Biden bets on emerging markets while Xi ignores the G20

WASHINGTON, Sept 7 (Reuters) – U.S. President Joe Biden arrives at this weekend’s G20 meeting in India with an offer for the Global South: Whatever happens to China’s economy, the United States can help finance 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 transferred billions of dollars to 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.

While Biden said he was “disappointed,” Xi’s absence amid China’s wobbling economy creates a narrow window of opportunity for Washington to reshape the agenda of the political club it has struggled to mobilize.

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, an alternative to Belt and Road that excludes China.

“Xi’s absence from the G20 gives the United States an opportunity, which could be exacerbated by the challenges that China’s economic downturn will pose to Belt and Road spending,” said Zach Cooper, a senior fellow focused 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 face declining growth and a potential mortgage debt crisis. Russian President Vladimir Putin was also absent from the event, sending Foreign Minister Sergei Lavrov.

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

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

The COVID-19 pandemic, high 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 G20 in 1999.

The Belt and Road Initiative launched by Xi Jinping ten years ago has played an important role. China has lent hundreds of billions of dollars as part of the project, which envisions Chinese institutions financing the bulk of infrastructure in mainly 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 last administration — the biggest skeptic in all of this — made investments in foreign aid because those investments are in the naked self-interest of the United States, as well as being the right thing to do,” Biden representative Jake Sullivan said. National Security Adviser, referring to the administration of former President Donald Trump.

In a press conference before Biden’s trip, Sullivan stressed that “World Bank reform is not about China, largely because China is a shareholder in the World Bank.”

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 was “essential 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.”

“Take sides”

Biden based his foreign policy on confronting the Russian war in Ukraine, managing the competition with China, and restoring American alliances that were neglected by his predecessor Trump, the Democrats’ potential Republican competitor in the 2024 presidential elections.

These efforts have been successful with traditional US partners, but have had less resonance with developing countries, including Brazil, India and South Africa, which have tried to avoid being exposed 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 Khulu Mbatha, a former foreign policy adviser 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 the BRICS summit in South Africa that the Chinese economy enjoyed “great vitality.”

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 Biden.

Our standards: Thomson Reuters Trust Principles.