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G7 and China Face Off on Infrastructure

Copyright © 2021 Energy Intelligence Group
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The Group of Seven (G7) announced after its Jun. 11 gathering in Cornwall, UK that it would be undertaking a global infrastructure development program known as Build Back Better World, or B3W. This program seeks to provide the developing world with an alternative to what the G7 deems the more oppressive policies of China's global infrastructure development program -- the Belt and Road Initiative, or BRI. The coming duel between B3W and BRI has been cast as a showdown between G7 democracies and Chinese autocracy to secure global supply chains and solidify international trading relationships. Complicating what would normally be viewed as conventional trade-based competition is the need to address climate change, particularly the transition from traditional carbon-based fuels to renewables and other alternative sources of energy. This climate dimension makes the B3W-BRI global infrastructure contest a battle of competing energy policies. And from that perspective, B3W doesn’t stand a chance.

When Chinese President Xi Jinping launched the BRI in 2013, he began a multitrillion-dollar effort to increase China’s influence through the financing and construction of global infrastructure projects that link the economies of Europe, Asia, and Africa with China. The BRI’s critics contend that China's infrastructure projects compel developing nations to assume prohibitively high debt burdens that threaten the potential forfeiture of critical assets such as ports and land-based distribution networks to Chinese creditors, which in turn undermines the national security and sovereignty of these countries while unjustly enriching China. There is some merit to these concerns, but the hard truth is that in a world where infrastructure development is the key to future growth and prosperity, China’s BRI program is by far the most ambitious, compelling developing nations to enter into agreements they might otherwise avoid.

To offset this Chinese advantage, the G7 nations (Canada, France, Germany, Italy, Japan, the UK and US) want to create an alternative to BRI. Their B3W effort calls for the various G7 members undertake individual global infrastructure development programs based upon their respective global visions and national capabilities. In a measure designed to contrast directly with the Chinese approach, B3W would incorporate what it calls “good governance and strong standards” so that recipients would get long-run benefits from infrastructure development projects. One of the major commitments the G7 made in B3W is that all projects should seek to conform with the goals of the Paris climate accord.

China's Head Start

One of the major obstacles for B3W is China's eight-year head start with the BRI. The G7’s effort can perhaps be best likened to entering an automobile race when your competition is already lapping you at over 100 miles per hour. You can never catch up unless the competition breaks down. But that is unlikely to happen. The scope and scale of China’s BRI program is unlike anything the world has ever seen, dwarfing the World Bank or even the post-war rebuilding of Europe under the Marshall Plan.

China is finishing construction of a transportation corridor through Pakistan connecting it with the Indian Ocean, and it has resurrected the modern-day version of the ancient Silk Road through Central Asia and on into Europe. Chinese-developed ports have sprung up throughout Southeast Asia, linking up with similar ports that China is developing in Africa and Europe. These transportation routes and hubs allow China to press inward by building roads that connect to factories and farms, whose services are then locked in to build critical supply chains for agricultural goods and raw materials needed back in China. All of this helps sustain China's domestic growth, with a goal to move more than 1.2 billion people into the middle class by 2027.

The linkage between the expansive programs of China’s BRI and its massive domestic economic development drive means that China has created a fully integrated, purpose-built self-sustaining model of economic growth and social advancement that shows no sign of slowing down. Through this combination of the BRI and domestic socioeconomic development, China alone will comprise one-fourth of the world’s total middle-class population.

Its singularity of focus allows China to integrate more successfully massive programmatic changes. One example is Xi’s goal of making China carbon-neutral by 2060. In addition to simple infrastructure building, China’s BRI is a systemic approach to making its carbon-neutral goal a reality. Moreover, because China has thoroughly integrated every aspect of its infrastructure development programs with its domestic economic growth plans, the changes in the energy sourcing requirements mandated by global climate change are being integrated into its plans for economic and social development both at home and abroad, making the BRI the most important vehicle for global climate change-related development in the world.

G7 Obstacles

Although the G7 nations boast a more ambitious carbon-neutral goal of 2050, they face many obstacles that China does not. In an example from its latest meeting, the G7 failed to come to agreement over an end-date for coal use because the US and Japan blocked a deal. Domestic politics loom large in the US, where President Joe Biden needs to court the support of Sen. Joe Manchin from the coal-friendly state of West Virgina. Japan has similar domestic political constraints because the 2011 Fukushima nuclear reactor accident compelled a return to coal for its energy security needs. Such constraints simply do not exist in China with its one-party system. Even when the G7 leaders tried to agree to stop financing coal plants and mines beyond their borders by the end of this year as a message to China, with its prolific consumption of coal, the effort stalled because of German and Japanese domestic coal policies that diverge from the standard the G7 was trying to impose on others.

This internal discord on display within the G7 underscores the limitations of an ambitious project such as B3W, which requires unity of command and effort to succeed at a scale to compete with BRI. The G7 must reconcile seven sets of unique domestic political needs and demands that are often in conflict with the each other.

Infrastructure development is all about building economic growth and capability. The economic engines produced from this effort require energy to make them run. China has made it clear that it will achieve maximum carbon emissions by 2030. At that time, the Chinese economy, fully integrated into a self-sustaining global supply chain, will begin to make the kind of massive transition to carbon-neutral fuels and sources of energy required to reach net-zero carbon emissions by 2060, with the BRI program at the heart of this effort.

For the US and the other G7 nations to begin to be able to compete with China, they would need to completely revamp the B3W concept, creating a unified structure for investment that operates independently of national control. It would also need to expand its scope and scale far beyond what is currently envisioned. Such an initiative is unrealistic in today’s geopolitical world.

The US would be far better off embarking on its own B3W project, thereby seizing a leadership position that could motivate similar policies on the part of the other G7 members. But the US is currently deadlocked on what a domestic infrastructure development plan would look like, let alone prepared to set aside trillions of dollars for overseas infrastructure development. By contrast, China is vigorously establishing a global leadership position when it comes to linking sustained economic growth with carbon neutrality. Given the central role that carbon-neutral economies will play in the world going forward, it looks increasingly likely that global affairs will be dominated by China in the future in much the same way that the last century was dominated by the US.

Scott Ritter is a former US Marine Corps intelligence officer whose service over a 20-plus-year career included tours of duty in the former Soviet Union implementing arms control agreements, serving on the staff of US Gen. Norman Schwarzkopf during the Gulf War and later as a chief weapons inspector with the UN in Iraq from 1991-98.

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