With its bold Belt & Road Initiative to boost trade and infrastructure links with partners, Xi Jinping’s China stole a march on other large economies. Since 2013, it has created a framework endorsed by more than 150 states and international organisations.
Western democracies were slow to recognise its strategic implications, and even slower to respond. Talks between the EU and India on building joint infrastructure projects around the world show attempts to come up with alternatives to China’s project are finally under way. Whether they can have a similar impact is less clear.
The EU and India hope to announce their “connectivity” partnership at an online leaders’ summit on May 8. In reality, it follows a similar alliance with Japan unveiled in September 2019. It is unlikely to be a one-off but eventually to form part of a kaleidoscope of co-ordinated bilateral and multilateral partnerships between the EU and US and Indo-Pacific nations.
As part of his plan to create an alliance of democracies to counter China’s growing power, US president Joe Biden has proposed to the UK’s Boris Johnson setting up an infrastructure effort to rival the Belt & Road Plan. That may form part of June’s G7 Summit, to be hosted by Johnson in the UK, and to which leaders from India, Australia and South Korea have been invited.
Many will be wary of anything that resembles a return to cold war-style practices of signing up client states into opposing camps. Some will note that Narendra Modi’s India is hardly a model democracy.
But the wealthy democracies are right to try to develop infrastructure ties that go deeper than the old “trade and aid” model with poorer countries. Such alliances can deliver mutual economic benefits, and enhance the resilience of global supply chains.
For Europe, in particular, they provide strategic leverage and a chance to present itself as a pole of attraction for third countries. While the EU lacks the military clout of the US, it does boast financial firepower. It can also offer highly attractive market access. In the past it has successfully used this as a carrot to encourage its near neighbours to move closer to Europe’s own standards of governance.
Concerns among western democracies and some BRI partner countries have intensified as China has taken an increasingly authoritarian path.
The project has been seen more overtly as a tool of influence and a way for Beijing to establish strategic or military footholds. China has been accused of using “debt trap diplomacy” to entice countries such as Sri Lanka into taking unsustainable loans for infrastructure projects; when they struggle to sustain the debt, Beijing can seize the asset. It has faced a backlash, too, over weak legal and environmental safeguards.
That opens an opportunity for advanced economies to offer alternatives with less onerous financing terms and more legal transparency. But there are also obstacles. Western countries have allowed China to build up a substantial lead in using infrastructure partnerships to create economic networks.
They will be hampered, too, by the lack of a unified strategic vision and centralised control compared with China’s BRI. Many countries, including India, are wary of being part of anything that might be construed as a global anti-China alliance.
While China, too, can rely on state banks to provide financing, the model the EU is pursuing envisages state bodies such as the European Investment Bank providing seed money to leverage private sector financing.
Private sector appetite for such investments remains in question; the EU-Japan infrastructure partnership has little to show for it, though it was signed just months before the pandemic.
A similar deal with India will be a further test of the EU’s ability to shift from “payer to player” and leverage its heft in trade, aid and investment to become a rival pole to China.