China’s – not US’s – plan offers big deal for SMEs By Faisal Ahmed and Alexandre Lambert During the pandemic, supply and value chain disruptions have emerged as a key geo-economic challenge for businesses. Small and medium enterprises (SMEs) face the biggest challenges in terms of their access to raw materials, credit financing, value chain upgrading and above all, their export competitiveness. In the recent Group of Seven (G7) Summit held in June 2021, U.S. President Joe Biden proposed a $40-trillion infrastructure plan known as, “Build Back Better World,” or B3W.
B3W is directed toward the needs of low- and middle-income economies, and identifies four potential areas: climate, health and health security, digital technology, and gender equity and equality. Interestingly, this initiative is positioned against China’s Belt and Road Initiative (BRI). Published Aug 5, 2021 4:55 pm KST Updated Aug 5, 2021 8:08 pm KST Faisal Ahmed Alexandre Lambert ₹14,997 15% OFF ₹764 ₹134,878 ₹89,718 ₹119,624 ₹33,480 However, as it becomes imperative for countries to strengthen their domestic production capacities, B3W’s positioning seems to be geopolitically motivated, though geo-economically flawed. It offers no concrete roadmap and is highly unlikely to match the potential benefits that the BRI offers to the business community in general, and to SMEs in particular.
Here we explain why this is so. First, as per a recent White House statement from June 12, this initiative solicits support from like-minded partners to “coordinate in mobilizing private-sector capital,” which may be supported by development finance institutions. The whole idea of mobilizing infrastructural finance seems to be strenuous, as it relies on the discretion of the private sector and would herewith ingrain some political and commercial biases. On the contrary, BRI projects ― be they the construction of high-speed railways, or the laying down of optical fiber networks, or the development of special economic zones ― carry government-specified roadmaps, robust investment strategies and well-defined financing support.
They provide significant opportunities and benefits for SMEs to engage in the corridor’s development depending on their value chain offerings. Second, a component of President Biden’s B3W plan seems to support the development of American jobs and the enhancement of the U.S.’s global competitiveness. It is highly likely that B3W may fail to garner support from the private sectors of “like-minded” countries, as it apparently seems to create a win for the United States at the cost of a win for others. In fact, former president Donald Trump, while addressing CEOs on the sidelines of APEC 2017 in Vietnam, had already asserted that he would not let others take advantage of the U.S. anymore.
So, President Biden’s B3W is an American effort to restore the world order in its own favor, which China seems to wish strongly to challenge through its trade, infrastructure and geo-strategic interventions. Such interventions are not confined to land corridors only, but have a significant maritime component too, through the Maritime Silk Road, which offers opportunities for SMEs in port development and trade across the Global South. 정신과 의 사도 경 악 한 ‘ 더 글로리’ 최악의 … ‘구독자 1억 명 ‘ 유튜 버 의 유 튜브 수익이 … “잇몸이 내 려간다 ” 반 드 시 고 쳐야 하는 잘… 정신과 의 사도 경 악한 ‘더 글로리’ 최 악의 … ‘ 이것’ 잡기 위해 직접 배 타 는 28세 청 년 … “잇몸이 내려간다” 반 드시 고쳐야 하는 잘… Third, in November 2019, the Indo-Pacific Forum was held in Bangkok, where the United States, Japan and Australia proposed an infrastructure-related initiative called the Blue Dot Network (BDN). The BDN is to be developed as a universal certification system for ensuring transparency in infrastructure financing. It was also positioned against the BRI, but its significance seems confined to policy and academic discourse alone, as it lacks a pragmatic, operational roadmap.
The inter-relationship between the BDN and B3W also remains complex and undefined, thus making it difficult for SMEs to decipher the potential benefits of these two American initiatives. Fourth, during the pandemic, especially in the year 2020, a China+1 model aimed at reducing supply chain dependence on China was hyped considerably. This model was not able to garner the desired results, however. Moreover, despite the trade war and the American narrative against China in the wake of the pandemic, many Indo-Pacific countries preferred to sign the China-led Regional Comprehensive Economic Partnership (RCEP) in November 2020.
The countries of Southeast Asia, along with Australia, New Zealand, South Korea and Japan, thus display robust economic diplomacy, and have abstained from buying into the American narrative. They instead decided to remain with China to leverage better geo-economic gains in this mega-regional trade agreement of the Indo-Pacific region. This move exemplifies the fact that the SMEs in low- and middle-income countries trust, and indeed continue to solicit, benefits from the Chinese infrastructural development model and have frequently sought partnerships along the BRI corridor. Fifth, the low- and middle-income economies are in dire need of infrastructural development, and many are at an advanced stage of engagement with China’s BRI.
For instance, the New Eurasian Land Bridge ― a BRI corridor ― that connects to the port of Rotterdam, will shorten the transit time between China and Western Europe. One can take another example of the signing of the plan for the construction of the China- Mongolia-Russia Economic Corridor in 2016. It aims to boost infrastructural development and regional connectivity. There are of course no dearth of examples of BRI projects across the world and SMEs’ active participation in them.
Several BRI projects are being duly supported by various financing mechanisms and institutions, including the China-led Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) ― also known as the “BRICS Bank.” The BRI projects also provide immense opportunities for the development of free trade areas and SMEs’ value chain participation along the corridor. B3W, however, offers no such concrete roadmap, nor does it specifically intend to address supply-side constraints in smaller economies. Faisal Ahmed is an associate professor of international business at the FORE School of Management, New Delhi, India. Alexandre Lambert is the academic director of the Geneva Institute of Geopolitical Studies, Geneva, Switzerland.