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China’s New Belt and Road Has Less Concrete, More Blockchain

The U.S. response to it has been “too little, too late,” says a new task force report. 

The Covid-19 pandemic hasn’t been good for China’s Belt and Road Initiative. The virus “seriously affected” one-fifth of the projects in the China-centered infrastructure drive, according to the Ministry of Foreign Affairs. Djibouti, Laos, Maldives, Pakistan, and Zambia, among others, have asked China to renegotiate or forgive Belt and Road loans. Kyrgyzstan and Sri Lanka have already extracted concessions. 

But Belt and Road isn’t going away. China is making more rigorous lending decisions while focusing somewhat less on heavy-duty construction and more on digital technology, says a Council on Foreign Relations task force report released on March 23. The 190-page report, titled China’s Belt and Road: Implications for the United States, was written by Jennifer Hillman and David Sacks of the CFR based on the findings of an independent task force chaired by former Treasury Secretary Jacob Lew and retired Admiral Gary Roughead.

For the U.S., calibrating an effective response to Belt and Road is tricky. The Obama administration pursued constructive engagement with China. As Belt and Road ramped up and became more of a threat, the Trump administration was more confrontational, but without allies’ support. The Biden administration aims to build more of a united front of nations to counter Chinese influence. Reflecting the difficulty of striking the right balance, the Council on Foreign Relations report says the U.S. response “has been too little, too late,” but also says “its blanket condemnation risks alienating partners.”

Tensions between the U.S. and China were clear on March 19 when both sides aired grievances in an hourslong meeting at a hotel in Anchorage, Alaska. “We expected to have tough and direct talks on a wide range of issues, and that’s exactly what we had,” U.S. National Security Adviser Jake Sullivan told reporters afterward.

The U.S. has restricted sales of 5G wireless network gear from Huawei Technologies Co. and other Chinese suppliers and tried to get other countries to go along. But the Council on Foreign Relations report makes clear that the Digital Silk Road—the tech portion of Belt and Road—goes well beyond wireless networks. It includes, among other things, Ant Group’s Alipay and Tencent’s WeChat Pay mobile payments apps. While Ant and Tencent are private companies, “they often use the BRI or Digital Silk Road label to gain domestic political support for their overseas commercial expansion and leverage the market access provided by BRI projects,” the report says.

China’s push in blockchain, if successful, could pose a serious threat to U.S. interests. Here’s a paragraph about that from the report:
 

Beijing is also focusing on blockchain ledgering. Chinese leaders believe that blockchain technology will be the foundational infrastructure for future technological innovation, and in 2020 Beijing launched the Blockchain Service Network (BSN). BSN is designed to leverage blockchain technology to offer software developers a cheaper alternative to current server storage space offerings. A number of major blockchain projects have joined BSN, integrating their own chains with it, thereby enabling developers to create applications on the larger, less expensive BSN. Such integration also allows Beijing to bring this “international plumbing,” including the network infrastructure in Australia, Brazil, France, Japan, South Africa, and the United States, under its influence. As China’s BSN white paper noted, “Once the BSN is deployed globally, it will become the only global infrastructure network autonomously innovated by Chinese entities and for which network access is Chinese-controlled.”

 

Belt and Road, says the report, “poses a significant challenge to U.S. economic, political, climate change, security, and global health interests.” It concludes that the U.S. shouldn’t attempt to “match China dollar for dollar or project for project.” Rather, it says, the U.S. should focus on areas where it can offer a “compelling alternative,” either on its own or with like-minded nations. Among the specific recommendations: “reenergize the World Bank so that it can offer a better alternative to BRI,” and improve and then join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which is the successor to the trade agreement that President Trump dropped out of as one of his first acts in office.

    Bloomberg Businessweek Writer
    Peter Coy
    Bloomberg Businessweek Writer
    Peter Coy is the economics editor for Bloomberg Businessweek and covers a wide range of economic issues. He also holds the position of senior writer. Coy joined the magazine in December 1989 as telecommunications editor, then became technology editor in October 1992 and held that position until joining the economics staff. He came to BusinessWeek from the Associated Press in New York, where he had served as a business news writer since 1985. Before that, Coy worked as a correspondent in the AP Rochester bureau. He began his career at the AP in 1980 as an editor in the Albany bureau. Prior to that, Coy was a reporter for the Waterbury (Conn.) Republican. Coy holds a BA in history from Cornell University.
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