from Asia Unbound

How Should the United States Compete With China’s Belt and Road Initiative?

A container ship is pictured docked at the Colombo South Harbor, funded by China, in Sri Lanka on June 25, 2016.
A container ship is pictured docked at the Colombo South Harbor, funded by China, in Sri Lanka on June 25, 2016. Dinuka Liyanawatte/Reuters

Jennifer Hillman and David Sacks are codirectors of the CFR-sponsored Independent Task Force report on a U.S. Response to China’s Belt and Road Initiative, which is co-chaired by Jacob J. Lew and Gary Roughead. 

China’s Belt and Road Initiative (BRI) is the country’s most ambitious foreign policy undertaking in modern times and is central to Chinese President Xi Jinping’s legacy. BRI, which dwarfs the Marshall Plan in scale, has funded and built roads, power plants, ports, railways, fifth-generation (5G) networks, and fiber-optic cables around the world. While BRI initially sought to connect countries in Central, South, and Southeast Asia with China, it has since transformed into a globe-spanning enterprise encompassing 139 countries.

More on:

Asia

China

Belt and Road Initiative

Indo-Pacific

World Order

Our independent Task Force report, chaired by Jacob J. Lew and Admiral (retired) Gary Roughead, evaluated the implications of BRI for U.S. interests and put forward a U.S. strategy to respond to it.

When Xi introduced BRI in 2013, he believed it could advance an array of Chinese economic, political, and geopolitical interests while filling a vital need in many countries for reliable sources of power and better infrastructure.

In theory, BRI has the potential to be a net positive in multiple respects, helping to close an infrastructure gap in developing countries while also smoothing transportation and logistics paths, and contributing to regional and global economic growth.

In practice, however, BRI’s risks outweigh its benefits. BRI undermines global macroeconomic stability by lending funds to unsustainable projects, thereby adding to countries’ debt burdens. It locks some countries into carbon-intensive futures by promoting coal-fired power plants, tilts the playing field in major markets toward Chinese companies, promotes exclusive reliance on Chinese technology, and draws countries into tighter economic and political relationships with Beijing.

The COVID-19 pandemic has upended BRI and accelerated host countries’ reckoning with the initiative, in many cases eviscerating their ability to pay for projects and forcing them to stall or cancel expensive projects. The pandemic has driven the Chinese government to pivot to a more slimmed-down, cost-effective, and technology-focused BRI.

More on:

Asia

China

Belt and Road Initiative

Indo-Pacific

World Order

While the pandemic challenged BRI, temporarily halting the flow of Chinese workers and supplies, the revamped BRI emerging from the pandemic expands rather than contracts opportunities for Beijing to promote its geopolitical and economic agenda. With BRI now enshrined in the Chinese Communist Party’s (CCP) constitution and Xi likely set to rule China indefinitely, his trademark policy will certainly continue.

As the United States embarks on an era of great power competition with China, it is incumbent on U.S. policymakers to better understand BRI and the strategic and political implications of the initiative. BRI also stands as an example of China’s willingness and ability to fill voids left by the United States. Cutbacks in federal research and development funding and investments in advanced technologies in the United States have allowed China to move ahead of the country in the development and sale of 5G technology, the installation of high-speed rail, the production of solar and wind energy, the promulgation of electronic payment platforms, the development of ultra-high-voltage transmission systems, and more. Tightened U.S. immigration and visa rules have turned away top talent. The United States’ withdrawal from the Trans-Pacific Partnership and disinterest in other multilateral trade agreements in Asia has allowed China to cement its position as the center of regional trade.

The United States has a clear interest in adopting a strategy that both pressures China to improve governance standards along the BRI and provides an effective alternative to the initiative—one that promotes sustainable infrastructure, upholds high environmental and anticorruption standards in foreign infrastructure projects, ensures non-Chinese companies can operate on a level playing field in foreign markets, and assists countries in preserving their political independence.

Our Task Force report recommends a four-pronged strategy to do so. It outlines particular steps to improve U.S. competitiveness, specifies how the United States can do more with allies, partners, and multilateral organizations to better meet developing countries’ infrastructure needs, and offers recommendations for steps to be taken to protect U.S. security interests in BRI countries.

The Task Force counsels that the United States cannot and should not respond to BRI symmetrically, attempting to match China dollar for dollar or project for project. Instead, the United States should focus on areas where it can offer, either on its own or in concert with like-minded nations, a compelling alternative to BRI. Such an alternative would leverage core U.S. strengths, including cutting-edge technologies, world-class companies, deep pools of capital, a history of international leadership, a traditional role in setting international standards, and support for the rule of law and transparent business practices.

The COVID-19 pandemic has made a U.S. response to BRI all the more needed and urgent. The global economic contraction has called into question the economic sustainability of many BRI projects and elevated questions of debt sustainability. Unless BRI-related debt is addressed, countries that are already being battered by the pandemic could be forced to choose between making debt payments and providing healthcare and other social services to their citizens.

As the Joe Biden administration takes stock of U.S.-China relations and crafts a plan for managing strategic competition with Beijing, it should make responding to BRI a critical component of a broader U.S. strategy.