The U.S. campaign to counter China’s efforts to project its economic clout got a boost from European and Asian countries, which also want to capitalize on Washington’s fight with Beijing.
The 28-member European Union, Norway, Switzerland and 21 Asian countries—including China—pledged to uphold market principles and international standards for infrastructure projects at a summit in Brussels on Friday.
“Leaders agreed to promote transparency, a level playing field and innovative funding mechanism,” said the statement of the Asia-Europe Meeting.
The agreement’s unstated target is China’s Belt and Road Initiative, as much as $1 trillion of infrastructure projects from Asia to Europe that critics say enrich Chinese companies and bolster Beijing’s international clout at the expense of its neighbors. China signed on to the statement, which doesn’t specifically target a hallmark of Beijing’s economic policies, in line with its official position that the undertakings meet global norms.
U.S. allies, led by the EU and Japan, want to seize on China’s trade fight with Washington to expand in Asian markets that need roughly $26 trillion of infrastructure investments. China’s European and Asian rivals say Beijing shuts them out by forcing noncompetitive bids in exchange for Chinese-financed development projects. China says its deals meet international norms.
The alignment of free-market countries to counter China’s state-backed capitalism shows that, while many dislike Mr. Trump’s combative approach to diplomacy, they fundamentally agree that China’s influence must be checked.
European and Asian moves against Chinese investment practices follow initiatives by Washington to go beyond tariffs in upping economic pressure on Beijing. The U.S. recently said it would double funding for international infrastructure projects, and in its revised North America trade pact it barred Canada and Mexico from inking free-trade deals with “nonmarket” countries, precluding new accords with Beijing.
EU officials interpreted China’s signoff to the meeting’s conclusions as signaling a desire to bolster partnerships amid Beijing’s escalating economic fight with the U.S. It is also in line with Chinese claims that the closed tenders and state-backed funding for what Beijing bills as the 21st-century Silk Road fit global norms.
“All of the projects are conducted according to the principles of consultation, joint contributions and shared benefits,” said Chinese Foreign Ministry spokesman Lu Kang Friday in Beijing. Beijing has been backing “open, transparent and inclusive” undertakings, he said, calling on other developed nations “to understand what is needed and offer help with no political strings attached.”
European officials say they see gaps between China’s rhetoric and actions and pushed for adoption of common definitions and practices for infrastructure investments at the Asia-Europe Meeting. The norms promoted at Friday’s meeting dovetail with EU laws and rules used by organizations like the World Bank, which don’t always apply in counties where China has been active.
The EU effort is spearheaded by the bloc’s executive—the European Commission—and includes the launch this week of an online portal to track project sustainability. It also seeks to tap into budding Asian disenchantment with massive Chinese undertakings.
“Calls for tender should be open and transparent to promote good governance and a level playing field,” European Commission Vice President Jyrki Katainen said Thursday on the sidelines of the summit. “It is an approach that works, and one that we see a demand for among Asian countries.”
EU officials said they hope Asian countries will adopt Western standards as they start to question Chinese practices. Japanese Prime Minister Shinzo Abe expressed support for the EU initiative and called for wider adoption of openness, sustainability and financial feasibility to ensure quality infrastructure projects.
Chinese President Xi Jinping’s massive initiative has faced fresh pushback. Malaysia’s new prime minister suspended $22 billion in projects. Sri Lanka struggled to make payments on more than $1 billion in of Chinese debt and granted a state-run company from China a 99-year lease to run a port. Pakistan, another Chinese borrower, in recent days turned to the International Monetary Fund for financial assistance.
The U.S. is also increasingly challenging Mr. Xi’s initiative. Vice President Mike Pence championed this month “a just and transparent alternative to China’s debt-trap diplomacy.” In August, Congress and the Trump administration said the U.S. would raise funds for foreign infrastructure projects to $60 billion.
Europe has similarly pledged to unlock cash for Asian countries that adopt Western tendering and finance practices. While it pales with the trillions in Chinese investments, the EU mobilized more than $8 billion of funding in Asia for 2014-2020. The commission proposed to boost its external investment budget to €60 billion ($69 billion) for 2021-2027, which the EU’s executive said “would make a significant contribution” to Europe-Asia infrastructure investments.
“Some countries are changing their mind or realizing that China’s generous money can sometimes be poisonous,” a senior EU official said. “Let’s hope more and more countries will join, and it will force China to change the way it acts. It will not happen overnight.”
The push against Beijing’s practices comes as Asian and European partners also seek to safeguard the rules-based international order established by the West after World War II. In a sign of their concerns over Mr. Trump’s “America First” policies, Asian and European leaders also reiterated support for the World Trade Organization and signaled a desire to redouble efforts to reform the global watchdog.
Emre Peker and James T. Areddy
Wall Street Journal