The U.S. teams up with Japan, Australia, Canada, and the EU to offer an alternative to China’s Belt and Road Initiative, which has been accused of being debt trap diplomacy.
It comes as the White House is pushing trade negations with China that may result in major new tariffs, and Italy joins with the Belt and Road.
What is the Belt & Road Initiative?
The Belt and Road Initiative is a $1 trillion investment scheme by the Chinese Communist Party to connect the world to China. The land belt runs from China through South and Central Asia into Europe, while the maritime road connects coastal Chinese cities with Africa and the Mediterranean.
Chinese President, Xi Jinping has pledged $1 trillion for the belt and road and has tied in about 70 countries and international organisations.
The U.S. is creating a powerful alternative to China’s Belt and Road. In October, Congress passed the Build Act, which is a massive upgrade to the U.S. organisation that handles infrastructure investment in developing countries.
It was called the Overseas Private Investment Corporation, or OPEC, but on October 1st of this year, it will be merged with other U.S. developing groups into a new organisation called the U.S. International Development Finance Corporation, or USDFC, or DFC for short. China is clearly the target, as it says on the DFC website.
It was created specifically to help countries sidestep opaque and unsustainable debt traps being laid by Beijing and the budget will double to $60 billion. Now that is still a far cry from the trillion dollars Xi Jinping has pledged to the Belt and Road, and there are some other key differences between China’s model and the U.S.
But it turns out the U.S. isn’t the only country interested in challenging China’s Belt and Road. A month after the Build Act was passed, the U.S. signed a trilateral development deal with Japan and Australia. Working together, the three countries will provide infrastructure development in developing countries in the Indo-Pacific region.
China’s Debt Diplomacy
Chinese loans are often unsustainable. Debt piles up, the countries end up defaulting on their loans, and they force those countries to give up strategic assets, things like natural resources or ports that could be used by the Chinese military. In a recent white paper by the Institute of International Finance, it said there is legitimate concern China is using debt diplomacy. This has happened to a lot of countries already: Sri Lanka, Djibouti, Kenya, Pakistan.
So if the Communist Party is acting like a loan shark, why aren’t developing nations jumping at the chance to work with the U.S. and its allies? Well, because U.S. deals also come with strings attached. OPEC’s investments are dependent on several other stringent requirements, such as human rights protection, transparency, local job creation, host nations’ sovereignty and an enduring legacy. The Chinese Communist Party’s belt and road has none of those things.
That’s why some of the biggest customers of the belt and road are authoritarian regimes. If you’re a brutal dictator, what would you rather do? Take U.S. money, but be required to allow free press and transparent elections that might not work out so well for you? Or take China’s money and maybe get your country deeply in debt, but the Chinese Communist Party will help keep you in power.
China is Exporting Its Internet Censorship
According to Freedom House, China is now exporting its model of comprehensive Internet censorship and surveillance around the world, offering training seminars and study trips as well as advanced equipment that takes advantage of artificial intelligence and facial recognition technologies. Beijing’s desire and capacity to spread totalitarian models of digitally enabled social control pose a major risk to democracy worldwide, and it doesn’t stop at digital social control. Venezuela is a major Belt and Road country in Latin America.
The Belt & Road Initiative’s Expanse
China has been pushing the Belt and Road so much it’s no longer just third world dictatorships getting hooked. At the end of March, Beijing nabbed its first G7 country, Italy. The U.S. National Security Council tweeted, “Italy is a major global economy and a great investment destination.
Endorsing BTI lends legitimacy to China’s predatory approach to investment and will bring no benefits to the Italian people.”
And that’s just one more factor making the EU very nervous about Chinese investment. In 2017 the EU tried to issue a statement at the UN condemning China’s human rights abuses, but Greece stepped in to block it.
That is, after Greece just took a belt load of money from China. China’s ability to affect voting inside the EU is making a lot of officials nervous, which is a big part of why the EU joined with Canada, Japan, and Australia in signing up with the U.S. plan.
Still, Chinese money is very tempting, and that’s why even though Japan signed on with the U.S., and the Chinese Communist Party actively produces anti Japanese propaganda, last October, Japan and China agreed to cooperate on 50 international investment projects, including smart cities in Thailand.
Basically both the U.S. and China are racking up supporters ahead of the upcoming G20 summit being held in Osaka, Japan, this June.