U.S. President Joe Biden on September 9, 2023 , while delivering his speech to the G20 Delhi Summit, affirmed: “When we invest in emerging economies, all economies benefit.”
The 18th G20 summit has been significant with respect to the implications it holds, for the transition that existing world order is witnessing. In the absence of the Chinese President Xi Jinping and the Russian Presidents Vladimir Putin, U.S. President held the stage to announce the grand Global Infrastructure and Development Plan (GIDP), as well as the reforms in the existing architecture of the World Bank. As an alternative to the grand Belt-and-Road Initiative (BRI) and the Asian Infrastructure Development Bank (AIIB), the proposed plan has the potential to counterweight the growing Chinese economic influence.
It’s the Economy Stupid
After the un-successful attempts of two former leaders to contain the Chinese threat, President Biden has finally realized that the solution lies in the economy. This time, however, it is the economic opening-up that the U.S. has opted for, instead of the restrain. After the withdrawal of U.S from the Trans-Pacific Partnership (TPP), China held the advantage of extending uncontested economic influence across the world through trade and investment. U.S., up till now, has been involved in the strategies of containing China in the Asia-Pacific. Nevertheless, the announcement of the Global Infrastructure and Development Plan, has brought the control of transitioning world economic-order, back in the hands of the U.S.
Under the “One Earth, One Family, One Future” vision, Biden has proposed two ground-breaking economic corridors; The India-Middle East-Europe economic corridor (it will extend India to Europe, through the bridging ports of UAE, Saudi Arabia, Jordan and Israel) and the Trans-African Corridor (connecting Angola to DRC and Zambia, to the Indian Ocean) in collaboration with the European Union.
The proposed plans require investment of trillions of dollars. To supplement this, Biden administration has proposed reforms in the World-Bank, to introduce the multilateral development banking system. The idea has been supported by the G20 Capital Adequacy Review, according to which the mission, vision, incentives, operational model and financing capacity of the World Bank will be reformed. Through the Multilateral Development Banking system, Biden proposes, an increase of $200 billion can be made in the lending capacity of the World-Bank over the coming decade.
To support the plan domestically, Biden administration has requested the Congress for additional concession of around $25 billion, towards World Bank (International Bank for Reconstruction and Development), as well as $1 billion for the International Development Association. He has also announced the “New Investment Forum” that will be held soon, in the U.S.
If anyone can alter the U.S led order, it’s the U.S
In the past few months, debate about the demise of the U.S led order gained momentum due to certain significant developments. Firstly, the uproar about expansion of BRICS voiced apprehensions about formulation of the anti-western bloc, that has the potential to challenge the existing world order. Secondly, China led Saudi-Iran rapprochement also provided space for the concerns regarding demise of U.S. led order, as it loses ground in the wake of growing Chinese influence. Thirdly, the debate regarding de-dollarization, posed another blow to the world economic order, that has been in place for decades. Finally, the ongoing tech-war between the U.S. and China, indicated the intensity of growing rift between the two states. In the wake of all of these developments, the proposed infrastructural investment plan from the U.S can turn out to be a game-changer.
Last month (August, 2023) China celebrated completion of a decade of the Belt and Road Initiative (BRI). Keeping in view the existing equation between the U.S. and China, if states are pushed to choose sides, it can pose challenges towards development of the BRI as well as GIDP. Three out of the six corridors of the BRI are likely to be directly challenged by this proposed Global Infrastructure and Development Plan, including the Bangladesh-China-India-Myanmar (BCIM) corridor that passes through India, the China-Central Asia-West Asia Economic Corridor (CCWAEC) that touches the Arabian Peninsula, and the New Eurasian Land Bridge (NELB) that touches Germany and Poland. In addition to this, U.S. also elevated the status of its relationship with Vietnam to comprehensive strategic partnership, rendering the fate of the China-Indochina Peninsula Economic Corridor (CICPEC) questionable as well.
Furthermore, China gained the ground by proposing alternatives to the worn-out financial apparatus of the Liberal International Order, and by appealing to the developing world against the developed one. Biden administration has hit the two targets by an arrow, through the proposal of reforms in the World Bank. If the proposed Multilateral Investment plan materializes, then the Asian Infrastructure Investment Bank (AIIB) and the Asian Development Bank (ADB) will have to offer additional incentives to maintain their credibility.
In a nutshell, Xi Jinping’s rationale to leave behind Deng’s dictum of “Hide your power, bide your time” brought China recognition as the second largest economy of the world with a grand vision (BRI), however it has also brought along its own costs. China’s uncontested economic and infrastructure plans, now face a major challenge.
Friction between the U.S and China, is the central feature of the existing dynamic world-order. Developments that can impact the equation between the two rivals, can impart influence on the world order at large. Diversion of the competition towards the domain of infrastructure and development, will benefit the developing economies the most. However, states like India, Brazil, Saudi Arabia, Poland, Germany and Vietnam, that are trying to sailing both the boats, can face the pressure to pick sides. Magnificence of the multilateral world-order is that the choices of these partner countries will eventually determine the fate of this contest.