G7 infra ginseng to China's BRI

A plan by the Group of 7 (G7) rich nations to raise $600 billion over five years to fund specific infrastructure projects in developing countries could offer some respite to economies that have piled on Chinese debt to fund ports, highways and railways. Although China denies its terms of financing are harsh, it has not escaped suspicions of furthering its political and economic agenda through Xi Jinping's flagship Belt and Road Initiative (BRI) to build manufacturing and logistics capacity in low-income nations. By some accounts, 40 countries have exposure to Chinese credit that is over a tenth of their GDP. China has not joined the Paris Club, a grouping of advanced economies that offers loans to the developing world. But it is owed much more than all the club members combined. Most of China's development lending is at rates well above those of the World Bank.

The Partnership for Global Infrastructure and Investment (PGII) commits the US to raising $200 billion and the EU to a further ₹300 billion (about $317 billion) in areas of climate change, digital infrastructure, healthcare and gender equality. This should tilt development lending away from supply chain infrastructure, and from China. Delivered a year after it was first announced, the lending initiative follows US efforts to revive a trade arrangement in the Asia-Pacific to rival a China-led patchwork of free trade agreements (FTAs) in the region. The Indo-Pacific Economic Framework (IPEF) focuses on supply chain resilience, harmonised ecommerce rules, clean energy and anti-corruption, elements missing in the China-backed Regional Comprehensive Economic Partnership (RCEP).

The development financing and trade initiatives are welcome, but to the extent that these are in reaction to widening of the Chinese sphere of influence, outcomes may be muted. IPEF keeps China out by design while inviting all the other members of the bloc. And, BRI, unveiled in 2013, has a decade's head start over the G7 plan. Selling either on democratic values is not going to be easy.