US President Joe Biden is looking to demonstrate to the world at the Group of 20 summit in India and during a stop in Vietnam that the United States and its like-minded allies are better economic and security partners than China.
White House officials said Biden, who was set to depart for New Delhi on Thursday evening, will use this year’s G20 gathering as an opportunity for the United States to highlight a proposition for developing and middle-income countries that would increase the lending power of the World Bank and International Monetary Fund by some USD 200 billion.
That is an attempt to offer a significant, albeit smaller, alternative to China’s massive Belt and Road infrastructure initiative, which the US views as a Trojan horse for China-led regional development and military expansion. Chinese President Xi Jinping plans to skip the summit, where Premier Li Qiang will represent the country.
Afterward the summit, Biden and Vietnamese General Secretary Nguyen Phu Trong will meet in Hanoi and are expected to announce plans to tighten economic cooperation.
Vietnam and China have robust trade relations, but also deep differences. Vietnam, like Malaysia, the Philippines, Taiwan and Brunei, has been in a tense territorial standoff for decades with China, which has claimed authority over waters in the South China Sea that are hundreds of miles from the Chinese coastline.
“I think Xi’s absence at this particular summit, if that comes to pass, really is a big missed opportunity for the Chinese,” said Colleen Cottle, deputy director at the Washington think tank Atlantic Council’s Global China Hub.
“And I think it affords the Biden administration even more of a chance to go on the offensive in terms of stepping up and showing … what their value proposition is to the Global South.”
Heading into the summit, the US has criticised China for reducing the transparency of its reporting on basic economic data in recent months and for cracking down on companies in China that had been providing such data.
At the same time, the White House has tried to improve ties. Commerce Secretary Gina Raimondo, who recently returned from China, was the latest administration officials to engage Beijing amid disputes over technology, security, Taiwan and other issues.
Raimondo told The Associated Press that “the world is looking for the US and China to responsibly manage our relationship.”
She said the administration’s goal is to have a stable economic relationship in which there is consistent engagement. But Xi’s decision to not attend the G20 shows that “we have work to do” regarding communication between the countries, she said.
“Communication is of course, a two-way street,” Raimondo said. “Communication does need to lead to action.” Biden said he was disappointed that Xi will not be in New Delhi, where the summit is expected to focus on climate, development and the future of the grouping of leading economies. Biden decided to skip this week’s gathering of the Association of Southeast Asian Nations in Jakarta, Indonesia, and sent Vice President Kamala Harris.
The US has criticised China’s lending practices under Belt and Road as “coercive,” saying the USD 1 trillion infrastructure effort that provides Chinese loan assistance to poor countries often comes with strings attached that restrict the restructuring of debt with other major creditor nations.
China also frequently retains the right to demand repayment at any time, giving Beijing leverage over other countries. A recent Associated Press analysis of a dozen countries most indebted to China, including Pakistan, Kenya, Zambia, Laos and Mongolia, found paying back that debt is consuming an ever-greater amount of tax revenue.
Countries in AP’s analysis had as much as 50 per cent of their foreign loans from China and most were devoting more than one-third of government revenue to paying off foreign debt.
White House national security adviser Jake Sullivan said the effort to bolster the lending capacity of the World Bank and the IMF would provide a “credible alternative” to China.
Biden included USD 3.3 billion for both institutions in the supplemental budget request he has sent to Congress. The administration said the money would help leverage nearly USD 50 billion from the US alone in lending for middle-income and poor countries and up to USD 200 billion around the world.
“We believe that there should be high-standard, noncoercive lending options available to low- and middle-income countries,” Sullivan said Xi is trying to navigate through one of the most turbulent moments for China’s economy in decades.
The Chinese economy is weighed down by a property bubble, local government debt, high youth unemployment and a broader inability to rebound as expected from pandemic lockdowns. Added to that is the longer-term challenge of China’s population starting to decline because of an ageing population and lower birth rates. “There is a loss of confidence or a lack of confidence in China’s economic recovery, both domestically in China and outside China now,” said Yun Sun, director of the China program at the Stimson Center. She said the lack of confidence is impacting China’s ability to generate the investment it needs to right the ship.
Most conventional economic analyses assume the US economy and its allies are largely insulated from a Chinese slowdown. There are supply chain risks if factories close in China and global growth struggles. But so far this year, the US economy has outperformed expectations as the Chinese economy has underperformed.
Xi countered in a speech published last month that the US and its allies “cannot curb the greedy nature of capital and cannot solve chronic diseases such as materialism and spiritual poverty.” He suggested his model of a government with centralized power will do more to serve the interests of ”the vast majority of people.”
How China navigates through its economic headwinds is a big question for the White House. The administration has tried to have a stable trade relationship, even as it has frustrated China by restricting imports of advanced technology for national security purposes.
US officials have emphasised the importance of an ongoing dialogue between the governments of the world’s two largest economies. Still, China’s economic challenges could create more geopolitical risk as economics can often inform national security strategies. At an August fundraiser in Utah, Biden called China’s economy a “ticking time bomb.” “When bad folks have problems, they do bad things,” the president said.
The White House said G20 leaders will also discuss the global impact of Russia’s invasion of Ukraine and joint efforts combating climate change. Any summit agreements on the climate front are expected to be incremental at best. G20 climate and environment ministers, at their July meeting, were unable to come to agreement on a goal of peaking emissions by 2025, moving to clean energy and a tax on carbon as a way to reduce emissions.
Biden is also scheduled to meet with Indian Prime Minister Narendra Modi soon after his scheduled arrival in India on Friday evening.
The US-India relationship will be vital in coming decades as both sides deal with an ascendant China and the enormity of climate change, artificial intelligence, supply chain resilience and other issues.
Biden hosted Modi in June for a pomp-filled state visit.