G-7 leaders finally came up with the Build Back Better World (B3W) project to counter China’s growing influence in more than 100 countries through Belt Road Initiative (BRI) projects. The proposal, although in its infancy, aims to close the infrastructure investment gap in developing and low-income countries – the space that has been increasingly conquered by China through 2,600 projects. BIS with billions of dollars in investment. BRI projects are seen as corrosive tactics or debt traps set by China for its strategic dominance in world trade, foreign policy and geopolitics. So B3W is a welcome but late stage.
Counter-strategy is needed to lower Chinese leverage. A macro view of BRI projects across geography – quantum and investment model – clearly reflects the motive for international economic integration centered on China, production networks, hegemony in the Asia-Pacific region and ultimately , the global economy. Since the creation of the BIS in 2013, Beijing’s outward investment has been aggressive, with the ratio of FDI outflows to Chinese inflows falling from around 0.34 to 1 between 2001 and 2010. In terms of volume, FDI outflows increased to an average of $ 140 billion in 2016-19, compared to an annual average of $ 25 billion in 2001-10. China’s share of FDI outflows increased from 2.3% between 2001 and 10% to 10.7% between 2016 and 2019.
China had an aggregate exposure of around $ 750 billion – $ 293 billion in investments and 461 billion in construction contracts – between 2013 and mid-2020. After the BRI, there is a sudden surge in investment – around $ 40 billion a year between 2013 and 2019 – in BRI countries, although investment has slowed due to the pandemic. Since the inception of the BRI, China has signed various projects worth $ 548.4 billion, four-fifths of which are in BRI participating countries ($ 461 billion). After 2013, there was a sudden increase in infrastructure investments in BRI projects compared to investments in non-BRI projects.
From 2013 to mid-2020, China was exposed to large contracts worth around $ 123 billion in sub-Saharan Africa, mainly with Nigeria, Zambia, Ethiopia, Angola, Tanzania and the United States. Kenya, mainly focused on hydropower and petroleum, maritime and rail transport. China has strategically made Kenya the African hub and plans to connect it with other landlocked countries in the region including Uganda, South Sudan, Rwanda, etc.
Central, South and West Asia is China’s second preferred region under the BRI, as construction contracts worth $ 110 billion are pending and 80% of contracts are concentrated in Pakistan, Bangladesh, Russia, Iran and Kazakhstan. The China-Pakistan Economic Corridor (CPEC), Bangladesh-China, India, Myanmar Economic Corridor (BCIM) and the Colombo Port City Project in Sri Lanka, among others, are important projects of the BRI. . China has a plan to complete 4,000 km of railroads and 10,000 km of highways in the Central Asian region under the BRI, at an estimated cost of $ 16 billion. Some of the major projects include freight trains between China, Turkey and Kazakhstan, and gas pipelines (Siberia and Altai) for the production and transportation of oil and natural gas.
China has signed construction contracts worth around $ 96 billion under the BRI, mainly focusing on Saudi Arabia, the United Arab Emirates and Egypt, with an allocation of 70 % of total regional contractual agreements. China is investing in Africa to build a comprehensive transport network.
Since the launch of the BRI, China has signed various contacts worth $ 90 billion with the East Asian region. The largest contracts were signed with Indonesia, Malaysia and Laos for $ 18.5 billion, $ 17.1 billion and $ 11.2 billion respectively, mainly focused on transport, railways , roads and waterways, for better integration between China and ASEAN countries.
Since the start of the BIS, China’s total exposure with Europe was around $ 23 billion as of mid-2020. Major projects include a freight train project from Ukraine to Kazakhstan via Georgia, Azerbaijan, Kazakhstan and possibly China, covering a distance of 5,475 km. The Greek port of Piraeus, the China-Belarus Industrial Park and the Green Silk Road Ecological Investment Fund are other major projects. These initiatives would contribute to trade facilitation for China and better delivery of goods and services.
BRI projects globally aim to facilitate cross-border transport of goods, access to energy, creating demand for existing excess capacity in Chinese industries. Although the objectives of projects undertaken in different countries vary, the overall focus is on the development of transport, logistics and communications, which would reduce the trade and transaction costs for China’s trade, give more access to Chinese markets and ensure a stable supply of energy and other resources. Many countries, including India, would see a negative trade impact on the competitiveness of their products, market access, resource extraction, etc. due to Chinese competition.
China is focused on its agenda and well ahead. It has also tried to gain a foothold in more countries and has increased the level of acceptance of the BRI over time through the BRI Summit, the Boao Forum for Asia, China-Central and Eastern Europe ( CEE), the Belt and Road Forum, etc. B3W’s counter-proposal is certainly a welcome step in containing the negative implications of a Chinese mega plan. However, B3W lacks consistent thinking and proper planning at this point. However, it is better late than never. Moreover, it remains to be seen what role India will play in B3W since it has been a strong opponent to the Chinese BRI.
This column first appeared in the paper edition on July 17, 2021 under the title “A Counter-Strategy Called B3W”. The author is a professor at the Institute for Economic Growth (IEG) at the University of Delhi.