explained | G7’s $600 billion plan to counter China’s Belt and Road Initiative

the story So Far: With US President Joe Biden on June 26 G7 partners unveil ambitious partnership for Global Infrastructure and Investment (PGII), announced a collective mobilization of $600 billion by 2027 to deliver “game-changing” and “transparent” infrastructure projects to developing and middle-income countries. The PGII is seen as the G7 counter to China’s multi-trillion dollar Belt and Road Initiative (BRI) to build connectivity, infrastructure and trade projects in Asia, Europe, Africa and Latin America.

What is PGII?

The West has been suspicious of the BRI since it was launched by President Xi Jinping in 2013, as it was seen as part of China’s larger strategy to increase geopolitical influence in Asia and other developing countries. US announced a 2021 launch with G7 partners UK, Japan, France, Canada, Germany, Italy and the European Union (EU). Build Back Better World (B3W) Aimed at bridging the infrastructure gap of $40 trillion in developing countries. Therefore, PGII is a relaunch of Mr. Biden’s B3W plan.

The factsheet presented by the White House describes PGII as a “value-driven, high-impact, and transparent infrastructure partnership designed to meet the vast infrastructure needs of low- and middle-income countries and the United States and its allies to support economic and national security interests”. G7 members aim to collectively raise $600 billion by 2027 to invest in sustainable and quality infrastructure projects in developing countries, including India, and strengthen global supply chains Mr. Biden announced the country’s pledge to channel $200 billion in grants, public funding and private capital over the next five years for PGII. European Commission President Ursula von der Leyen announced 300 billion for the partnership over the same period. Announces Europe’s pledge to raise the euro.

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What kind of projects will PGII take up?

All PGII projects will be driven by “the four priority pillars that will define the second half of the 21st century”. First, the G7 group aims to tackle the climate crisis and ensure global energy security through clean energy supply chains. Second, the projects will focus on strengthening digital information and communication technology (ICT) networks that facilitate technologies such as 5G and 6G internet connectivity and cyber security. Third, the projects aim to advance gender equality and equality, and finally, build and upgrade global health infrastructure.

Mr. Biden announced major projects for PGII that have either started or are about to begin. The US International Development Finance Corporation (DFC), along with G7 nations and the EU, is disbursing a $3.3 million technical assistance grant to build a vaccine facility in Senegal, with a potential annual potential to manufacture “millions of doses of COVID-19”. have capacity. Other Vaccines”. Ms Leyen said the European Commission’s Global Gateway initiative is also working on projects supporting PGII such as the mRNA vaccine plant in Latin America and the fiber-optic cable connecting Europe to Latin America.

In India, the US will invest up to $30 million in DFC Omnivore Agritech and Climate Sustainability Fund 3, an impact venture capital fund that invests in entrepreneurs building the future of agriculture, food systems, climate and rural economies in India .

How does it compare to China’s BRI?

The Belt and Road project was initiated to revive connectivity, trade and infrastructure along China’s ancient Silk Road. China had announced a two-pronged approach to building the Silk Road Economic Belt on land and the Silk Road of the 21st century at sea. The project was initially aimed at strengthening connectivity with Southeast Asia, but later expanded to South and Central Asia, Africa, Europe and Latin America, with Mr. Xi saying it would “break down barriers to Asian connectivity”. will give”.

Meanwhile, the G7 specifically outlines the PGII as a value-based scheme to help low- and middle-income countries meet their infrastructure needs. The PGII has focused on climate action and clean energy, while China has built solar, hydro and wind power projects as well as large coal-fired plants under the BRI. While the G7 has promised $600 billion by 2027, Morgan and Stanley estimate that China’s total funding for the BRI could reach $1.2 to 1.3 trillion by that time, while actual funding will be higher. Large private capital will also be raised under the PGII, while China’s BRI is largely state-funded.

In addition, BRI was also launched at a time when local construction firms in China lacked projects in developed Chinese provinces. Studies have shown that 89% of contractors participating in BRI projects are Chinese. According to 2019 data from Engineering News Records, seven of the world’s 10 largest construction contractors based on foreign revenue were Chinese. BRI projects employ a large number of Chinese workers; For example by the end of 2019 there were 1.82 lakh working in Africa.

While G7 leaders insisted on ‘transparency’ as a cornerstone of PGII projects, the BRI has faced criticism for signing secret tenders for large-scale lending, leaving countries indebted to China . For example, after the BRI’s flagship $62 billion China-Pakistan Economic Corridor, Pakistan owes Beijing a substantial part of its foreign debt.

China builds on BRI’s projects by giving large, low-interest loans to countries that typically have to be paid off over 10 years. There have been cases of non-payment of debt-ridden countries on time. For example, Sri Lanka had to lease its major Hambantota port to China for 99 years. Mr Biden has meanwhile said that PGII aims to build projects through grants and investments.

A PGII project in India has already been announced, but India opted out of China’s BRI, with the aim of increasing its influence in Beijing’s Indian Ocean region with Pakistan as a major BRI recipient. was included in.

• On June 26, US President Joe Biden unveiled the Partnership for Global Infrastructure and Investment (PGII) with his G7 allies, largely as a counter to China’s multi-trillion-dollar Belt and Road Initiative (BRI). seen.

• All PGII projects will be driven by “the four priority pillars that will define the second half of the 21st century”. Addressing the climate crisis and ensuring global energy security, strengthening digital information and ICT networks, promoting gender equality and equity, and finally, building and upgrading global health infrastructure.

• A PGII project has been announced in India. On the other hand, India has stayed away from China’s BRI, wary of Beijing’s goal of expanding its influence in the Indian Ocean region.