During the Group of Seven (G7) meeting in Cornwall, United Kingdom (UK) earlier this month, United States (US) President Joe Biden introduced the Build Back Better World Initiative (B3W). According to the White House, the B3W commits the world’s major democracies “to concrete actions to help meet the tremendous infrastructure need in low- and middle-income countries.” Crucially, the initiative has been introduced to strategically counter China’s widely successful global infrastructure development strategy—the Belt and Road Initiative (BRI).
However, President Xi Jinping’s BRI has been functional—and aggressively so—since 2013. Through big and small investment portfolios, 139 countries are now affiliated with the Initiative. It has proven to be a grand channel of diplomacy that has elevated Beijing’s position in the world as a leading soft power. Moreover, the BRI has helped China literally build new bridges in previously overlooked regions such as Central Asia. Through substantial funding and engagement, Beijing has been able to exert its influence and firmly stamp its footprint in the region.
Against this backdrop, does the West’s B3W pose any real competition or threat to China’s BRI in Central Asia?
Through the B3W, the G7 and its partners will coordinate in mobilizing private-sector capital in four areas of focus: climate, health and health security, digital technology, and gender equity and equality. In comparison, the BRI’s main focus areas that receive maximum funding include energy (~39%), transport (~25%), real estate (~10%), and metals (~8%). At the moment, the B3W has only specified that “different G7 partners will have different geographic orientations,” without any specific mention of Central Asia. However, since “the sum of the initiative will cover low- and middle-income countries across the world,” it is expected to cover the region as well. However, since both initiatives’ focus areas seem to be different at the moment, it is indicative that the two might not be in direct competition in the region, at least initially.
The US has only recently started considering the region strategically relevant to its interests and begun invigorating its cooperation programmes. In January this year, Washington announced the launch of the Central Asia Investment Partnership with Uzbekistan and Kazakhstan. Through the initiative, the three countries “will make all possible efforts to raise at least $1 billion over five years to support projects that advance private-sector-led growth and increase economic connectivity within Central Asia and the broader region.”
While the B3W initiative is a start, it faces an uphill task to match China’s engagement in the region. In 2013, Beijing agreed to provide more than $50 billion in infrastructure and energy deals with Central Asian states. It pledged a further $40 billion in 2014 to set up an infrastructure fund to boost connectivity in Asia and continues to make strides in the region.
In fact, China’s investments in Central Asia began as far back as 2007, when it focused largely on hydrocarbon extraction and laying pipelines through Kazakhstan to bring Central Asian oil and gas into China’s energy mix. Over the last four or five years, it has diversified its portfolio and invested in what it calls “industrial capacity building,” by setting up manufacturing plants. As a result, it is now the largest trading partner of every one of the former Soviet republics in Central Asia.
China has even gone a step further and strengthened its relationship with the region through the establishment of the Shanghai Cooperation Organisation (SCO), which has helped China have a forum to resolve any rising border issues with Central Asia, especially since it borders the volatile Xinjiang Autonomous Region. Apart from the forum, it regularly engages with its Central Asian partners through high-level visits and bilateral meetings. In contrast, Washington has demonstrated the region’s lack of importance to its foreign policy, as no US president has ever made a diplomatic visit to Central Asia. In fact, even visits by senior US officials have generally been rare.
Nevertheless, despite major successes, the road into Central Asia has not been smooth sailing for Beijing either. Recent years have witnessed an uptick in anti-China sentiment at the citizen level, as China holds considerable economic, political, and military control in the region. In 2019, Kyrgyz police detained over a dozen people during the “biggest public protests to date” in Central Asia. The protesters were demanding that fewer work permits be granted to Chinese workers, as at least 150,000 Chinese migrant workers live in the country to work on BRI projects. Just prior to that, protests were reported in Kazakhstan against growing Chinese construction projects. Citizens across the region are growing increasingly wary of what they see as debt-trap diplomacy. In fact, several governments in the region have either requested debt waivers or ceded strategic territories and resources in exchange.
Against this backdrop, Central Asia, which was previously financially dependent on Russia, might welcome the alternative offered by the B3W. The B3W boasts of a “transparent source of financing,” although it is unclear how this financing will avoid making Central Asian countries victims of deb-trap diplomacy once again.
All that being said, when these Western democracies might actually be able to enter the playing field still remains largely unclear as they work through the details of the initiative and secure funding channels. Furthermore, the US has stated that it aims to mobilise the potential of its development finance tools, including the Development Finance Corporation, USAID, EXIM, the Millennium Challenge Corporation, the US Trade and Development Agency, and complementary bodies such as the Transaction Advisory Fund. However, how much financial aid it is actually able to muster, while also keeping domestic interests in check, remains to be seen.
Conversely, China’s enormous $4-$8 trillion budget has already secured and diversified funding channels over the years, including BRI bonds, private capital investment and public-private partnerships (PPP) but also State-Owned Enterprise (SOE). To facilitate this vision, the Asia Infrastructure Investment Bank and the New Development Bank were set up, the $40 billion Silk Road Fund was created, China’s two big policy banks (China Development Bank and the Export-Import Bank of China) extended over $200 billion in loans to BRI countries, and four of China’s big non-commercial banks have contributed tens of billions of dollars.
Furthermore, given that all participant nations of the B3W will be the world’s strongest, albeit wealthiest democracies, there is a strong possibility that the bureaucratic delays typically attached with democratic functioning might slow down the pace of investment and development in the already politically volatile region. This is a barrier that China’s communist system has been able to swiftly bypass, allowing it to waste no time in setting up projects all around the world in only eight years.
While growing anti-China sentiment may provide a window of opportunity for the US and its allies in Central Asia, it is clear that China remains undeterred in the face of public discontent and the threat of competition, as it has continued to expand its investment in the region. China shares natural borders with Central Asia, implying that despite new players entering the playing field, Beijing, with its power and resources, will always have a dominant interest and influence over the region.
Biden’s Build Back Better World Is No Threat To China’s BRI in Central Asia
While the Build Back Better World may be the advent of the G7 in Central Asia, it has miles to go before it can significantly threaten China’s foundation in the region.
June 26, 2021
SOURCE: SCMP