What differentiates the US-driven Blue Dot Network from China’s Belt and Road Initiative? Money

The revived Blue Dot Network is the latest in a series of attempts by the US, Japan and Australia to counter China’s transnational infrastructure-focused scheme
However, it lacks the funding needed to back projects in the way China has been able to, using its foreign exchange reserves and financing from state banks

Anthony Rowley

Published: 3:30am, 14 Jun, 2021

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Imitation, it is said, is a “form of flattery” and if that is true then China should be feeling extremely flattered by the lengths to which other powers (notably the US, Japan and Australia) are prepared to go to emulate its remarkable infrastructure initiatives, domestically and overseas.

The latest manifestation of this “copy and catch-up” obsession on the part of the three powers (or partners of convenience) is their launching of consultations on something called the Blue Dot Network which, broadly speaking, represents their response to China’s Belt and Road Initiative.

The move should perhaps come as little surprise at a time when the US is bent on forming China-countering alliances with other key nations, but what is notable is the fact that the Organisation for Economic Cooperation and Development is providing technical support to the initiative at the request of the US, Australia and Japan.

The move comes as the Paris-based OECD has just come under new leadership, with former Australian politician and finance minister Mathias Cormann taking over from Angel Gurria as secretary general and when the OECD has added a desire to “preserve individual liberty” to its mission statement.

Preserving individual liberty – as distinct from broader socio-economic aims – is not the kind of activity that a politically neutral body like the OECD would normally be expected to engage in, and it is not stretching a point to see this as part of a wider China-criticising trend.

Japanese Prime Minister Yoshihide Suga walks with US President Joe Biden towards the White House Rose Garden, in Washington on April 16. Photo: AP

The context in which the Blue Dot Network has come into being is certainly political (though it might not sound so from its nondescript title). Its genesis has to be seen against the background of Chinese President Xi Jinping’s launch of the Belt and Road Initiative in 2013.

China surprised the world when it launched the plan to build transport, energy, communications (and later digital) infrastructure stretching from China to Europe, via central Asia, and on into the rest of Asia, the Middle East and Africa.

It did so after building an extensive network of high-speed rail links right across China and showing itself to be an emerging infrastructure superpower. All this served to “show up” the ageing and decrepit state of basic infrastructure in the US and much of Europe.

The reaction of the US (then under president Donald Trump) was defensive and aggressive, and much the same goes for Japan and later India and Australia. They began scrambling to come up with alternatives to the belt and road, rather than embracing or cooperating with the Chinese project.

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First came a plan hatched by then Japanese prime minister Shinzo Abe and his Indian counterpart Narendra Modi in 2016 for an “Asia-Africa Growth Corridor” which looked very similar to China’s initiative. Then came the US, Japan and Australia’s “Trilateral Partnership” in 2018 with similar objectives of countering the Belt and Road Initiative with joint infrastructure.

Neither of these initiatives got off the ground, largely because their sponsors lacked the funds to support international infrastructure projects in the way that China was able to back belt and road projects using its foreign exchange reserves and funding from state banks.

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Japan never attacked China’s infrastructure initiatives directly, but instead began to emphasise the “quality” of Japanese infrastructure. The US and Australia then picked up on this and the Blue Dot Network was launched, aiming to give a kind of “Good Housekeeping” seal of approval to “quality” infrastructure projects it certifies.

The scheme is “voluntary” and supposed to assist investors in identifying projects that have “positive sustainability features and therefore represent lower-risk investments”, according to an OECD statement.

Beyond that, the Blue Dot Network is supposed to ensure “responsible business conduct, high quality infrastructure governance, anti-corruption, gender equality, sustainable finance as well as economic and social progress”.

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Such objectives are reminiscent of the criteria cited by Western critics of China’s Belt and Initiative, to which Chinese officials have responded with the argument that much basic infrastructure would never get built at all if such demanding development criteria were applied.

As one highly-placed source in Beijing observed to me, private-sector investments in infrastructure are already evaluated on the basis of ESG (environment, social and governance) objectives, which most private-sector investors and financial institutions “take very seriously”.

The Blue Dot Network, however, implies a supranational institution with the ability to formulate standards recognised by all private- and public-sector investors, and with the authority to impose discipline on those who do not comply, the source suggested.

As such, it could deter investors wishing to be involved in infrastructure projects such as those sponsored by the Belt and Road Initiative that do not qualify for Blue Dot approval. This could be seen as a way to “contain” China’s initiative. But the bottom line is that Blue Dot does not have money. China does.

One of the criticisms of the Belt and Road Initiative is that it lacks a structure allowing project partners to have a dialogue on areas such as standards. But the US and Japan refused to join the Asian Infrastructure Investment Bank where such issues could be raised. That smacks of a desire to compete, not cooperate.

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