G7-CHINA The G7 Belt and Road changes its name, but its limitations remain

Renamed the Partnership for Global Infrastructure and Investment, it should raise $600 billion in five years. The money will be invested in “sustainable” infrastructure projects for developing countries. With the crisis of the pandemic, inflation and the war in Ukraine it will be difficult to mobilize resources. Potential clients prefer to deal with Beijing, which imposes few conditions.

Rome () – A year ago it was called Build Back Better World, at their annual summit on June 26, the G7 leaders renamed it the Partnership for Global Infrastructure and Investment: a change of label in order to become a true alternative to the China’s Belt and Road Initiative, the problems of Covid-19 and the Russian invasion of Ukraine.

With their “new” partnership, the world’s seven most advanced economies aim to raise $600 billion over five years to finance infrastructure projects in developing countries. The Biden government speaks of a coordinated effort to meet the needs of the most disadvantaged countries, but in a “transparent” manner and meeting high financial, environmental, labor and security standards. The investment must be at the service of the fight against climate change, improve global health, promote gender equality and strengthen the digital economy.

From a perspective of competition (confrontation) with China, the Partnership for Global Infrastructure and Investment comes at the right time. As Chinese observers also point out, in the last four years the Belt and Road has suffered a drastic reduction in investment. According to the China Global Investment Tracker, the initiative launched in 2013 by Xi Jinping to increase China’s global weight through investments in infrastructure has so far involved investments of 838 billion dollars. However, from the peak of 130,000 million in 2015, it went to 63,500 million in 2021.

The slowdown in the Chinese economy, aggravated by the draconian covid-19 containment regulations and the effects of the Russo-Ukrainian war, could further reduce Chinese investments in the 140 Belt and Road partner countries.

Financial resources are the first hurdle also faced by the G7 countries. For the Partnership for Global Infrastructure and Investment, the US has promised public and private financing of 200 million dollars, as an alternative to those offering plans that in Washington’s opinion are actually “debt traps”. The European Union wants to contribute 316.7 billion dollars to build a “sustainable” alternative to the Belt and Road. Between plans for recovering from the pandemic, fighting inflation and supporting Ukraine, it remains to be seen how much Washington and its allies will be able to spend; not to mention that it will not be easy to involve private investors.

The Belt and Road has been criticized for financing polluting structures such as coal plants, for its opaque bidding that favors Chinese companies, and for the forced displacement of populations to make room for new infrastructure. The harshest accusation, however, is that of making debtor countries increasingly dependent on the Chinese creditor.

Although an AidData study found that 40 of the 50 largest loans made by Chinese state-owned creditors have received “collateral” guarantees from client governments, developing countries seem unwilling to give up money from Beijing. In all probability, the biggest problem for the G7 governments is to dismantle a relationship that has been structured over time between China and its debtors.

Although they pay higher interest than those offered by Western governments and institutions, many developing countries favor Chinese financing and projects because Beijing does not impose fiscal and financial conditions, environmental and humanitarian restrictions or complex management and transparency controls. In short, the points on which the Partnership for Global Infrastructure and Investment is based.