US, India, Japan Lack Beijing’s Financial Muscle To Challenge China at Indo-Pacific

Australia, India, Japan and the US lack the financial muscle to challenge China’s vast infrastructure funding initiative in the Indo-Pacific, and should rather focus on alternative strengths according to London-based think tank the Henry Jackson Society (HJS).

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In a report released on Wednesday (AEDT), the HJS highlights shortcomings in the four countries’ strategic response to China’s assertive effort to secure influence and leverage through its massive Belt And Road Initiative (BRI) infrastructure program.

The report’s concerns include India being a reluctant or uncertain partner, the US struggling to turn on the funding tap; and the continued vagueness of some Australian initiatives.

The Indo-Pacific region reportedly needs £1.29 trillion ($2.4 trillion) in infrastructure spending a year to keep up its growth rates and tackle poverty and climate change, but only spends about half that, at £567 billion.

China’s BRI program aims to meet the region’s funding needs but is viewed suspiciously by Australia, India, Japan and the US as less about altruistic development assistance and more as an attempt to buy strategic influence, economic leverage and logistical dominance of the Indo-Pacific.

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As China’s economic and strategic heft has grown, the four countries have tried to work more closely together, and in 2017 revived the idea of a “Quad” forum.

But the HJS report finds the Quad members have different levels of commitment, conceptions of its purpose, and views on the exact perimeter of the Indo-Pacific region. And most face constraints or hurdles in rolling out an infrastructure program to challenge the BRI.

“Clearly, the Quad will take time to evolve as a security partnership,” Rahul Roy-Chaudury, a London-based senior fellow at the International Institute for Strategic Studies, writes in the report.

“This will be driven largely by the actions of China and the US, with India instead currently seeking in the interim to focus the Quad on economic and infrastructural projects and partnerships.”

According to Harsh Pant, King’s College London fellow, India’s top concern with the BRI is that its China-Pakistan Economic Corridor runs through Kashmiri territory to which India lays claim and because funds may be directed to Pakistani military entities. Delhi is also worried about the BRI’s Gwadar Port initiative, which gives China easy access to the western Indian Ocean.

But he reckons India is uncertain how to counter the BRI, and its infrastructure track record is poor. “New Delhi will have to be more proactive in shaping the strategic landscape of the wider Indo-Pacific. Its infrastructure strategy will have to respond to this larger structural change, especially as the credibility and sustainability of American presence in the region comes under question,” Dr Pant writes.

He says India’s best bet would be to develop an alternative infrastructure strategy of its own, but the Modi Government hasn’t been prepared to get on board with a joint initiative by Japan, the US and Australia last year to finance counterbalancing infrastructure projects.

“India is gearing up for that challenge, but it will be some time before the results of New Delhi’s new approach become evident.”

Euan Graham, executive director of La Trobe Asia, also notes India’s “lukewarm attitude” to the Quad, which means that the US, Japan and Australia are doing most of the heavy lifting.

The three countries announced their infrastructure investment partnership last July, but Dr Graham says few details have surfaced. There’s a similar lack of grit in Australia’s infrastructure cooperation initiative with ASEAN.

Ian Easton, a research fellow at the Project 2049 Institute, says the US wants to unlock private investment in infrastructure in the region as an alternative to state-sponsored cash, and also support Japan’s multi-billion-dollar infrastructure funds. But its efforts are still “embryonic”.

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And “the means available to the US are limited and insufficient for direct competition with China” with its US$40 billion ($57 billion) of annual infrastructure development spending.

Mr Easton argues that since China’s investments are not market-driven but diplomatic, the funding is “predatory, and risks considerable blowback”, whereas “the US and its allies are likely to achieve more sustainable results over time”.

Satoru Nagao, visiting fellow at the Hudson Institute, explains that this is because BRI funding can “severely disadvantage its recipients” through punitive interest rates, loan conditionality, and fostering corruption. The projects may also prioritise Chinese strategic goals over the recipient states’ interests.

“One of the features of China’s infrastructure projects is a lack of published details,” he writes. “The likes of the US and Japan should “pressure China to adhere to a rules-based process with high transparency and accountability”.

John Hemmings, director of the Asia Studies Centre at HJS, agrees: “While they cannot afford to keep up with China’s ever-burgeoning infrastructure funding, they can offer better alternatives at cheaper prices, and based on good accountability and transparent contracting.”

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