The European Union this week launched a $340 billion “Global Gateway” fund to boost global infrastructure, which analysts say aims to rival China’s Belt and Road Initiative. But will it be able to compete with Beijing’s billions?
The European Union says its Global Gateway will primarily finance high-quality digital, climate, and energy and transport infrastructure in developing countries, including fiber-optic cable, road and rail, and renewable energy.
“It will take investments around the world to support our priorities – that is, the green and digital transition,” European Commission President Ursula von der Leyen said at a news conference on Wednesday.
“For example, think about investing in clean hydrogen. We have partner countries that have an abundance of renewable energy. Think wind or solar to produce hydrogen, which is good for them as well as for us. Interesting, or think of underwater data cables connecting continents,” she told reporters. “The Global Gateway will also focus on transportation links, health care capability … It will also support schools and education systems.”
The fund will offer the equivalent of $340 billion by 2027, most of which will be in loans rather than grants.
“We want to take a different approach. We want to show that a democratic, value-driven approach can meet most challenges. We want to show that it can meet local needs, on the one hand, but on the other. On the other hand, tackle the global challenges we face. And thus, in a way, of course, benefit the European Union as well, because the Global Gateway is also about our strategic interests around the world,” von der Leyen he said.
The project is clearly about geopolitics as well, said analyst Jonathan Holslag, professor of international politics at the Free University of Brussels.
“The European Commission obviously does not want to say so, but the main objective behind the Global Gateway is to respond to China’s Belt and Road Initiative, China’s New Silk Road,” Holslag told VOA. “Many European companies have faced heavy competition from their Chinese rivals. They have also seen countries slipping into China’s orbit.”
Francesca Ghiretti, an analyst at Germany’s Mercator Institute for China Studies, told VOA that the EU should be strategic about which projects it chooses, but gravitate towards investments in Africa and India.
“We know that by now Africa will be a major focus of Brussels, and perhaps India too, in light of the fact that in 2022 there are going to be two summits, an EU-Africa summit and an EU-India summit. is,” she said. said.
Is Europe’s $340 billion enough to compete with Beijing?
“Given the need for infrastructure development in every way, whether it is related to railroads, ports, etc., it’s just a drop in the sea, you might say,” Holslag said. “But at the same time, if you compare it with the investments that are being made by China, it remains quite small. China today has a total portfolio of foreign loans and debt of about US$ 1,500 billion.”
Financial firepower was visible in Laos this week, as the country officially opened a $5.9 billion, 1,000-kilometer rail link in China with Kunming, which was financed 60% with Chinese state loans.
The railroad, which connects the Laotian capital, Vientiane, to the southern Chinese city through lush tropical mountains, is one of hundreds of projects launched under the Belt and Road Initiative, which will provide ports, railways and Expands business by building other facilities. Calm.
For some analysts, the cost of Chinese debt is alarmingly high.
“The COVID situation is not particularly good for making money from railways, and that means more debt, and less revenue, less exports,” Greg Raymond of the Australian National University told the Associated Press.
Raymond said, “For me, when I look at the facts about the economic situation in Laos, it’s hard to avoid the conclusion that they are slipping deep into a sort of Chinese orbit, just the economic decisions they make.” because of.”
China has also invested heavily in Europe, buying ports including Piraeus in Greece – the EU’s sixth busiest container port – and financing transport routes in the Balkan states. Montenegro was recently forced to seek help from European and American banks to pay off a $1 billion Chinese loan to be used to finance a new freeway.
Analysts say the EU is looking to offer an alternative, after Beijing has got its back. The European Union said this week its “Global Gateway” program could work in conjunction with the United States’ “Build Back Better World” infrastructure fund, which was launched in June along with other G-7 members.
But Europe cannot compete on the same terms as China, analyst Holslag said.
“We still have to see whether developing countries are interested in taking on the terms associated with European loans in terms of environmental sustainability, transparency, etc. I think they will try to play different donors against one. And,” Holslag told VOA.
China denies that the Belt and Road Initiative falls into a debt trap. Beijing has yet to react directly to the European plans.
In response to a question on the US “Build Back a Better World” fund, Chinese Foreign Ministry spokesman Wang Wenbin told reporters on November 9, “There is a lot of room for cooperation in the field of global infrastructure, where various initiatives will not offset Or change each other. The world needs to be built instead of breaking bridges, interconnected instead of decoupling, and mutually beneficial, not attached or exclusive.”
Chris Cheng and VOA’s Cantonese Service contributed to this report.