Biden bets on emerging markets while Xi ignores the G20

WASHINGTON, Sept. 7 (Reuters) – US President Joe Biden arrives at the G-20 meeting this weekend in India with an offer for the “global south”: Whatever happens to China’s economy, the United States can help fund your development.

Armed with World Bank money and promises of sustained US engagement, Biden hopes to convince fast-growing economies in Africa, Latin America and Asia that there is an alternative to China’s Belt and Road project, which has funneled billions of dollars into developing countries. But it left many deeply in debt.

And he will have at least one advantage: Chinese President Xi Jinping will not attend the meetings.

And while Biden has said he is “disappointed,” Xi’s absence amid a volatile Chinese economy creates a narrow window of opportunity for Washington to reshape the agenda of the political club it has struggled to muster.

At the heart of Biden’s offer are proposals to reform the World Bank and increase financing for the lender’s climate and infrastructure aid in the developing world, which would free up hundreds of billions of dollars in new financing for grants and loans.

The White House is seeking $3.3 billion from Congress to complement previous steps taken by the United States and its close allies to raise $600 billion by 2027 in public and private funds for the Partnership for Global Infrastructure and Investment, the Belt and Road alternative that excludes China.

“Xi’s absence from the G-20 presents the United States with an opportunity, which could be exacerbated by the challenges that China’s economic downturn will pose to Belt and Road spending,” said Zack Cooper, a senior fellow focusing on Asia at the American Enterprise Institute.

“But the question … is whether the United States will be able to step up its efforts.”

Rapid growth and high debt

Chinese Premier Li Qiang will represent China at the G20, where its leaders grapple with declining growth and a potential real estate debt crisis. Russian President Vladimir Putin was also absent from the event, and Foreign Minister Sergey Lavrov was sent.

The International Monetary Fund expects the Middle East, Central Asia and developing countries in Asia and sub-Saharan Africa to grow between 3.2% and 5.0% in GDP next year, which is faster than the expected 1.0% for the United States and 3.0% globally. .

But those countries face serious challenges in realizing their potential, with infrastructure dating back to the colonial era often aging due to the tests of climate change.

The COVID-19 pandemic, soaring inflation and rising US interest rates have combined to make those countries’ debt burdens increasingly unsustainable, causing fears of problems similar to the Asian financial crisis that prompted the creation of the G-20 in 1999.

The Belt and Road Initiative launched by Xi Jinping ten years ago has played an important role. China has loaned hundreds of billions of dollars as part of the project, which envisions Chinese institutions financing the bulk of infrastructure, mainly in developing countries.

However, credit has dried up in recent years, and many countries are struggling to repay their debts as interest rates rise.

Washington believes that restarting the World Bank can meet the needs of the global south and serve its own interests.

“Even the most recent administration — the biggest skeptic of all of this — has made investments in foreign aid because those investments are in the abstract self-interest of the United States, as well as the right thing to do,” said Jake Sullivan, a Biden representative. National Security Adviser, referring to the administration of former President Donald Trump.

“Reforming the World Bank is not about China, in large part because China is a contributor to the World Bank,” Sullivan emphasized, at a press conference ahead of Biden’s trip.

But when the White House asked Congress for money to fund the effort last month, the White House said in a letter to lawmakers that “it is imperative that we provide a credible alternative to the People’s Republic of China’s coercive and unsustainable lending and infrastructure projects for development.” developing countries around the world.”

“aligned”

Biden focused his foreign policy on addressing the Russian war in Ukraine, managing competition with China, and restoring US alliances that his predecessor Trump, a potential Republican rival to the Democrats in the 2024 presidential election, neglected.

These efforts have had success with traditional US partners, but less so with developing countries, including Brazil, India and South Africa, which have tried to avoid exposure to Washington’s conflicts with Beijing and Moscow even as they seek to increase Western investment.

“We must be able to maneuver without taking sides, as we did in the Ukraine war,” said Kholu Mbatha, former foreign policy advisor to South African President Cyril Ramaphosa.

For his part, Xi is also seeking new ways to engage the developing world, hosting a gathering of Central Asian leaders and discussing development in May. Last month, he told a BRICS summit in South Africa that the Chinese economy enjoys “great vitality”.

The BRICS, which includes Brazil, Russia and India along with China and South Africa, is the newest of the G20, excludes Washington, and soon plans additions to its list — Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates.

Xi is also expected to attend the Asia-Pacific Economic Cooperation (APEC) summit in San Francisco in November, where he may meet with Biden.

Our standards: Principles of Trust for Thomson Reuters.