Whole world risks losing from US-China rivalry

Gideon Rachman

London: American and Chinese foreign policy sometimes feel like mirror images. The Americans are obsessed by containing Chinese power. The Chinese are obsessed by containing American power.

But the mirroring stops when it comes to how these policies are executed. Washington and Beijing bring different strengths to their battle for power and influence. As a result, they are pursuing different strategies.

America’s singular strength is its military might and its willingness to offer security guarantees to its allies. The United States has collective defence agreements with 56 countries around the world, in Europe, Asia and the Americas. It also provides crucial military aid to other countries, such as Israel and Ukraine, that are not formal treaty allies.

China, by contrast, has a mutual defence treaty with just one country – North Korea. Unlike the US, it also has territorial disputes with many of its neighbours, which tends to push them in the direction of America. But when it comes to economic relations, China has the advantage.

Australia’s Lowy Institute calculates that 128 countries now trade more with China than with the US. Over the last decade, China has spent more than a trillion dollars in more than 140 countries on infrastructure investment, becoming the world’s largest creditor and the world’s largest trading power in the process.

The results are on display all over the world, whether it is high-speed rail in Indonesia, ports and bridges in Africa or an intercontinental highway crossing central Asia.

Western countries can and do point to the flaws in China’s Belt and Road Initiative, notably the huge debts owed to Chinese lenders that weigh on countries such as Pakistan, Sri Lanka and Zambia. But for developing countries that are seeking to make rapid economic progress, the Chinese offer remains attractive.

As Daniel Runde, a former USAID official, told Congress this year: “From project identification to signing, commencing and completing – China is much faster and cheaper than the United States at virtually every stage.”

The US is trying to push back. Last year, America’s Eximbank signed a deal to finance more than a billion dollars’ worth of transport and power projects in Angola. But with a yawning US budget deficit and new trade deals off the table in Congress, it will be all but impossible for America to rival China’s economic offer.