The West is trying to create 'an adequate alternative' to China's New Silk Road
Group of Seven (G7) leaders announced a new initiative called Build Back Better World (B3W) this week to better compete with China when it comes to funding the world's infrastructure needs.
China’s Belt and Road Initiative (BRI), envisioned as the revival of an ancient trading route between Asia and Europe, has been plugging away since 2013. Through various infrastructure projects like ports and highways, the multi-trillion-dollar initiative is a key way that China is asserting itself on the world stage.
The West, led by the U.S., wants to counter China's colossal geopolitical project.
"There is a tremendous demand for infrastructure globally, as countries are moving from lower middle-income to middle-income countries," Kaush Arha, senior fellow at the Atlantic Council's Scowcroft Center for Strategy and Security, told Yahoo Finance. "There is a tremendous desire or hunger for an alternative to totalitarian state capitalist funding for infrastructure."
That demand hasn't been met, added Arha, and there hasn't been an "adequate alternative to meet the infrastructure aspirations" of these countries.
According to the White House's fact sheet, the B3W infrastructure initiative will be a "a values-driven, high-standard, and transparent infrastructure partnership led by major democracies to help narrow the $40+ trillion infrastructure need in the developing world."
Much like the existing U.S. approach to development finance thus far, B3W looks to mobilize private sector funds and encourage them to invest in overseas projects. (The BRI's funding comes from state-backed Chineses banks.)
The White House is expecting the B3W initiative to collectively mobilize "hundreds of billions of dollars of infrastructure investment for low- and middle-income countries in the coming years."
The competition to win over participating countries has already begun: A Indonesian Ministry of Maritime Affairs and Investment spokesperson told Reuters that that while the country welcomes the B3W, they also hoped "this time they put their money where their mouth is."
'Belt and Road has a 10-year head start'
Along with the U.S. European countries, Japan and Australia will likely be key players in the B3W.
"I think [Japan] has the most to gain, being in the region," said Josh Lipsky, Director of Atlantic Council's Geoeconomics Center. "I think they're going to want to invest in this heavily, and that would be a pretty significant statement."
Japan, already one of the largest investors in Southeast Asia and the Indo-Pacific region, is committing $10 billion for an initiative to help Association of Southeast Asian Nations (ASEAN) member countries cut green house gas emissions and move towards decarbonization.
Australia, a key Western ally in the region, recently scrapped its own BRI project with China and banned Chinese telcom companies Huawei and ZTE from building its 5G network in 2018.
Lipsky noted that playing catchup with China will be a tall task, given the sheer size of its investments and the scope of projects tied to BRI.
"Belt and Road has a 10-year head start, with projects all over the world including, by the way, in a G7 country, Italy," Lipsky said. "[B3W] was a good announcement, but a lot of questions remain about how much money is going into it. Who's funding it? What projects will be funded? And China is well on its way in terms of their infrastructure projects."
What happens to the BRI projects in Europe is an open question, particularly since EU solidarity is a crucial part to the West countering China's global infrastructure ambitions.
"The biggest entity that can move on this would be the EU," Arha said.
Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita
Aarthi Swaminathan is a reporter for Yahoo Finance. She can be reached at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.
First Solar CEO: New factory allows the US ‘to think through’ decoupling from China
U.S.-China relationship 'going down a path of great confrontation,' analyst says
'Biden needs Putin more than Putin needs Biden,' expert argues
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.