WHAT US-LED G20 DEALS MEAN FOR CHINA
The US is actively looking for ways to blunt one of China’s best tools of influence: International loans.
During the New Delhi G20 summit in September, the US pledged to help reform the World Bank and International Monetary Fund to make them more flexible in lending to developing countries to finance renewable energy, climate mitigation and critical infrastructure projects. Biden committed the first US$25 billion to make those reforms possible and secured additional financial pledges from other countries totalling US$200 billion in new funding for developing countries over the next decade.
The US also signed onto a deal with the European Union, Saudi Arabia and India that will help connect the Middle East, Europe and Asia through rails and ports. Characterising it as a “real big deal”, Biden said the rail and ports agreement would help stabilise and integrate the Middle East.
These plans are aimed at providing an alternative to China’s Belt and Road Initiative. Commonly referred to as BRI, the initiative is China’s international infrastructure loan program. Over the past decade, Chinese government agencies, banks and businesses have loaned more than US$1 trillion abroad, and 60 per cent of the recipient countries are now in debt to these Chinese entities.
The US and other countries have long criticised BRI as “debt trap diplomacy”. One study suggests that the trillions of dollars in infrastructure loans to countries by the government and quasi-government bodies in China typically lead to debt problems that the borrowing countries can’t manage.