Hostility to China preventing groundbreaking global cooperation on infrastructure building

With enough support, the China-led AIIB could expand to lead a joint effort to address infrastructure gaps that were already huge before Covid-19 struck, boosting economic recovery
The other major Chinese-led project, the belt and road, is similarly shunned by the US and some major developed countries, to the detriment of the greater interest

Anthony Rowley

Published: 1:30am, 24 May 2021

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A toxic mixture of resentment, envy and fear seems to characterise Western reactions to China’s economic initiatives. This is very apparent in the area of basic infrastructure, where national competition threatens to trump international cooperation just when joint initiatives are most needed.

The China-led Asian Infrastructure Investment Bank is one of few such multilateral institutions designed specifically to focus on infrastructure rather than on broad development issues. Some in China argue that it could serve as a model for a global infrastructure bank.

But others say that, however rational this argument may be, it is unlikely to win international acceptance at a time when tensions are running high on other issues between, on the one hand, the US and its “alliance partners” and on the other hand, China.

The idea will be seen, one senior Chinese financial official tells me, as another example of China “trying to throw its weight around”. And yet the need for a global institution with a specific remit to address infrastructure issues seems undeniable.

Even before Covid-19 struck, the global need for huge spending on transport, energy and communications infrastructure in the coming decades was widely acknowledged. This is a huge challenge and the pandemic has added a new dimension – the need for digital infrastructure.

Students wearing masks to curb the spread of the coronavirus take online classes with computers loaned to them by the teachers of the Gualberto Villarroel school in La Paz, Bolivia, on May 12. The school’s teachers and some parents are providing the devices to students who do not have access to a computer or cellphone to attend classes online. The school itself provides the internet signal. Photo: AP

When the coronavirus emerged, it seemed that the global economy faced a disastrous implosion from the impact on business and industry. What prevented this happening (apart from gigantic fiscal and monetary stimulus) was a digital revolution, both in advanced and emerging economies.

But the physical and human underpinnings needed to support this revolution, in terms of electric power generation, computer and IT equipment and retraining, are under great stress and this in itself will increase the demand for digital infrastructure.

As Wang Huiyao, president of the non-governmental think tank the Centre for China and Globalisation, noted recently in the Post, the infrastructure initiatives that developed nations launched to boost recovery are out of reach for the less-well-off countries that need them most.

Facing an infrastructure financing shortfall of US$18 trillion out to 2040, he said, the world “needs a dedicated global infrastructure bank that can mobilise capital to spur recovery and build for long-term goals related to climate, resilience and inclusivity”. The AIIB, argued Wang, has the potential to fill this role.

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Built from scratch, a global bank would need many years to become operational. However, with a fresh capital injection and expanded membership, the AIIB with its 100-plus member nations and operations in and beyond Asia could expand its remit and become a global infrastructure bank.

But there are serious obstacles. For those inclined to Sinophobia, it was bad enough when, in 2013, Chinese President Xi Jinping launched his bold plan for the Belt and Road Initiative, a semi-global network of road, rail, air and sea linkages plus energy and communication networks.

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The belt and road has since come under a seemingly unending barrage of criticism – not least from the US and Japan – both countries that have also declined to become members of the AIIB (although some European nations including Italy have joined).

To hear these critics tell it, the Belt and Road Initiative is part of China’s neo-imperial economic and geostrategic designs, a means to “trap” borrower countries into debt, a source of “slave labour” and a means for China to export its surplus construction and production capacity.

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One might alternatively describe the belt and road and the AIIB as “visionary” developments which came at a time when leading Western nations had all but forgotten the critical role infrastructure can play in economic and social development, and when multilateral development banks like the World Bank had done likewise.

The fact that China not only drew attention to those myopic failings by building some of the world‘s most advanced basic infrastructure both at home and overseas but also established a lending institution specifically designed to finance such activities was not exactly welcomed in capitals such as Washington and Tokyo.

Now, of course, US President Joe Biden has entered the fray with his proposed US$4 trillion fiscal package, of which a large part will be devoted to rebuilding America’s crumbling infrastructure. Meanwhile, the US, Japan, Australia and India have plans – on paper at least – to launch joint initiatives rivalling the belt and road.

What a tragic waste of resources, both financial and physical, this amounts to when global cooperation on infrastructure building would be so much better than competition.

Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs