Title: Biden’s Infrastructure Pact Seeks to Counter China’s Belt and Road Initiative
At the recent G20 leaders’ summit in New Delhi, President Joe Biden surprised many by extending a handshake to the Saudi Crown Prince Mohammad bin Salman. This marks a significant turnaround in the U.S.-Saudi Arabia relationship, considering Biden’s previous warnings last year. However, Saudi Arabia’s newfound participation in the China-dominated BRICS coalition and its involvement in the Biden-led pact for a ship-to-rail economic corridor indicate the diverse economic and strategic opportunities available to countries caught between the U.S. and China’s competing influences. As the world witnesses a rise in protectionism and nationalism, global trade is becoming more complicated, leading to the formation of complex relationships and alliances.
Exploring the Biden-led Infrastructure Pact and its Counter to China’s Belt and Road Initiative:
Biden’s initiative aims to establish two separate corridors – the east corridor connecting India to the Middle East and the northern corridor connecting the Middle East to Europe. This ambitious project includes the development of railways to supplement existing cross-border maritime and road transport routes, connecting countries such as India, the UAE, Saudi Arabia, Jordan, Israel, and Europe. The primary goal is to bridge infrastructure gaps in low- and middle-income nations, ensuring regional supply chains, boosting trade connectivity, and stimulating economic activity. However, it is crucial to note that this initiative is not intended as a direct confrontation to China’s Belt and Road Initiative, but rather as a focus on multiplication and addition, rather than subtraction.
Risks and Lessons Learned from China’s Belt and Road Initiative:
China’s Belt and Road Initiative has been in operation for over a decade and has garnered partnerships with 148 countries, likely to boost the world GDP by $7.1 trillion per annum by 2040. However, there are some cautionary lessons for Biden’s infrastructure pact, stemming from China’s 10-year head start. The initiation of BRI deals typically involves loans with higher interest rates, construction and equipment by Chinese companies, and state ownership in many cases. Additionally, large-scale infrastructure projects tend to carry high risks, with returns often realized in the long term and not necessarily benefiting the original investors. As a result, public funds are generally used to support these projects due to their limited commercial viability.
Debt and Negotiations:
BRI deals have led to debt-related issues, with a significant number of loans issued by Chinese institutions for infrastructure projects renegotiated or written off between 2020 and March 2021. To address these concerns, there has been a gradual shift towards involving multilateral banks in debt restructuring negotiations. U.S. Treasury Secretary Janet Yellen has prioritized this issue, emphasizing the need for an alternative strategic approach. Biden’s infrastructure plan appears to adopt a lower-risk strategy that utilizes existing infrastructure and focuses on connecting ports, railways, energy grids, and telecommunications cables.
The Rise of Middle Powers and India’s Leadership:
Biden’s coalition-building approach and infrastructure pact provide Indian Prime Minister Narendra Modi with an opportunity to position India as the leader of the developing world. Modi has used the G20 and the presidency of the Shanghai Cooperation Organization to boost India’s global standing, advocating for the interests of the Global South while engaging with developed nations. This move by the United States aligns with India’s efforts to lead and represent the developing world.
Biden’s infrastructure pact aims to counter China’s Belt and Road Initiative by focusing on connectivity, investment, and building alliances. While China’s initiative has significant global reach and influence, Biden’s plan offers a pragmatic and lower-risk approach. The complex landscape of international relations in a multipolar world requires countries to pursue their self-interests while actively participating in various alliances and partnerships. As the U.S. and China navigate their economic and strategic battles, the world’s developing economies stand to benefit from the promises of investment and regional integration presented by both powers.