forward-looking agenda that anticipated clean energy demand several years before it became topical in the US or Europe.

Finally, in “Global China Inc. Updates,” we provide succinct updates on the overseas activity of Chinese companies these past three months.

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